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82–183 2013

ENERGY CONSUMERS RELIEF ACT OF 2013 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ENERGY AND POWER 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

APRIL 12, 2013 

Serial No. 113–30 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

(II) 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

RALPH M. HALL, Texas 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Missouri 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

BEN RAY LUJAN, New Mexico 

PAUL TONKO, New York 

(III) 

SUBCOMMITTEE ON ENERGY AND POWER

ED WHITFIELD, Kentucky 

Chairman 

STEVE SCALISE, Louisiana 

Vice Chairman 

RALPH M. HALL, Texas 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

LEE TERRY, Nebraska 

MICHAEL C. BURGESS, Texas 

ROBERT E. LATTA, Ohio 

BILL CASSIDY, Louisiana 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

BOBBY L. RUSH, Illinois 

Ranking Member 

JERRY MCNERNEY, California 

PAUL TONKO, New York 

EDWARD J. MARKEY, Massachusetts 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN D. DINGELL, Michigan 

HENRY A. WAXMAN, California (ex officio) 

(V) 

C O N T E N T S 

Page 

Hon. Ed Whitfield, a Representative in Congress from the Commonwealth 

of Kentucky, opening statement ......................................................................... 1 

Prepared statement .......................................................................................... 3 

Hon. Bobby L. Rush, a Representative in Congress from the State of Illinois, 

opening statement ................................................................................................ 11 

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

opening statement ................................................................................................ 12 

Prepared statement .......................................................................................... 13 

Hon. Bill Cassidy, a Representative in Congress from the State of Louisiana, 

opening statement ................................................................................................

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 14 

Prepared statement .......................................................................................... 16 

WITNESSES

Paul Cicio, President, Industrial Energy Consumers of America ........................ 23 

Prepared statement .......................................................................................... 25 

Brendan Williams, Vice President, Advocacy, American Fuel & Petrochemical 

Manufacturers ...................................................................................................... 30 

Prepared statement .......................................................................................... 32 

William N. Rom, Professor of Medicine and Environmental Medicine, NYU 

School of Medicine, on Behalf of the American Thoracic Society ..................... 47 

Prepared statement .......................................................................................... 49 

Rena Steinzor, Professor of Law, University of Maryland, and President, 

Center for Progressive Reform ............................................................................ 57 

Prepared statement .......................................................................................... 59 

Anne E. Smith, NERA Economic Consulting ........................................................ 71 

Prepared statement .......................................................................................... 73 

Scott H. Segal, Director, Electric Reliability Coordinating Council .................... 175 

Prepared statement .......................................................................................... 177 

SUBMITTED MATERIAL

Discussion draft ....................................................................................................... 5 

Statement of the Environmental Protection Agency, submitted by Mr. 

Whitfield ............................................................................................................... 18 

Letter of April 11, 2013, from the Natural Resources Defense Council to 

the Subcommittee, submitted by Mr. Rush ....................................................... 213 

Statement of the Society of Environmental Journalists, submitted by Mr. 

Whitfield ............................................................................................................... 217 

Article entitled, ‘‘EPA: Agency comes under fire for ‘closed, opaque’ press 

policy,’’ by Emily Yehle, E&E reporter, April 11, 2013 ..................................... 218 

(1) 

ENERGY CONSUMERS RELIEF ACT OF 2013 

FRIDAY, APRIL 12, 2013 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON ENERGY AND POWER, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC. 

The subcommittee met, pursuant to call, at 9:35 a.m., in room 

2123 of the Rayburn House Office Building, Hon. Ed Whitfield 

(chairman of the subcommittee) presiding. 

Members present: Representatives Whitfield, Hall, Shimkus, 

Terry, Burgess, Latta, Cassidy, Olson, McKinley, Gardner, Pompeo, 

Kinzinger, Griffith, Upton (ex officio), Rush, McNerney, Tonko, 

Green, Capps, Barrow, and Waxman (ex officio). 

Staff present: Nick Abraham, Legislative Clerk; Charlotte Baker, 

Press Secretary; Allison Busbee, Policy Coordinator, Energy and 

Power; Patrick Currier, Counsel, Energy and Power; Tom 

Hassenboehler, Chief Counsel, Energy and Power; Mary Neumayr, 

Senior Energy Counsel; Andrew Powaleny, Deputy Press Secretary; 

Jeff Baran, Democratic Senior Counsel; Alison Cassady, Democratic 

Senior Professional Staff Member; Greg Dotson, Democratic Staff 

Director, Energy and Environment; and Caitlin Haberman, Democratic Policy Analyst. 

OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF KENTUCKY 

Mr. WHITFIELD. I would like to call the hearing to order this 

morning. And I certainly want to welcome the panel members who 

were braving the weather to get here this morning. We appreciate 

that. Our ranking member Mr. Rush has been caught in traffic and 

is on his way, and when he gets here I am sure he will want to 

give an opening statement as well. 

But today’s hearing, we are going to be focusing on the Energy 

Consumers Relief Act of 2013, which was introduced by our colleague Mr. Cassidy, who is a member of this committee. A couple 

of days ago we had a debate on the Keystone pipeline; we had a 

hearing on the Keystone pipeline, which I might say the American 

people in a recent Pew poll showed that they support by a margin 

of 66 percent to 23 percent. And I think during that hearing, it 

really brought to the focus two different views of the way we 

should be proceeding in developing energy in America. 

One view supported by many people in America, including some 

of our Democratic colleagues, view climate change as the most important issue facing mankind. And they support more mandates 

2 

and more regulations relating to energy, forcing energy cost upward. They support new energy taxes and a strong cap-and-trade 

system. 

Another vision supported by many in this committee is that we 

want a pathway to energy self-sufficiency focused on maximizing 

abundant, affordable, and diverse energy resources, reducing emissions through technological development, economic competition, 

and market-based efficiencies. Now, I would say that in America 

we don’t have to take a backseat to anyone about being focused on 

the environment. Our CO2 emissions are the lowest that they have 

been in 20 years. 

EPA reports that total emissions of toxic air pollutants have decreased by approximately 42 percent between 1990 and 2005. EPA 

has said that since 1990, nationwide air quality has improved significantly for the six common air pollutants. Between 1980 and 

2010, total emissions of the six principal air pollutants have 

dropped by 63 percent. 

Now, I don’t know if any of you focused on this, but next year, 

the Dakota Prairie refinery is going to open up in North Dakota. 

This is the first new refinery in America since 1976. Now, the reason that this has happening is that because of fracking on nonfederal lands in the Bakken formation, there is a bountiful production of this oil and a refinery is absolutely necessary. Now, what 

many people don’t know is that the tribes have submitted an application to build a refinery in North Dakota over 10 years ago, and 

it has taken 10 years to obtain this permit. 

And while everyone is excited about this refinery opening up, the 

problem is that it has been dramatically downsized because everyone is concerned about the new greenhouse gas rule that is expected to be coming out of EPA. So on one side, people are excited; 

on the other side it is being artificially remaining a low-scale plant. 

Now, the great thing about this development in North Dakota 

and other parts the country is that in North Dakota, the unemployment rate today is 3.2 percent, the lowest in the country. And since 

2009, employment in North Dakota has increased by 60 percent. So 

I think those two visions of America is what we are really talking 

about today. We have an opportunity to be energy efficient. We do 

not have to be dependent upon the Middle East or anyone else. As 

a matter of fact, we are the number one oil-producing country in 

the world today, having passed Saudi Arabia in late 2012. 

Now, today, we are going to take up a bill that would require 

EPA to be more transparent. There was a news release yesterday 

put out by the Society of Environmental Journalists that said that 

EPA is one of the most closed, opaque agencies in the Federal Government. And that is the view of many of us as well. 

So the legislation that Mr. Cassidy is introducing today simply 

requires a more thorough review of cost and the impact on jobs, energy prices if the overall cost of the regulation will exceed $1 billion. So I think this is a very important piece of legislation and we 

look forward to your testimony about it. 

[The prepared statement of Mr. Whitfield follows:] 

3 

PREPARED STATEMENT OF HON. ED WHITFIELD

On Wednesday, when the rest of us were gathered to talk about increasing U.S. 

energy security through legislation that would finally approve the 1,666 day-long delayed Keystone Pipeline, a pipeline that according to Pew, the American public supports by a margin of 66–23 percent, my colleagues, as they have done in every other 

hearing this subcommittee has conducted so far this Congress, were asking to debate the science of climate change. 

You couldn’t paint a picture that is more in contrast to two visions for the future. 

Some of my colleagues on the other side of the aisle vision a future, which they 

claim is driven by scientific models, of continued demand destruction mandates, new 

energy or carbon taxes, and back door cap-and-trade regulations. While our vision, 

a pathway to energy self-sufficiency, is focused on maximizing abundant, affordable, 

and diverse energy resources. Reducing emissions through technological development, economic competition, and market-based efficiencies, things that allow our 

economy and jobs to prosper, are very different from the solutions the current EPA 

and my colleagues on the other side of the aisle recommend. 

The Waxman-Markey cap-and-trade bill failed in the Democratically-controlled 

Senate for a reason, and it is because consumers and the American public understand that we don’t have to choose between the environment, and jobs and the economy with a command-and-control Washington-centric energy vision. Policies that increase energy costs on consumers only seek to drive more innovation and jobs offshore. And I would note, since the time of that bill’s failure, we have seen innovation and job creation flourish in the U.S. energy sector, but the EPA is now regulating what the Obama administration failed to legislate and their regulatory assault on coal is only beginning to be realized. 

We are now at the cusp of an industrial and manufacturing renaissance—- but 

this future can only be realized if we are able to continue to successfully harness 

our resources and maintain a diverse energy portfolio. New taxes, mandates, and 

back-door cap-and-trade policies only hold us back—and we can look to Europe and 

other economies as a real world case study on where that path takes us. 

We are here today to debate a bill that seeks to keep us on this path to self-sufficiency by putting some inter-agency checks and balances on what many view as an 

agency who is single handedly controlling nearly all of the energy and environment 

issues facing our nation. The number of major new rules is like nothing I have seen 

before and is doing serious economic damage by reducing energy supplies, raising 

energy prices, risking job growth, jeopardizing competitiveness, and compromising 

reliability. It is time to restore balance to EPA’s rulemaking process, and that is 

the goal of the ‘‘Energy Consumers Relief Act of 2013.’’ 

Specifically, the ‘‘Energy Consumers Relief Act’’ would require that, prior to finalizing a rule estimated to cost at least a billion dollars; EPA must first submit a concise cost analysis to Congress. This analysis will provide the public with greater 

transparency by requiring the inclusion of such things as the impact of the rule on 

gasoline or electricity prices, as well as any potential job losses. 

At the same time, the rule would be subject to an independent analysis led by 

Department of Energy in consultation with the Federal Energy Regulatory Commission and the Energy Information Administration. DOE would then make an initial 

determination whether the rule increases energy prices for consumers, including 

low-income households, small businesses, and manufacturers. 

Then, if the Secretary of Energy determines the rule would raise energy prices 

or impact fuel diversity, he is required to conduct a more extensive analysis in consultation with the Secretaries of Commerce and Labor and the Administrator of the 

Small Business Administration to determine if the identified energy impacts will 

have significant adverse effects on the economy, including impacts on jobs and economic growth. If the effects are in fact significant, then EPA may not proceed with 

the proposed rule. 

And of course, this bill would increase the scrutiny of EPA’s assault on coal. We 

have seen a number of costly rules affecting coal-fired electricity generation, and 

many more are in the works. But the agency’s own discussion of the impacts of 

these rules on electricity costs, reliability, coal-related jobs, and American competitiveness has been woefully inadequate. Indeed, we are already seeing coal-fired 

power plant shutdowns at a much faster pace than anything EPA ever suggested. 

Under the ‘‘Energy Consumers Relief Act,’’ these rules would finally be getting the 

cumulative analysis they warrant. 

Overall, this bill would empower DOE to take a commonsense, look-before-youleap approach to EPA’s energy-related billion dollar rules. And given the prolonged 

weakness in the economy and stubbornly high gasoline prices and unemployment 

rates, it’s a level of scrutiny that is long overdue and critical. 

4 

# # # 

[H.R. ———— follows:] 

5 


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[DISCUSSION DRAFf] 

113TH CO~GRESS 

1ST SESSION H.R. 

To protect consumers by prohibiting the Administrator of the Environmental 

Protection Agency from promulgating as final certain energy-related rules 

that are estimated to cost more than $1 billion and will cause significant 

adverse effects to the economy. 

IN THE HOUSE OF REPRESENTATIVES 

M . introduced the following bill; which was referred to the 

Committee on 

A BILL 

To protect consumers by prohibiting the Administrator of 

the EnviJ'onmental Protection Agency from promUlgating 

as final certain energy-related rules that are estimated 

to cost more than $1 billion and will cause significant 

adverse effects to the economy. 

1 Be it enacted by the Senate and House of Representa2 t'ives of the United States of AmeTica in CongTess assembled, 

3 SECTION 1. SHORT TITLE. 

4 TIns Act may be cited as the "Ener6'Y Consumers Re5 lief Act of 2013". 

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2 

1 SEC. 2. PROHmITION AGAINST FINALIZING CERTAIN EN· 

2 ERGY·RELATED RULES THAT WILL CAUSE 

3 SIGNIFICANT ADVERSE EFFECTS TO THE 

4 ECONOMY. 

5 Notwithstanding any other proYision of law, the Ad6 ministrator of the Environmental Protection Agency may 

7 not promulgate as final an energy-related rule that is esti8 mated to cost more than $1 billion if the Secretary of En9 ergy determines under section 3(3) that, with respect to 

10 the rule, significant adverse effects to the economy will 

11 be caused. 

12 SEC. 3. REPORTS AND DETERMINATIONS PRIOR TO PRO· 

13 MULGATING AS FINAL CERTAIN ENERGY-RE14 LATED RULES. 

15 Before promulgating as final any energy-related rule 

16 that is estimated to cost more than $1 billion: 

17 (1) REPORT 'ro CO~GRESS.-The Administrator 

18 of the Environmental Protection Agency shall sub19 mit to Congress a report containing20 (A) a copy of the rule; 

21 (B) a concise general statement relating to 

22 the rule; 

23 (C) an estimate of the total costs of the 

24 rule, including the direct costs and indirect 

25 costs of the rule; 

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3 

1 (D) an estimate of the increases in energy 

2 prices, including potential increases in gasoline 

3 or electricity prices for consumers, that may re4 suIt from implcmentation or enforcement of the 

5 rule; and 

6 (E) a detailed description of the employ7 ment effects, including potential job losses and 

8 shifts in employment, that may result from im9 plementation or enforcement of the rule. 

10 (2) I~ITL\L DETER:\,IINATION ON I~CREASES 

11 A.'<D IMPACTS.-Thc Secretary of Energy, in con12 sultation with thc Federal Energy Regulatory ComB mission and the Administrator of the Energy 1nfor14 mation Administration, shall prepare an independcnt 

15 analysis to determine whether the rule will cause16 (A) any increase in energy prices for con17 sumers, including low-income houscholds, small 

18 businesses, and manufacturers; 

19 (B) any impact on fuel diversity of the Na20 tion's electricity generation portfolio or on na21 tional, regional, or local electric reliability; or 

22 (C) any other adverse effect on energy sup23 ply, distribution, or use (including a shortfall in 

24 supply and increased use of foreign supplies). 

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4 

1 (3) SUBSEQUE~T DETERJ\n~ATION O~ ADVERSE 

2 EFFECTS TO 'rIlE Eco~o:\fY.-If the Srcretary of 

3 Energy detennines, under paragraph (2), that the 

4 rule will cause an increase, impact, or effect de5 scribed in such paragraph, then the Secretary, in 

6 consultation with the Secretary of Commerce, the 

7 Secretary of Labor, and the Administrator of the 

8 Small Business Administration, shall9 (A) determine whether such increase, ml10 pact, or effect will cause significant adverse ef11 fects to the economy, taking into consideration 

12 impacts on eeonomic indieators, including those 

13 related to gross domestic produet, unemploy14 ment, wages, consumer prices, and business and 

15 manufacturing activity; and 

16 (B) publish the results of such determina17 tion in the Federal Register. 

18 SEC. 4. DEFINITIONS. 

19 In this Act: 

20 (1) The tenllS "(lireet costs" and "indirect 

21 costs" have the meaning's given sueh terms in chap22 tel' 8 of the EnvirOlIDlental Protection Ageney's 

23 "Guidelines for Preparing Economic Analyses" 

24 dated December 17, 2010. 

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(2) The term "energy-related rule that is esti2 mated to cost more than $1 billion" means a rule of 

3 the Environmental Protection Agency that4 (A) regulates any aspect of the production, 

5 supply, distribution, or use of energy or pro6 vides for such regulation by States or other gov7 ernmental entities; and 

8 (B) is estimated by the Administrator of 

9 the Environmental Protection Agency or the 

10 Director of the Office of Manag'ement and 

11 Budget to impose direct costs and indirect 

12 costs, III the aggregate, of more than 

13 $1,000,000,000. 

14 (3) The term "rule" has the meaning given to 

15 sueh term in section 551 of title 5, United States 

16 Code. 

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SECTION-BY-SECTION 

H.R. _, "Energy Consumers Relief Act of 2013" 

Section I: This section provides the short title of "Energy Consumers Relief Act of2013." 

Section 2: This section prohibits the Administrator of the Environmental Protection Agency (EPA) from 

finalizing any energy-related rule estimated to cost more than $1 billion if the Secretary of Energy determines 

that the rule will cause significant adverse effects to the economy. 

Section 3: This section provides for certain reports and determinations prior to the finalizing of EPA 

energy-related rules estimated to cost more than $1 billion. 

Section 3(1) of the Act directs that before such a rule may be promulgated as final, the EPA Administrator 

shall submit a report to Congress that includes: (I) a copy ofthe rule; (2) a concise general statement relating to 

the rule; (3) an estimate ofthe total costs ofthe rule, including direct and indirect costs; (4) an estimate ofthe 

increases in energy prices, including potential increases in gasoline or electricity prices for consumers, that may 

result from implementation or enforcement of the rule; and (5) a detailed description of the employment 

effects, including potential job losses and shifts in employment, that may result from implementation or 

enforcement of the rule. 

Section 3(2) provides that before such a rule may be promulgated as final by EPA, the Secretary of Energy, 

in consultation with the Federal Energy Regulatory Commission and the Energy Information Administration, 

shall prepare an independent analysis to determine whether the rule will cause: (a) any increase in energy prices 

for consumers, including low-income households, small businesses, and manufacturers; (b) any impact on fuel 

diversity ofthe Nation's electricity generation portfolio or on national, regional, or local electric reliability; or 

(3) any other adverse effect on energy supply, distribution, or use (including a shortfall in supply and increased 

use of foreign supplies). 

Section 3(3) specifies that ifthe Secretary of Energy determines that the rule will cause an increase, impact, 

or effect described in section 3(2), then the Secretary, in consultation with the Secretary of Commerce, the 

Secretary of Labor, and the Administrator of the Small Business Administration, shall: (a) determine whether 

such increase, impact, or effect will cause significant adverse effects to the economy, taking into consideration 

impacts on economic indicators, including those related to gross domestic product, unemployment, wages, 

consumer prices, and business and manufacturing activity; and (b) publish the results of such determination in 

the Federal Register. 

Section 4: This section contains the following definitions: 

(I) "Direct costs" and "indirect costs" have the meanings given such terms in chapter 8 of EPA's 

"Guidelines for Preparing Economic Analyses" dated December 17, 2010. 

(2) "Energy-related rule that is estimated to cost more than $1 billion" means a rule of the EPA that (a) 

regulates any aspect of the production, supply, distribution, or use of energy or provides for such regulation by 

States or other governmental entities; and (b) is estimated by the Administrator of EPA or the Director of the 

Office of Management and Budget to impose direct costs and indirect costs, in the aggregate, of more than $1 

billion. 

(3) "Rule" has the meaning given to such term in section 551 of title 5, U.s. Code. 
11 

Mr. WHITFIELD. And at this time, I will recognize the gentleman 

from Illinois, Mr. Rush, for his opening statement. 

OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS 

Mr. RUSH. I want to thank you, Mr. Chairman. And let me begin 

by commending you for agreeing at our last panel on Wednesday 

to hold a hearing hopefully sometime in the very near future and 

dedicated solely for the purpose of hearing from scientific experts 

on the science of climate change. Mr. Chairman, as you know from 

24 letters that Ranking Member Waxman and I have sent to you 

and Chairman Upton, since May 2011, we have requested a hearing on this matter. 

Climate change is an issue that the minority side takes very seriously and we believe that hearing from actual scientists and climatologists rather than industry representatives will benefit and 

inform every member of this subcommittee. 

Mr. Chairman, we all understand that just because one might 

not like what the facts or the science is telling us does not mean 

that we can simply ignore science or facts or wish them away. Last 

year’s record temperatures, record droughts, record wildfires, and 

record levels of flooding prove this point. Still, we are here holding 

yet another hearing on yet another Republican bill designed to gut 

the Clean Air Act and tie EPA’s hands and prohibit this agency 

from doing exactly what it was established to do. And that is to 

protect the public. 

Mr. Chairman, we know that the EPA does not simply propose 

regulations willy-nilly, or just pull them out of thin air. In fact, in 

a rule that EPA has proposed has been mandated by law specifically to protect the public health by ensuring that all citizens have 

access to clean air, land, and water. My constituents do not always 

have the means and wherewithal to hire expensive lobbyist to influence the debate in the Congress in order to enact policies favorable to their futures, nor their financial interest. 

So it is imperative that we allow the EPA to act as an impartial 

referee and ensure that the playing field is level for all Americans. 

This bill before us is flawed in so many ways but one of its biggest 

deficiencies is that it will give the Secretary of Energy unprecedented authority to effectively veto public health regulation if the 

Secretary found that the rule will cause ‘‘any significant, adverse 

effects to the economy.’’ 

The analysis called for in this legislation is so skewed that even 

if the economic benefits of a rule dramatically outweigh any significant adverse effects to the economy or rather to industries’ profits, 

the rule will still be blocked. 

Mr. Chairman, I find it is curious that my colleagues on the 

other side of the aisle are quick to point out that carbon emissions 

in the U.S. are down to mid-1990 levels but refusing to acknowledge that the EPA regulation implemented under the Clean Air Act 

have played a key role in reducing harmful air pollutants by 60 

percent, while at the same time our economy has grown over 200 

percent. 

Mr. Chairman, my Republican colleagues, you can’t have it both 

ways and attack the EPA for issuing regulations while at the same 

12 

time pointing to progress that we have made as a country, both environmentally and economically, due in large part to these very 

same EPA rules. 

The bill today is simply another sham that may serve as a good 

messaging piece for the majority and its allies but will never, ever 

see the light of day in the Senate and will never, ever be signed 

into law by President Obama. But if getting through today’s hearing will help bring us a step closer to holding a real meaningful, 

a real climate change hearing where we can really tackle the issues 

that most Americans truly feel about it, then, Mr. Chairman, I say 

let’s begin the hearing. 

Thank you and I yield back the balance of my time. 

Mr. WHITFIELD. Thank you very much. 

At this time I recognize Mr. Upton, chairman of the full committee for 5 minutes. 

OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mr. UPTON. Well, thank you, Mr. Chairman. 

You know, common sense dictates that we should fully understand the cost of new regs to jobs and the economy before they are 

implemented, especially the highest cost regs as the Nation continues to endure high energy prices and unemployment. Maybe the 

EPA doesn’t present a full economic analysis now because they 

know the public would not like what it hears. But transparency 

and regulatory costs is a reasonable expectation. And the Energy 

Consumers Relief Act will make sure that the EPA, in fact, provides it. 

Having worked in President Reagan’s OMB, I have long been interested in the proper oversight of federal regs, and I cannot think 

of a set of regs more in need of additional oversight that EPA’s energy-related rules. 

I want to commend Bill Cassidy for his Energy Consumers Relief 

Act, which is a commonsense solution that bolsters EPA transparency and puts American consumers first. For an agency that 

was never granted any energy policy-setting authority, EPA, nonetheless, has taken charge of directing the Nation’s energy agenda. 

They are seeking to regulate where they have been unable to legislate, evidenced by EPA’s avalanche of coal regs seeking to effectively regulate out of existence the use of abundant resource without any regard for electricity prices, reliability, or jobs. At a time when most Americans haven’t seen gasoline under $3 

a gallon in years, we now have a proposed Tier 3 gas rule that 

would put forward upward pressure on prices at the pump, creating a disproportionate hardship for the country’s most vulnerable, those most likely not to be able to afford those higher prices. 

But gas prices aren’t alone in being stubbornly high. With just 

88,000 jobs created last month, it looks like 2013 is going to be yet 

another year with unemployment staying well above 7 percent. The 

Energy Consumers Relief Act gives the Department of Energy the 

lead role in conducting a multiagency analysis of EPA’s energy-related rules estimated to cost at least $1 billion, $1 billion. 

No longer will the impacts of these measures on energy prices, 

jobs, or manufacturing competitiveness be a secondary considerVerDate Nov 24 2008 15:32 Sep 23, 2013 Jkt 037690 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-30 CHRIS
13 

ation that is hidden from view. It is now more important than ever 

to weigh the consequences of the EPA’s actions. The U.S. is on a 

pathway to unprecedented energy self-sufficiency, a pathway that 

has seen technology and innovation in the energy sector drive new 

energy resource abundance, diversity, and affordability, all for the 

benefit of consumers. Without the additional checks and balances 

this bill provides, the pathway will remain threatened by an agency that sometimes fails to provide an adequate and complete picture of the sweeping cumulative impacts of its own regs. 

And I would yield to other members of the committee that 

might—Mr. Cassidy, I yield the balance of my time. 

[The prepared statement of Mr. Upton follows:] 

PREPARED STATEMENT OF HON. FRED UPTON

Common sense dictates that we should fully understand the cost of new regulations to jobs and the economy before they are implemented—especially the highestcost regulations as the nation continues to endure high energy prices and unemployment. Maybe the EPA does not present a full economic analysis now because they 

know the public would not like what it hears. But transparency in regulatory costs 

is a reasonable expectation, and the Energy Consumers Relief Act will make sure 

the EPA provides it. 

Having worked in President Reagan’s Office of Management and Budget, I have 

long been interested in the proper oversight of federal regulations. And I cannot 

think of a set of regulations more in need of additional oversight than EPA’s energyrelated rules. I commend Rep. Bill Cassidy for his Energy Consumers Relief Act, 

which is a commonsense solution that bolsters EPA transparency and puts American consumers first. 

For an agency that was never granted any energy policy setting authority, EPA 

nonetheless has taken charge of directing the nation’s energy agenda. They are 

seeking to regulate where they have been unable to legislate, evidenced by EPA’s 

avalanche of coal regulations seeking to effectively regulate out of existence the use 

of an abundant American resource without any regard for electricity prices, reliability, or jobs. 

At a time when most Americans haven’t seen gasoline under $3.00 a gallon in 

years, we now have a proposed Tier 3 gasoline rule that would put further upward 

pressure on prices at the pump, creating a disproportionate hardship for the country’s most vulnerable. But gas prices aren’t alone in being stubbornly high. With 

just 88,000 jobs created last month, it looks like 2013 is going to be yet another year 

with unemployment staying well above 7 percent. 

The Energy Consumers Relief Act gives the Department of Energy the lead role 

in conducting a multiagency analysis of EPA energy-related rules estimated to cost 

at least one billion dollars. No longer will the impacts of these measures on energy 

prices, jobs, or manufacturing competitiveness be a secondary consideration that is 

hidden from view. 

It is now more important than ever to weigh the consequences of EPA’s actions; 

the U.S. is on a pathway to unprecedented energy self-sufficiency-a pathway that 

has seen technology and innovation in the energy sector drive new energy resource 

abundance, diversity and affordability, all for the benefit of consumers. Without the 

additional checks and balances this bill provides, this pathway will remain threatened by an agency that fails to provide an adequate and complete picture of the 

sweeping cumulative impacts of its own regulations. 

# # # 

OPENING STATEMENT OF HON. BILL CASSIDY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF LOUISIANA 

Mr. CASSIDY. Thank you, Mr. Chairman. 

I am offering the bill this week or next week. And the bill is actually about transparency. 

14 

Dr. Rom, I read your testimony and it is all very nicely referenced, but there is nothing to prevent that from impacting or influencing or encouraging EPA to address the situation. All it is is 

going to require is transparency. Your article was so beautifully 

reference peer-reviewed. I will note that EPA’s work is not peer-reviewed. That is not me saying it; it is actually the National Academy of Science, which found on something regarding formaldehyde, 

that the draft assessment has not adequately supported its conclusions et cetera, et cetera, et cetera. You would never accept EPA’s 

document in a peer-reviewed journal. 

With that said, EPA science can be specious. So this is about 

transparency. And the stakes are high. People are losing their jobs 

over specious science. Now, maybe the science is good, and maybe 

the science is not, but I see nothing wrong with transparency and 

accountability. Why should the EPA be a dictator over our lives? 

Why shouldn’t the EPA answer to somebody? 

Ultimately, Mr. Rush spoke about how folks back home don’t 

have high-powered lobbyists. I totally agree. So therefore, it is incumbent upon us to make sure that every bureaucracy has someone to whom they are accountable. In this case it is the same administration. We would be saying that President Obama appointed 

somebody who is going to deep-six his environmental agenda if he 

was the Department of Energy Secretary, or if she was. I don’t 

think that is very practical, very reasonable, or very likely. 

The fact is that everybody should be accountable. There are an 

incredible number of jobs on the line here and the science at times 

has not been adequate. So therefore, I see nothing wrong with putting in transparency for those thousands, millions of Americans 

who cannot afford a lobbyist but whose livelihood may be threatened by dictatorial powers which have no accountability. 

Thank you, I yield back. 

Mr. WHITFIELD. Thank you. 

At this time I recognize the gentleman from California, Mr. Waxman, for 5 minutes. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you, Mr. Chairman. When I woke up this 

morning I noticed it had been raining. I was pretty sleepy. I didn’t 

really want to come to work, and there was a cost to me because 

I had to do a lot of things to get ready. But I didn’t realize the benefits. And the benefit is to sit here at a hearing to talk about a bill 

that doesn’t make sense. So if I knew the full facts, I could have 

weighed the costs and benefits. If I just looked at the costs, that 

would be one way to make a decision, but you should look at the 

costs and benefits. 

Anyway, this bill says we are not going to look at the costs and 

the benefits. We are only going to look at the costs. And if the costs 

are high, well, forget about it. But that doesn’t make sense because 

a lot of regulations weigh costs and benefits and say that the benefits outweigh the costs. 

During the 1990s, a lot of people looked at regulations and they 

said, oh, we have got to have a cost-benefit analysis. Well, cost-benVerDate Nov 24 2008 15:32 Sep 23, 2013 Jkt 037690 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-30 CHRIS
15 

efit analysis is far from perfect. Important benefits can’t always be 

reduced to a dollar figure. The estimates of compliance costs are 

frequently inflated. But cost-benefit analysis, at least attempts to 

capture both sides of the equation. 

The problem with this bill is it says that when EPA does this 

cost-benefit analysis, they should then be accountable to the Department of Energy to make the decision. Well, why? Why should 

the Department of Energy be superior to the Environmental Protection Agency? The benefits of most important rules dwarf the 

costs. 

Let me give you some examples. The benefits of the Mercury and 

Air Toxics Rules are between four and nine times greater than the 

costs. EPA’s tailpipe standards for reducing carbon pollution produced net benefits to society of up to $451 billion by saving car 

owners money at the gas pump. The benefits of these and other 

rules are huge. 

Faced with these facts, opponents of EPA rules now say we 

should simply ignore the benefits and consider only the costs. That 

is what the discussion draft before us requires. This is an extreme 

and nonsensical approach. Imagine applying this bill’s premise to 

everyday decisions. Not my decision on whether to come this morning, but would somebody decide not to pay for a child’s college tuition, even though college opens doors of opportunity? If we look 

only at the price of medical care and not its benefits, would we 

forgo medical care? 

Every day, Americans look at both the pros and cons of making 

even the smallest decisions. But this bill would require decisionmakers in the Federal Government to look only at the downside of 

making critical investments to protect public health and the environment. 

This discussion draft is hopelessly flawed. It gives the Department of Energy a veto over EPA regulations. Is that giving one bureaucracy some accountability because it has to satisfy another bureaucracy which has an other purpose than environmental protection when the agency in charge of environmental protection, after 

weighing costs and benefits, decides to go forward with a regulation? 

This is an unprecedented intrusion on the authority of the EPA. 

It is not common sense. It is not providing transparency. It is providing barriers to do something to protect public health and the environment if there is a cost that the industries don’t like. And 

therefore, the industries can simply go and stop regulations. 

Now, let’s see this bill more in detail. It requires the Department 

of Energy to conduct a skewed analysis of only the costs of EPA 

rules without any consideration of the benefits. So if the Secretary 

of Energy determines that a rule will cause any ‘‘significant adverse effects to the economy’’—that means the cost—EPA would be 

blocked from finalizing its rule, after they went through a cost-benefit analysis, even if the economic benefits of the rule dramatically 

outweigh the costs. 

I have further comments in my opening statement that I would 

like to put in the record, but Mr. Chairman, the American people 

want us to solve problems not waste our time with partisan posturing, taking up nonsensical message bills that stand no chance 

16 

of becoming law. This just deepens and justifies the cynicism of the 

American people. We have two problems within our committee’s jurisdiction that are crying out for attention, cybersecurity and climate change. And instead, we are wasting our time telling people 

regulations are no good if special interests don’t like it and they 

can convince the Department of Energy, which has no expertise on 

doing these regulations to be able to veto them if there is any cost 

whatsoever. I think this is a real waste of time and I wish I would 

have stayed in bed. 

[The prepared statement of Mr. Waxman follows:] 

PREPARED STATEMENT OF HON. HENRY A. WAXMAN

National Defense Magazine recently examined the latest intelligence forecasts to 

identify the five biggest challenges to U.S. and global security in the coming decades. The Energy and Commerce Committee has jurisdiction to address two of the 

top five threats: climate change and cybersecurity. 

Today, the Subcommittee is ignoring these urgent threats in order to spend its 

time considering what can only be described as a dumb bill. This bill relies on an 

outlandish premise: that EPA’s public health and environmental protections provide 

no benefits at all to the American people. 

During the 1990s, opponents of EPA rules saw cost-benefit analysis as a way of 

weakening public health and environmental protections. Cost-benefit analysis is far 

from perfect. Important benefits cannot always be reduced to a dollar figure. And 

the estimates of compliance costs are frequently inflated. But cost-benefit analysis 

at least attempts to capture both sides of the equation. 

The problem for opponents of EPA’s public health rules is that the benefits of the 

most important rules dwarf the costs. The benefits of the mercury and air toxics 

rule are between four and nine times greater than the costs. EPA’s tailpipe standards for reducing carbon pollution produce net benefits to society of up to $451 billion by saving car owners money at the gas pump. The benefits of these and other 

rules are huge. 

Faced with these facts, opponents of EPA rules now argue that we should simply 

ignore the benefits and consider only the costs. That’s what this discussion draft requires. It is an extreme and nonsensical approach. Imagine applying this bill’s 

premise to everyday decisions. You would choose not to pay your child’s college tuition, even though college opens doors of opportunity. You would look only at the 

price of medical care, not its benefits. 

Every day, Americans look at both the pros and cons of making even the smallest 

decisions. But this bill would require decision-makers in the federal government to 

look only at the downside of making critical investments to protect public health 

and the environment. 

The discussion draft is hopelessly flawed. It gives the Department of Energy 

(DOE) a veto over EPA regulations. This is an unprecedented intrusion on the authority of EPA. 

And it then requires DOE to conduct a skewed analysis of only the costs of EPA 

rules without any consideration of the benefits. If the Secretary of Energy determines that a rule would cause any ‘‘significant adverse effects to the economy,’’ EPA 

would be blocked from finalizing the rule—even if the economic benefits of a rule 

dramatically outweigh the costs. This gives the Secretary of Energy authority to 

block EPA public health protections that are required by law. 

Even if the Secretary of Energy ultimately decides that the rule does not hurt the 

economy, this new process could indefinitely delay important public health protections. The bill bars EPA from finalizing a rule before DOE completes its analysis. 

But it establishes no deadline for DOE to act and provides no resources to DOE to 

undertake these analyses. 

Moreover, this bill simply adds more bureaucracy to the rulemaking process. Numerous statutes and executive orders already require EPA to conduct rigorous costbenefit analysis of its rules, which are subject to public comment and extensive 

interagency review. This bill would require the same agencies to look at the same 

rules again, but this time ignoring all of the pages that talk about how the rules 

would benefit Americans. 

Mr. Chairman, the American people want us to solve their problems, not waste 

our time with partisan posturing. Taking up a nonsensical message bill that stands 

no chance of becoming law just deepens and justifies their cynicism. We should 

17 

spend our time developing real solutions to real problems. A good place to start 

would be with the recommendations of National Defense Magazine and holding 

hearings on climate change and cybersecurity. 

Mr. WHITFIELD. Thank you, Mr. Waxman. 

And that concludes the opening statements, so once again, I want 

to welcome the panel of witnesses today. We had invited representatives from EPA and DOE to attend but they do not have witnesses 

here. But EPA did submit a testimony, a statement and I would 

ask unanimous consent that we introduce into the record the EPA 

statement. 

[The information follows:] 

18 


82183.074

House Energy and Commerce 

Energy and Power Subcommittee Hearing 

Statement for the Record 

from the 

Environmental Protection Agency 

on the 

Energy Consumers Relief Act 

Legislative Hearing 

April 12, 2013 

The Administration makes it a priority to ensure that our federal regulatory system is guided 

by science and that it protects the health and safety of all Americans in a pragmatic and cost 

effective manner. 

The core mission of the EPA is protection of public health and the environment. That 

mission was established in recognition of a fundamental fact of American life - regulations 

can and do improve the lives of people. We need these rules to hold polluters accountable 

and keep us safe. For more than 40 years, since the Nixon administration, the Agency has 

carried out its mission and established a proven track record that a healthy environment and 

economic growth are not mutually exclusive. 

The Clean Air Act is one of the most successful environmental laws in American history and 

provides an illustrative example of this point. For 40 years, the Clean Air Act has made 

steady progress in reducing the threats posed by pollution and allowing us to breathe easier. 

In 2010 alone, programs implemented pursuant to the bipartisan-enacted Clean Air Act 

Amendments of 1990 are estimated to have reduced premature mortality risks equivalent to 

preventing over 160,000 premature deaths; spared Americans more than 100,000 hospital 

admissions and emergency department visits; and prevented millions of cases of respiratory 

problems, including bronchitis and childhood asthma attacks. 

Few of the emission control standards that gave us these huge gains in public health were 

uncontroversial at the time they were developed. Most major rules have been adopted 

1 
19 


82183.075

amidst claims that they would be bad for the economy, increase energy prices, and lead to 

unemployment. 

For example, an early industry study of EPA's Acid Rain Program estimated the cost at $7.5 

billion annually. However, multiple recent analyses show that the Acid Rain Program has 

been implemented at a fraction of that estimate - between $1 and 2 billion annually (2011 

National Acid Precipitation Assessment Program Report to Congress). The resulting 

emission reductions are providing substantial health and ecosystem benefits with a 

monetized value of between $170 billion and $430 billion per year (2008$).' In contrast to 

doomsday predictions, history has shown, again and again, that we can clean up pollution, 

create jobs, and grow our economy all at the same time. Over the same 40 years since the 

Clean Air Act was passed, the Gross Domestic Product of the United States grew by more 

than 200 percent. At the same time, the Clean Water Act has kept tens of billions of 

pounds of sewage, chemicals and trash out of American waterways. America's urban 

waterways have gone from wastelands to centers of redevelopment and activity, and we 

have doubled the number of American waters that meet standards for swimming and 

fishing. In the process, we've advanced environmental science and spurred countless 

innovations in technology. 

We must regulate sensibly - in a manner that, when allowed by statute, carefully considers 

both the benefits and the costs. EPA's detailed regulatory impact analyses help us 

accomplish that goal in a manner that best supports the reasons for implementation of 

environmental regulations: to ensure that American families have clean air to breathe and 

clean water to drink and in which to swim and fish. 

Although the Administration does not have a position on the draft legislation at this time, 

EPA has serious concerns with the legislation that the Agency believes merit close 

consideration. First, the draft legislation before the committee today departs from the 

1 http://www . white hou se.gov / sites/ defau It/files/ m icrosites/ ostp/20 11_ napa p _ 508. pdf 

2 
20 


82183.076

principle that both the benefits and costs of regulations should be considered together. 

Second, it would waste limited analytical resources on duplicative analysis that could 

needlessly delay important pUblic health protections at an additional cost to taxpayers. And 

third, in the worst case, it could permanently block EPA from fulfilling its statutory 

obligations to protect public health and the environment. 

The draft legislation directs the EPA to report to Congress only on the costs of a regulation, 

but not on the benefits. Similarly the Secretary of Energy is directed to conduct an analysis 

of energy price impacts and their effects on the economy, but is not directed to take into 

account benefits to the economy such as cleaner air and water, fewer premature deaths and 

fewer days of work missed due to illness. Health and environmental benefits are the driving 

rationale for our environmental laws and for the regulatory actions taken to implement 

these laws. By ignoring benefits, the draft legislation instructs policy makers to adopt an 

inherently biased approach that is inconsistent with the fundamental principles of 

environmental law and would lead to flawed decision making. 

A second serious concern with the draft legislation is that it would require duplicative 

economic analysis. Executive Order 13211>, issued in 2001, already requires agencies to 

examine energy effects. EPA already examines impacts on energy prices and output, 

changes in electricity generation mix, impacts on reserve margins for reliability, and other 

energy-related metrics where relevant for regulations. After the proposed rule is published, 

these analyses receive public comment and are revised as appropriate. Despite this 

analysis, the legislation directs DOE to conduct its own analysis of the same regulation for 

key energy impacts. EPA encourages the committee to consider whether it is wise to 

require DOE to fully duplicate analyses that EPA already performs and the added costs of 

such analyses. 

2 http://www.gpo.gov /fdsys/ pkg/FR -2001-05-2 2/pdf/01-13116.pdf 

3 
21 


82183.077

A third concern is that this legislation could result in delay of EPA regulations - creating 

regulatory uncertainty and, potentially, leading to lengthy (and potentially indefinite) delays 

in important protections for public health and the environment. The draft legislation calls 

for detailed economic analysis by DOE, in consultation with the Federal Energy Regulatory 

Commission (FERC) and the Energy Information Administration (EIA), and further 

consultation with three additional Federal agencies if certain determinations are made. 

Section 3 directs that these analyses and determinations are to be done "before 

promulgating as final" any energy-related rule of EPA's, but it does not set a timeline for the 

length ofthis process and this could create regulatory uncertainty. 

Even if this process were to result in a determination of no "significant adverse effects to 

the economy," the process could take substantial time, while leaving the public and the 

regulated community in doubt as to the outcome. This may create uncertainty for the 

regulated community, which cannot fully plan regulatory compliance investments until the 

rule is finalized. As the Agency has moved to finalize rules such as the Mercury and Air 

Toxics Standards (MATS) under the Clean Air Act, we have heard from regulated entities 

that urge us to proceed with prompt finalization so that they can move forward with 

compliance. An extra layer of review may extend the period where industry must place 

plans to invest in new pollution control equipment on hold. In addition to the costs that 

such uncertainty imposes on the regulated community, this could delay creation or support 

of jobs by delaying anticipated increases in both short- and log-term job opportunities from 

installation of air pollution control equipment. 

The impacts could be even more severe for members of the public. Each year, 

implementation of the MATS rule, for example, will avoid thousands of premature deaths, 

prevent thousands of heart attacks and thousands of hospital visits for respiratory and 

cardiovascular disease, and alleviate tens of thousands of childhood asthma attacks and 

other respiratory illnesses. EPA estimates that this rule will yield tens of billions of dollars in 

net benefits in 2016 alone. The draft legislation could place an additional procedural hurdle 

in the path offinalizing important public health rules such as this one. 

4 
22 


82183.078

Finally, this bill appears designed to override every environmental law that EPA administers 

that authorizes energy-related regulation estimated to cost more than the specified 

threshold even when the benefits of taking action justify the costs. Energy-related rules 

could be blocked by a determination based on analysis and consultation specified in the bill 

by agencies without the direct responsibility for implementing the Clean Air Act, Clean Water 

Act, and other landmark environmental protection laws. 

In conclusion, the draft legislation being discussed today could delay or even block public 

health and environmental protections for Americans based on misplaced concerns that EPA 

standards would be bad for the economy and bad for employment. In contrast to 

doomsday predictions, history has shown that we can clean up pollution, preserve jobs, and 

help grow our economy all at the same time. Over the 40 years since the Clean Air Act and 

Clean Water Act were passed, our air and water has become enormously cleaner, and the 

economy of the United States more than doubled. EPA already undertakes robust analysis 

of the costs and benefits and energy impacts of its significant rulemakings, consistent with 

relevant Executive Orders, and history has shown that American ingenuity and innovation 

can allow us to continue environmental progress while we grow our economy. 

5 
23 

Mr. WHITFIELD. And at this time I would like to introduce members of the panel. We have Mr. Paul Cicio, who is the president of 

the Industrial Energy Consumers of America. We have Mr. 

Brendan Williams, who is vice president, Advocacy for the American Fuel and Petrochemical Manufacturers. We have Dr. William 

Rom, who is professor of medicine and environmental medicine at 

the New York University School of Medicine, and he is testifying 

today, I believe, on behalf of the American Thoracic Society. We 

have Ms. Rena Steinzor, who is a professor of law at the University 

of Maryland and is also president of the Center for Progressive Reform. And we have Dr. Anne Smith, who is senior vice president 

of NERA Economic Consulting. And we have Mr. Scott Segal, who 

is the director of the Electric Reliability Coordinating Council. 

So we have some real experts with us today and we look forward 

to your testimony about this legislation. 

And Mr. Cicio, I will recognize you first for an opening statement. Each one of you will be given 5 minutes, and there is a little 

box on the table that has green, yellow, and red, and red means 

stop. So if you all would pay some attention to that, we would appreciate it. 

Mr. Cicio, you are recognized for 5 minutes. 

STATEMENTS OF PAUL CICIO, PRESIDENT, INDUSTRIAL ENERGY CONSUMERS OF AMERICA; BRENDAN WILLIAMS, VICE 

PRESIDENT, ADVOCACY, AMERICAN FUEL & PETROCHEMICAL MANUFACTURERS; DR. WILLIAM N. ROM, PROFESSOR OF MEDICINE AND ENVIRONMENTAL MEDICINE, 

NYU SCHOOL OF MEDICINE, ON BEHALF OF THE AMERICAN 

THORACIC SOCIETY; RENA STEINZOR, PROFESSOR OF LAW, 

UNIVERSITY OF MARYLAND, AND PRESIDENT, CENTER FOR 

PROGRESSIVE REFORM; ANNE E. SMITH, NERA ECONOMIC 

CONSULTING; AND SCOTT H. SEGAL, DIRECTOR, ELECTRIC 

RELIABILITY COORDINATING COUNCIL 

STATEMENT OF PAUL CICIO 

Mr. CICIO. Thank you. Thank you, Chairman Whitfield, Ranking 

Member Rush, for the opportunity to testify before you and other 

subcommittee members. 

My name is Paul Cicio and I am president of the Industrial Energy Consumers of America. The IECA member companies have 

over $1.1 trillion in revenues. We have over 1,000 major manufacturing facilities across the country, and we employ over 1.4 million 

employees. IECA supports the draft bill entitled ‘‘Energy Consumers Relief Act of 2013,’’ because transparency of the cost of 

compliance is critically important to cost-effective regulation. 

Under this legislation, in the event that the review of cost finds 

that the EPA regulation would be harmful to the economy, we 

would hope that the EPA would reconsider the rule and seek alternative low-cost regulation. 

IECA has three points we would like to share with you this 

morning. Point number one, the EPA should not fear transparency 

of economics of regulation. They should embrace it as part of their 

regulatory reform effort. And EPA should also embrace pursuit of 

a more accurate and less controversial method for calculating 

24 

health benefits. Too much is at stake to not get these right; both 

must be credible. 

The EPA must be mindful that the manufacturing companies 

have a choice as to where they build their facilities around the 

world. The U.S. and its policies are in competition with other countries for these investments and jobs. This means that U.S. regulations must compete as well. That is, to regulate in a manner that 

is cost-effective and implemented in a time horizon that are responsible to public health but mindful of market realities. 

The most fundamental element is transparency of the cost of regulation. And in our view, the EPA scorecard is very poor. The EPA 

provided leadership decades ago in reducing emissions. They now 

need to lead again by addressing the cost and transparency issues. 

Congressmen, this is a win-win. There are no losers. 

Point number two, besides the cost of EPA regulations placed directly on our own facilities, when the EPA promulgates rules and 

costs on, for example, the electric utility industry, it is us consumers that pay for that. When the EPA promulgates rules on oil 

and the gas industry, it is us the consumers that pay for those. 

When the EPA chooses fuel mix strategies that give preference of 

one fuel over another, it is we consumers that pay for that. And 

there appears to be an insensitivity or a disconnect to this point 

as EPA proceeds to roll out a multiplicity of new regulations. Someone has to pay for these regulations and that someone is the industrial sector and other U.S. consumers. 

As the only sector of the economy that competes with global competition, the pass-through of these costs to us is significant, and it 

is getting greater all the time, continually eroding at our ability to 

compete and create jobs. 

Point number two, this is not 1970 when emissions were relatively high and significant action was needed to reduce any omissions. Emissions have dramatically been slashed since then and 

that is the good news. The bad news is that now that emissions are 

small, the cost of the next increment of reduction is very expensive, 

so expensive that manufacturing companies could be forced to 

make decisions on whether to comply or shut down facilities and 

move production offshore. 

The reality is that manufacturers face a significant number of existing, new, or proposed EPA regulations all at the same time, with 

overlapping requirements and additive and compounding costs. 

This plethora of regulations has resulted in business investment 

uncertainty. 

Point three, we encourage policymakers—all policymakers—to be 

mindful of another reality: that when companies spend capital on 

regulatory compliance, it consumes capital that would otherwise be 

used to create jobs, producing manufacturing products and exports, 

both of which are desperately needed to revive our weak economy 

and job creation. 

Thank you for considering our points. 

[The prepared statement of Mr. Cicio follows:] 

25 


82183.001

"Energy Consumers Relief Act of 2013" 

Before the House Committee on Energy and 

Commerce, Subcommittee on Energy and 

Power 

Friday, April 12, 2013 

Testimony of 

Paul N. Cicio 

President 

Industrial Energy Consumers of America 
26 


82183.002

Thank you Chairman Whitfield and Ranking Member Rush for the opportunity to testify before you and 

other Subcommittee Members. My name is Paul Cicio and I am the President of the Industrial Energy 

Consumers of America (IECAj. As significant consumers of energy, our competitiveness is dependent 

upon the cost of energy. For this reason, we welcome the opportunity to comment on the proposed 

legislation "Energy Consumers Relief Act of 2013." 

The Industrial Energy Consumers of America is a nonpartisan association of leading manufacturing 

companies with $1.1 trillion in annual sales, over 1,000 facilities nationwide, and with more than 1.4 

million employees worldwide. It is an organization created to promote the interests of manufacturing 

companies through advocacy and collaboration for which the availability, use and cost of energy, power 

or feedstock playa significant role in their ability to compete in domestic and world markets. IECA 

membership represents a diverse set of energy intensive industries including: chemical, plastics, steel, 

aluminum, paper, food processing, fertilizer, insulation, glass, industrial gases, pharmaceutical, brewing 

and cement. IECA companies do not include producers of natural gas, oil, coal, or electric utilities. 

IECA supports the draft bill entitled the "Energy Consumers Relief Act of 2013," which would require the 

U.S. Department of Energy (DOE), the Federal Energy Regulatory Commission (FERC) and Energy 

Information Administration (EIA) to make a determination as to the direct and indirect costs of any 

energy-related EPA regulation that may cost one billion dollars or more, prior to finalizing the rule. If, in 

the event that the review of the costs by the U.S. Department of Commerce, the Department of Labor 

(DOL), and the Small Business Administration (SBA) finds that the Environmental Protection Agency 

(EPA) regulation would be harmful to the economy - we would hope that the EPA will reconsider the 

rule and seek alternative lower-cost regulation. 

The EPA should not fear transparency of the economics of regulation - they should embrace it as part of 

their regulatory reform efforts. Policymakers, including the EPA, must be mindful that manufacturing 

companies have choices as to where they build their facilities around the world. In this regard, the U.S. 

and its policies are in competition with other countries for these investments and jobs. This means that 

U.S. regulations must compete as well- that is, to regulate in a manner that is cost-effective and 

implemented in time horizons that are responsible to the public health, but mindful of market realities. 

The most fundamental element is transparency of the cost of regulation. In our view, EPA's scorecard is 

very poor. The EPA provided leadership decades ago in reducing emissions; they now need to lead again 

by addressing the cost and transparency issues. This is a win-win and there are no losers. 

IECA SUPPORTS THE LEGISLATION FOR THE FOLLOWING REASONS: 

1. All costs associated with EPA regulations that are energy-related, whether through regulations 

directly upon the industrial sector company or indirectly on our energy suppliers - are passed onto to 

us and can greatly impact our competitiveness, U.S. investment levels, jobs and exports. 

When the EPA is promulgating rules and costs on the electric utility industry - we consumers pay for it. 

When the EPA promulgates rules on the oil and natural gas industry - consumers pay for it. When the 

EPA chooses fuel mix strategies that give preference of one fuel over another - consumers pay for it. 

There appears to be insensitivity or disconnect to this point as EPA proceeds to roll out a multiplicity of 

new regulations. Someone has to pay for these regulations and that someone is the industrial sector and 

other U.S. consumers. As the only sector of the economy that competes with global competition, the 
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pass through of these costs to us is significant and getting greater all the time - continually eroding our 

ability to compete and create jobs. 

2. The manufacturing sector competes globally, often with unfair or subsidized global competition, 

and even a relatively small cost increase can impact competitiveness and result in lost jobs and 

exports. 

This is not 1970 when U.S. emissions were relatively high and significant action was needed to reduce 

emissions. Emissions have been drastically slashed since then and that is the good news. The bad news 

is that now that emissions are so small, the cost of the next increment of reduction is very expensive. So 

expensive that manufacturing companies could be forced to make decisions of whether to comply or 

shut down the facility and move its production offshore. 

The reality is that manufacturers face a significant number of existing, new or proposed EPA regulations, 

all at the same time with overlapping requirements, and additive and compounding costs. This plethora 

of regulations has resulted in business investment uncertainty. 

We encourage policymakers to be mindful of another reality - when companies spend capital on 

regulatory compliance it consumes capital that would otherwise be used to create new jobs producing 

manufacturing products and exports. Both are desperately needed to revive our weak economy and 

weak job creation. 

3. Congress never intended for the EPA to set energy policy - but that is what is happening. 

EPA rules can and are having a significant impact on both the production and consumption of energy. 

EPA rules can have direct and indirect impact to energy production levels, costs, reliability and national 

security. Likewise, EPA rules can increase direct and indirect demand for energy that impact energy 

prices. 

EPA rules have absolutely become intertwined with reducing emissions and our nation's energy 

production and consumption. And, EPA does not have expertise in energy markets. Because emissions 

and energy production and consumption are intertwined, policy checks and balances are needed. The 

capabilities of the DOE, FERC and EIA will provide expertise necessary to determine direct and indirect 

cost impacts. Congressional oversight is needed because one agency should not have the power to 

dictate energy policy that could significantly and negatively impact the economy, jobs and the 

competitiveness of the industrial sector. 

4. A key cornerstone of responsible public policy is that the cost of the regulation is transparent (in 

advance of implementation) and that it is implemented using the lowest cost policy alternative. 

EPA has shown either the inability or unWillingness, or both, to determine the full cost of their 

regulations. As stated above, the stakes are much too high for our country not to make this policy 

change. We are not saying do not regulate - we are saying - do it better and at less cost. 

3 
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5. With this legislation in place, we are hopeful that if in the event that the DOE, FERC, and EIA cost 

evaluation clearly shows that the EPA regulation costs exceed one billion dollars, and that the DOC, 

DOL and SBA finds the regulation would be harmful to the economy - that the EPA will consider 

alternative and less expensive policy alternatives. 

6. Weak economy and job growth are reasons enough. 

If the above reasons are not sufficient, then we hope that the reality of U.S. weak economic gains and 

lack luster job growth will spur support for this legislation. There are multiple studies, too long to list 

here, all of which confirm, EPA regulations are indeed costly and that these costs are accelerating in a 

time of weak economic growth. As said before, unnecessary high costs divert business capital away from 

investment that create needed jobs. 

SUPPORT MATERIAL 

About the manufacturing sector 

Manufacturing is the most diverse end-use sector -in terms of energy services required, 

sources of energy used, technologies needed, and product output. 

Contributes about 12% of gross domestic product (GOP) 

Directlyemploys approximately 12 million people 

Accounts for 60% of U.S. engineering and science jobs 

Supplies about 57% of U.S. exports 

Produces nearly 20% of the world's manufacturing output 

The cost and implications of regulations to the manufacturing sector 

On August 21, 2012, the Manufactures Alliance for Productivity and Innovation commissioned a study 

entitled "Macroeconomic Impacts of Federal Regulation on the Manufacturing Sector" that illustrates 

why the "Energy Consumers Relief Act of 2013" is needed. Below are some of the key points: 

The average number of major regulations 

o 1993 to 2000: 36 

o 2001 to 2008: 45 

o 2009 to 2011: 72 

All manufacturing subsectors are impacted by increased costly regulations 

o Energy-intensive sectors are most impacted. Output could fall by about 9% to 10% per 

year on average 

o Total value of shipments could be reduced by $200B to $500B in constant 2010 dollars 

in 2012 

o EPA imposes the largest number of regulations on manufacturing: (972); including 122 

major regulations 

o EPA imposes the largest regulatory costs totaling $117B in constant 2010 dollars 

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Growth in the cost of regulation has exceeded economic growth and especially manufacturing 

sector growth 

o From 1998 through 2011, cumulative inflation adjusted cost of compliance grew by an 

annualized rate of 7.6% while GDP growth averaged 2.2% per year; annual growth of 

physical volume of manufacturing output averaged a mere 0.4% 

Exports are being held down by regulatory burden. Exports in 2012 could be 6.5% to 17% lower 

than they would be without the estimated regulatory burden. 

Thank you. 

5 
30 

Mr. WHITFIELD. Thank you, Mr. Cicio. 

And Mr. Williams, you are recognized for 5 minutes. 

STATEMENT OF BRENDAN WILLIAMS 

Mr. WILLIAMS. Thank you, Chairman Whitfield, Ranking Member Rush, and members of the subcommittee, for this opportunity 

to be here today. 

The Energy Consumers Relief Act is a commonsense measure 

that will inject transparency and scientific vigor back into the regulatory process. While not stopping EPA’s ability to regulate emissions, the legislation would inject a more rigorous review of the 

most costly regulations and foster a more robust, public debate 

about the costs and benefits of the proposals. 

My written testimony details some of the nebulous costly and 

conflicting regulations that fuel and petrochemical manufacturers 

are facing. These regulations pose significant costs often with questionable benefit and ultimately impact consumers. The consumer 

impact of regulation is where I would like to focus my remarks 

today. 

Energy is truly the lifeblood of our economy. Affordable, abundant supplies of energy make modern life possible and have made 

America the most prosperous nation on Earth. Abundant energy 

and a clean environment are not mutually exclusive. The air is 

cleaner today than it ever has been and it is getting even cleaner. 

EPA notes that between 1990 and 2011, emissions of the six principal pollutants drop 63 percent while vehicle miles traveled increased 94 percent and energy consumption increased 26 percent in 

that period. 

Today, emissions are so low the new requirements for incremental reductions become extremely costly. Given this reality, it is 

important to develop objective assessments on costs and energy 

supply impacts of additional regulations. Energy cost increases 

carry significant implications for consumers and our economy. Consider the following facts: every penny increase in gasoline prices 

translates into a more than $1 billion increase in household energy 

spending. And this is money that, as my colleague noted, consumers could spend elsewhere on other goods and services. 

In 2011, the trucking industry consumed more than 35 billion 

gallons of diesel fuel. A .01-per-gallon increase would have translated into an additional $365 million annually for truckers. Every 

dime increase in gasoline or diesel prices sustained over a year 

costs domestic agriculture over $381 billion annually. In fact, 65 

percent of farmer’s costs are dedicated to fuel, electricity, fertilizer, 

and chemicals. 

Increased energy costs not only affect what consumers pay for 

transportation and for operating their businesses but also manufactured goods. Petrochemicals are the basis for most consumer goods 

and energy represents one of the largest costs for petrochemical 

manufacturers. To highlight the significance of petrochemicals for 

consumer products, consider the following: an average vehicle contains almost 600 pounds of petrochemical derived plastics, composites, rubber coating, and textile products. Home electronics, such as 

TVs, computers, and cell phones contain up to 40 percent or more 

of plastics derived from petrochemicals. Nearly 14 percent of conVerDate Nov 24 2008 15:32 Sep 23, 2013 Jkt 037690 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-30 CHRIS
31 

struction materials used in the U.S. are made from synthetic materials and derived from petrochemicals. Even renewable energy 

products—windmills—about 15 percent of them are derived from 

petrochemical products. 

These facts make it easy to see how energy cost increases have 

significant ripple effects throughout the economy. The potential for 

such ripple effects is why we need to ensure regulation takes a balanced approach and maximizes environmental protection without 

disproportionately raising consumer costs or sending manufacturing jobs overseas. 

The Energy Consumers Relief Act will help restore such balance. 

As previously stated, today’s regulatory environment is characterized by costly and conflicting regulations with questionable benefit 

justifications. The legislation today establishes a thorough review 

of the most costly regulations by federal departments with expertise in energy economic ramifications of regulations. Such a structure will serve as a check against a potential for EPA to overstate 

benefits while minimizing costs. 

Most importantly, by requiring a report to Congress, this legislation will increase transparency and give policymakers and consumers alike the opportunity to better understand the tradeoffs between increased regulation and economic activity. Such measures 

will create a more balanced approach to environmental rulemaking 

that could significantly impact consumers and our economy. 

AFPM supports the Energy Consumers Relief Act and appreciate 

the opportunity to voice our opinion today, and I will be happy to 

answer any questions at the appropriate time. 

[The prepared statement of Mr. Williams follows:] 

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AfPM 

WRITTEN STATEMENT OF THE 

AMERICAN FUEL & PETROCHEMICAL MANUFACTURERS 

AS SUBMITTED TO mE 

SUBCOMMITTEE ON ENERGY AND POWER 

Committee on Energy and Commerce 

United States House of Representatives 

For a Hearing on 

The "Energy Consumers Relief Act 0(2013" 

April 12,2013 
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Testimony Summary of Brendan Williams, Vice President of Advocacy of the American Fuel & 

Petrochemical Manufacturers (AFPM) 

House Committee on Energy and Commerce - Subcommittee on Energy and Power 

Hearing on the "Energy Consumers Relief Act of2013" 

This hearing comes at a critical time for energy producers and the consumers they serve. There are many reasons 

to be optimistic about the future of U.S. energy production. For the first time in modem memory, the national 

conversation about our energy potential has shifted from one of scarcity to one of abundance. 

As a result, U.S. workers now face the prospect of manufacturing jobs returning to the U.S. as abundant and 

affordable energy attract billions of dollars in planned new investment. Such developments are happening against 

a backdrop oftremendous investment and advances in environmental performance within the refining industry. 

Last week, the Environmental Protection Agency (EPA) reported that energy-related emissions are at their lowest 

since 1994 and that refineries reduced emissions by 13.5 percent since 2006. A peer-reviewed report from Sage 

Environmental Consulting likewise found that refinery emissions of criteria air pollutants decreased as much as 

80 percent between 1990-2010. 

Despite such progress, the EPA is advancing an onslaught of costly regulations that provide minimal, if any, 

benefit. EPA pushes such an agenda forward with limited transparency, questionable economic analysis, and 

without consideration for inherent conflicts among major energy rules. These regulations, some of which are 

completely discretionary, threaten to chill investment and require companies to divert capital from job-creating 

projects to comply with unnecessary and burdensome regulations. 

The Energy Consumer Relief Act is a common sense measure that would inject transparency and scientific rigor 

back into the regulatory process. 

In relation to regulatory conflicts, EPA's Tier 3 standards will impcse costly new gasoline regulations on 

consumers, while providing minimal, if any, benefit. In addition to potentially adding 6 to 9 cents per gallon to 

the cost of producing fuel, it will require refiners to increase GHG emissions. 

Additionally, new GHG tailpipe standards are leading to lower gasoline demand, which creates conflicts with the 

federal Renewable Fuels Standard (RFS). Meeting both requirements will lead to more ethanol being forced into 

the fuel supply than existing engines and refueling infrastructure can safely accommodate. Studies also show the 

RFS could lead to increases in emissions EPA specifically regulates in other rules. 

Planned GHG regulations for refineries, as well as upcoming ozone requirements layer on additional all cost, 

Iittle-to-no benefit regulations that will have significant cost implications for the fuel supply and manufacturers. 

The Energy Consumers Protection Act will help better ensure energy costs and regulatory conflicts are given 

appropriate consideration in relation to future EPA regulations. Independent and thorough review by federal 

departments with expertise in energy and economic ramifications of regulations will serve as a check against EPA 

overstating or double counting benefits, minimizing costs. 

Most important, by requiring a report to Congress, it will increase transparency and give policymakers and 

consumers alike the opportunity to better understand the tradeoffs between increased regulation and economic 

activity. 
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The American Fuel & Petrochemical Manufacturers (AFPM) appreciates the opportunity 

to express its support for the Energy Consumers Relief Act. AFPM is a trade association 

representing high-tech American manufacturers of virtually the entire U.S. supply of gasoline, 

diesel, jet fuel, other fuels and home heating oil, as well as the petrochemicals used as building 

blocks for thousands of products vital to everyday life. AFPM members make modem life 

possible and keep America moving and growing as we meet the needs of our nation and local 

communities, strengthen economic and national security, and support 2 million American jobs. 

This hearing comes at a critical time for energy producers and the consumers they serve. 

There are many reasons to be optimistic about the future of U.S. energy production. For the first 

time in modem memory, the national conversation about our energy potential has shifted from 

one of scarcity to one of abundance. Innovation and feats in engineering-rather than mandates 

and subsidies--now allow U.S. oil and gas producers to develop energy from areas once 

considered impossible. Last year, the U.S. Energy Information Administration (EIA) reported 

that the U.S. is on track to become the world's largest oil producer, surpassing Russia and Saudi 

Arabia. Due in large part to these innovations, imports of oil as a percent of demand have 

already fallen from 60 percent in 2006 to 40 percent in 2012.) 

As a result, U.S. workers now face the prospect of manufacturing jobs returning to the 

U.S. as abundant and affordable energy attract billions of dollars in planned new investment.2 

Such developments are happening against a backdrop of tremendous investment and advances in 

1 Energy Information Administration. Monthly Energy Review, Table 3.3a 

http://'n\'W.eia.gov/totalenergv/dataimol1thlyipdfisec3 7.pdf 

2 See Michael Birnbaum, European Industry Flocks to u.s. to Take Advantage a/Cheaper Gas, Washington Post. 

April 1.2013: Jack Kaskey. LyondellBasell May Spend SI Billion to Boos/ Production, Bloomberg, March 13,2013. 

1 
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environmental performance within the refining industry. Last week, the Environmental 

Protection Agency (EPA) reported that energy-related emissions are at their lowest since 1994 

and that refineries reduced emissions by 13.5 percent since 2006.3 Moreover, the refining sector 

spent $132 billion since 1990 to improve environmental performance.4 A peer-reviewed report 

ITom Sage Environmental Consulting likewise found that refinery emissions of criteria air 

pollutants decreased as much as 80 percent between 1990-2010.5 

Despite such progress, the EPA is advancing an onslaught of costly regulations that 

provide minimal, if any, benefit. EPA pushes such an agenda forward with limited transparency, 

questionable economic analysis, and without consideration for inherent conflicts among major 

energy rules. These regulations, some of which are completely discretionary, threaten to chill 

investment and require companies to divert capital from job-creating projects to comply with 

unnecessary and burdensome regulations. The Energy Consumer Relief Act is a common sense 

measure that would inject transparency and scientific rigor back into the regulatory process. The 

legislation does not stop EPA's ability to regulate. It would simply inject more rigorous review 

of the most costly regulations and foster more robust public debate about the costs and benefits 

of such proposals. 

One need look no further back than 2012 to understand the impact of the regulatory 

environment on the nation's refineries. Until new investors and agreements between businesses, 

labor and policymakers, several Philadelphia region refineries faced the prospect of closing. In 

3 Edward Felker, Energy Sector Carbon Output Declined Again Last Year, Energy Guardian, April 5, 2013. 

4 American Petroleum Institute, Environmental Expenditures by the Oil and Gas Industry 1990·2011, December 

2012. 

S Thomas. P. Nelson, An Examination 0/ Historical Air Pollutant Emissions/rom US Petroleum Refineries. Sage 

Environmental Consulting (2012). 

2 
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discussing the many factors behind its refinery closures, one of the companies noted that 

environmental regulatory costs consumed approximately 15 percent of its operating budget. 

Similarly, over the ten years prior to selling its Trainer refinery in Philadelphia, ConocoPhillips6 

invested 100 percent of its cash flow to meet regulatory requirements before making the difficult 

decision to idle the plant and put it up for sale. While the Philadelphia area situations were 

resolved, that has not always been the case. A Hovensa refinery that closed in the u.S. Virgin 

Islands was located in a region already in attainment with the Clean Air Act. EPA nevertheless 

required the company to spend $700 million replacing turbines. After losing $1.3 billion over 

three years due to several factors, the refinery could not afford the additional regulatory 

compliance costs and decided instead to close its doors. 

2013 Regulatory Environment 

A brief examination of the regulatory landscape underscores the high-cost, conflicting 

nature of the U.S. regulatory regime. For example, the following three current regulations are 

inherently in conflict and are, or will, disadvantage consumers-Tier III fuel standards, the 

Renewable Fuels Standard (RFS), and Corporate Average Fuel Economy (CAFE) standards. 

On March 29, 2013, EPA proposed its long anticipated Tier III fuel standards, requiring 

refiners to remove trace amounts of sulfur from gasoline despite the fact that the industry already 

removed 90 percent of the sulfur in gasoline since 2004. The incremental reduction to remove 

the trace amounts of sulfur will cost refiners almost as much as the original reduction, which 

removed 15 times more sulfur than the current regulation will require. While not completely 

6 ConocoPhillips has since split into separate upstream and refining companies. 

3 
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analogous to the parameters of the proposed rule, a Baker and O'Brien analysis estimates that a 

sulfur only reduction will cost refiners $10 billion in capital costs and $2.4 billion a year in 

operating costs~quating to 6 to 9 cents per gallon in additional cost. EPA has still failed to 

sufficiently demonstrate the justification for this discretionary rule. 

Incongruously, as a result of the equipment needed to remove additional sulfur, Baker 

O'Brian estimates that greenhouse gas emissions will increase by I to 2.3 percent as a result of 

the Tier III rule. This occurs because required technologies such as hydrotreating result in 

increased energy consumption with associated greenhouse gas and other emissions. In addition, 

the production of extra hydrogen necessary for the hydrotreater results in an increase in GHG 

emissions because the hydrocarbon source (natural gas or refinery fuel gas) must be "cracked" to 

recover the hydrogen - releasing large amounts of CO2• Therefore, a further gasoline sulfur 

reduction standard will increase the carbon footprint at refineries. Such carbon emission 

increases conflict with EPA's attempts to regulate GHGs under the Clean Air Act. 

EPA characterizes this proposed rule as necessary for public health and as helpful to 

automakers in meeting increasing fuel efficiency standards. These are both laudable goals, but 

unfortunately EPA does not show all ofits math, so the public and other policy makers cannot 

appropriately judge the true costs and true benefits. For example, as part ofthe proposed rule, 

EPA includes new tailpipe emissions standards. Yet in its recital of benefits arising from Tier 

III, EPA does not delineate among the tailpipe, evaporative, or gasoline sulfur standards. If the 

benefits flow primarily from the tailpipe emission reductions, the fuel sulfur reduction is 

tremendously expensive with little return on public health. We already know that mobile source 

4 
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emissions have declined because of the Tier 2 standards, and this will continue because not all 

cars and light-duty trucks are Tier 2 vehicles. However, the air quality benefits of Tier III will be 

much smaller than Tier 2. For ozone, this reduction is estimated to be no more than 0.5 ppb by 

2022 compared to a 12 ppb reduction from Tier 2, or one twentieth ofthe reduction achieved 

from moving to Tier 2.7 Stated differently, Tier 2 will help reduce ozone emissions 10 percent 

below 2008 levels by 2022. Moving to Tier III would only achieve another 0.7 percent 

reduction. In other words, EPA proposed Tier III before all the benefits of Tier 2 have been 

realized, the cost of both rules will be similar despite Tier III yielding only a fraction ofthe 

benefit of Tier 2, and despite the increase in GHG emissions stemming from Tier III compliance, 

dampening the impact of other EPA programs. 

EPA claims that the proposed Tier III standard is necessary for states to attain the 

existing national ambient air quality standards (NAAQS). Last year, EPA promulgated 

nonattainment areas for the 2008 ozone NAAQS. Most (36 are marginal out of 46 total 

nonattainment areas) must be in compliance by 2015 based on monitoring data for 2013, 2014 

and 2015. Therefore, EPA's stated justification for Tier III is suspect since it will not help the 36 

marginal non attainment areas because it will not be effective until 201 7. 

Similarly, EPA contends that Tier III will help automakers meet CAFE standards by 

helping catalytic converters to run more efficiently. Again, EPA declines to place a value on the 

incremental efficiency gain and does not allow consumers to consider whether 9 cents per gallon 

is worth (hypothetically) a tenth ofa mile in fuel economy gains. Moreover, EPA should have 

7 ENVIRON, Effects of Light-duly Vehicle Emissions Standards and Gasoline Sulfur Lel'els on Ambient O=one, 

September 2012. 

5 
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analyzed the ability of auto manufacturers to achieve CAFE in the context of that earlier 

rulemaking. If a fuel change is necessary for CAFE standards to be achieved, then EPA had the 

obligation to incorporate that analysis and the costs that flow from it into its CAFE rulemaking. 

This is a perfect example of the problems caused by the agency's silo approach to rulemaking. 

CAFE standards will likewise create an inherent conflict with the RFS that will 

disadvantage consumers. In particular, domestic gasoline demand will continue to decline in 

large part due to fuel efficiency standards. However, the volumes of ethanol mandated in the 

RFS will continue to increase to a point where there will be a de facto government mandate for 

transportation fuels to contain more than 10 percent ethanol. When the RFS was passed in 2007, 

EIA projected gasoline demand would be nearly 150 billion gallons in 2012 and nearly 155 

billion gallons in 2022. Instead, U.S. consumers used 134 billion gallons of fuel in 2012 and 

EIA projects only 124 billion gallons of demand in 2022. The RFS grows to a 36 billion gallon 

consumption mandate by 2022-including 15 billion gallons of corn ethanol and 21 billion 

gallons of advanced biofuels, which includes 16 billion gallons of cellulosic biofuels, I billion 

gallons of biomass based diesel, and other advanced biofuels. The 10 percent limit at which 

ethanol can safely be introduced into the fuel supply is called the "blendwall." 

A recent NERA report highlighted that breaching the blendwall alone will significantly 

increase gasoline costs. 8 Additionally, several groups have expressed concern over the adverse 

impacts higher ethanol blends in the fuel supply could have on consumers. These problems 

range from potential engine damage, to food price inflation, to lower fuel economy and increased 

8 NERA Economic Consulting, Economic Impacts Resultingfrom Implementation ofRFS2 Program. (October 

2012). 

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emissions. Several comments the Committee has and will receive on its RFS white papers -

including those AFPM recently submitted - go in detail about these individual problems. 

AFPM's comments detail problems with the blendwall and E 15, but one particular aspect is 

worth noting. A 2009 study by the Environmental Working Group (EWG) concluded that a 

higher ethanol blend may damage non-road engines and emission control systems, worsen health 

risks from air pollution, pose safety risks and higher fuel costs, and compromise performance of 

non-flex-fuel vehicles.9 EWG found that El5 increases emissions of acetaldehyde, PM2.5 

particulate air pollution, ground-level ozone and other toxic air pollutants. 1O These pollutants are 

precisely the targets of other regulations, notably national ambient air quality standards discussed 

below. 

In short, the conflicts between the RFS and CAFE will force more ethanol into the fuel 

supply than existing engines and refueling infrastructure can safely accommodate. This reality 

will create significant fuel supply and consumer cost concerns. Increased vehicle purchasing 

costs, combined with requirements that will force consumers to pay more per mile for fuel could 

have significant economic impacts, while potentially increasing emissions and resulting in costly 

repairs. 

Anticipated Regulations 

9 Olga V. Naidenko, Ph.D., Ethanol-Gasoline Fuel Blends May Cause Human Health Risks and Engine Issues, 

Environmental Working Group at I (2009). 

10Id at 3. 

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Despite substantial progress in industry environmental performance and existing 

regulatory programs to combat greenhouse gas emissions, President Obama indicates that he 

plans to move forward with additional unilateral measures to layer on new regulations. 

"But if Congress won't act soon to protect future generations, I 

will. I will direct my Cabinet to come up with executive actions 

we can take, now and in the future, to reduce pollution, prepare our 

communities for the consequences of climate change, and speed 

the transition to more sustainable sources of energy." 

-President Obama, 2013 State of the Union Address 

Although this statement is not surprising, for those industries already navigating an 

onerous, conflicting and costly maze of regulations, it is nonetheless disappointing. It also 

underscores the need for more robust public debate that the Energy Consumers Protection Act 

would afford. In addition to ongoing compliance challenges with the aforementioned 

regulations, AFPM anticipates EPA will seek to promulgate at least two costly new 

environmental standards: revised ozone national ambient air quality standards (NAAQS) and 

refinery greenhouse gas New Source Performance Standards (NSPS). 

This year, the Clean Air Scientific Advisory Committee (CASAC) will advise the EPA 

Administrator on new ozone NAAQS, following the five-year review process that started in 

2008. The Clean Air Act (CAA) calls on EPA to revise NAAQS every five years "as may be 

8 
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appropriate" in accordance with sections 108 and \09(b) ofthe CAA. NAAQS regulates six 

criteria pollutants, namely ozone, carbon monoxide, lead, sulfur dioxide ("SOT), nitrogen oxides 

("NOx") and particulate matter ("PM"). In relation to the ozone NAAQS, EPA seeks to control 

emissions of volatile organic compounds ("VOCs") and NOx, because they are ozone precursors. 

Primary NAAQS must be set at a level "requisite to protect the public health" with "an adequate 

margin of safety." Secondary NAAQS must specify a level of air quality "requisite to protect the 

public welfare from any known or anticipated adverse effects." Failure to achieve NAAQS has 

significant ramifications for states and localities. If an area is designated "non-attainment," it 

becomes subject to several new regulations, such as a requirement to use reformulated gasoline 

in a given area, much more stringent stationary source permitting, and required implementation 

of "Reasonably Achievable Control Technology" ("RACT") on major stationary sources 

emitting VOCs and NOx. The potential fuel modifications alone could have significant cost 

ramifications for businesses and consumers. Depending on the level of non-attainment severity, 

states and localities can actually be denied federal transportation funding. 

EPA finalized a new NAAQS ozone standard of 0.075 ppm in 2008 following substantial 

and rigorous scientific review. This standard itself is extremely stringent and will be difficult to 

meet. Further tightening of already stringent ozone levels with expedited compliance schedules 

could have a significant and adverse impact on all aspects of the economy. A Manufacturers 

Alliance study found that lowering the standard to 0.060 ppm would cost over $1.6 trillion and 

could lead to the loss of 7.2 million jobs economy wide over the next decade. EPA's own 

numbers indicated the cost of a revised ozone NAAQS standard would range from $19-$90 

billion annually. To emphasize how stringent a 0.060 ppm standard is, Yellowstone National 

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Park, with no industrial development in it or for miles around, would be nonattainment if the 

standard were set that low. 

Moreover, ambient air quality is, and has been, dramatically improving, even as the 

nation's economy has grown. According to the EPA, between 1980 and 2008 total emissions of 

the six principal air pollutants has dropped 54 percent. Measures of ambient concentrations of 

ozone dropped 25 percent in that time, while national GDP increased 126 percent, vehicle miles 

traveled were up 91 percent and energy consumption increased 29 percent. A tighter standard 

could have significant adverse health and welfare impacts associated with continued 

unemployment and economic decay. 

In addition to GHG and emissions controls implemented through CAFE, RFS, Tier III, 

NAAQS, and other policies not mentioned herein, in late 20 I 0 EPA agreed to a settlement with 

environmental groups and several states that will require EPA to propose regulating GHGs under 

a section ofthe CAA that calls for the creation of New Source Performance Standards (NSPS). 

EPA has proposed a GHG NSPS for electric utilities currently focusing only on new units and 

still has not reached agreement on a schedule for the refinery GHG NSPS. Under the Clean Air 

Act, a New Source Performance Standard requirement applies to new, modified and 

reconstructed, and existing facilities subject to regulation under the act. A GHG NSPS would 

require any regulated facility to install Best Demonstrated Technology ("BDT") and EPA is 

required to consider cost in determining BDT. 

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AFPM members have concerns with this action. The Agency continuously mentions that 

utilities and refiners together account for upwards of 40 percent of GHG emissions. This 

statement is misleading, because the overwhelming majority of that figure is attributable to 

utility emissions (2.4 billion tons for electricity generation versus 183 million tons annually for 

refineries). Stationary source refinery GRG emissions comprise roughly only 4 percent of our 

nation's GRG emissions. 

Finally, it is important to remember that the Clean Air Act was never designed or 

intended to regulate carbon emissions. It is, at best, a blunt instrument to address an issue that 

should remain within the purview of Congress, which answers to constituents and is in a better 

position to understand the real-world impacts of such policies. Congress has, on numerous 

occasions, explicitly rejected new carbon control legislation. 

Energy Consumers Protection Act 

The foregoing examples highlight a few of the current and upcoming regulations AFPM 

is closely monitoring. Viewed individually, each poses a unique challenge and added cost to 

refineries. However, collectively, these laws and regulations are often in conflict with each other 

and their aggregate compliance costs rise exponentially. Reducing emissions to comply with one 

regulation compels refiners to deal with higher emissions and associated compliance challenges 

in another. 

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The Energy Consumers Protection Act will not stop regulatory activity and does not 

remove EPA's ability to regulate emissions. It is also not specific to fossil fuel regulations. In 

fact, one can imagine a scenario where a proposed EPA energy regulation would affect the 

renewables industry. However, independent, and thorough review by federal departments with 

expertise in energy and economic ramifications of regulations will serve as a check against EPA 

overstating or double counting benefits, while minimizing costs. Most important, by requiring a 

report to Congress, it will increase transparency and give policymakers and consumers alike the 

opportunity to better understand the tradeoffs between increased regulation and economic 

activity. In short, the bill will act as a check against a "fox guarding the henhouse" scenario in 

relation to an agency that is incentivized to increase regulation, acting as its own judge of the 

impact of those regulations. 

Finally, in its justification for new regulations, EPA typically claims that the costs of such 

regulations are only a few pennies per gallon (including its recent Tier III proposed rule). Even 

if one did not take issue with such rosy estimates (and AFPM takes issue with many), what EPA 

fails to consider, however, is the cumulative cost those pennies and that of the broader 

Administration policy limiting energy production and manufacturing. For example, a one cent 

increase in gasoline prices translates to more than $1 billion increase in household energy 

spending that could otherwise be used for other goods and services. 11 

II Bloomberg, The Impact on u.s. Consumers of lovery i¢ increase in Gas Prices: $i billion, March 19.2012 

(citing 2011 Deutsche Bank report), accessed April 9,2013, available at: 

http://www.bloomberg.com/portfolio-impactl20 12-03-19/the-impact-on-u-s-consumers-o f-every-I-increase-in-gasprices-I-billion.html#what%27s happening 

12 
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Conclusion 

The U.S. is in the midst of an energy revolution. New technology--driven by private 

sector ingenuity without the benefit of mandates and subsidies-has placed the U.S. in a position 

to become the world's largest energy producer, led by the oil and gas industry. The air is cleaner 

than it has been in decades, driven by continuous improvements in the energy production, fuel 

and petrochemical manufacturing and vehicle technology. Yet an onslaught of conflicting and 

costly laws and regulations threatens these positive developments. The Energy Consumer 

Protection Act, while not stopping EPA's ability to regulate emissions, would inject more 

rigorous review of the most costly regulations and foster more robust public debate about the 

costs and benefits of such proposals. AFPM fully supports the Energy Consumers Protection 

Act and appreciates the opportunity to share its views. 

13 
47 

Mr. WHITFIELD. Thank you very much, Mr. Williams. 

Dr. Rom, you are recognized for 5 minutes. 

STATEMENT OF DR. WILLIAM N. ROM 

Dr. ROM. Thank you, Mr. Chairman. Congressman Whitfield and 

Congressman Rush, I am Dr. Bill Rom. I am a professor of medicine and environmental medicine at New York University. I direct 

a division of pulmonary critical care and sleep medicine. I direct 

what is called the Chest Service at Bellevue Hospital. This is the 

Nation’s largest and oldest public hospital in the country. I have 

done this for the past three decades. 

I am testifying today on behalf of the American Thoracic Society. 

It is a medical professional organization of 15,000 doctors dedicated 

to protecting lung health in the U.S. and around the world. 

I have three important messages I would like to convey to the 

committee. First, air pollution inflicts significant health risks to my 

patients; second, reducing air pollution is good for public health 

and the economy; and third, Congress should let EPA do its job. As 

a pulmonary doctor, I spend my days treating patients who struggle to breathe. They have serious long diseases like asthma, COPD, 

pneumonia, and a number of other conditions like sarcoidosis and 

IPF that most people have never heard of. Through a combination 

of medications, interventional procedures and GC’s management, I 

work with my patients to help control their lung disease. However, 

there is one thing that neither I nor my patients can control and 

that is the air they breathe, and it can be deadly. 

So let me share with you what I do on a daily basis. I am an 

attending now at the University Hospital and then after that I am 

an attending at Bellevue, and I always attend at Bellevue during 

the month of July. That is when the new interns come, that is 

when the ozone peaks, and that is when the PM accumulates. We 

have the largest emergency room in this city and patients are admitted from there to my service and I also oversee all the intensive 

care units. 

So I had a patient a while back during the summer. He was 53. 

He had both asthma and COPD. COPD is chronic obstructive pulmonary disease and the chronic and the obstructive parts in that 

disease mean his lungs can’t breathe well on a regular basis. Despite that, he went to the gym four to five times a week and works 

full-time as a computer programmer. One morning he walked to 

the bus stop near his home to go and visit a friend. While waiting 

for his bus to arrive, he stood near the exhaust of an idling bus for 

approximately 5 minutes. Soon thereafter, he developed the acute 

onset of severe shortness of breath and a bystander called the 

emergency medical services. 

In the emergency room, he was in extreme distress. He couldn’t 

get air in or out of his lungs and his blood pressure shot up to 200/ 

139. He was emergently intubated and admitted to the intensive 

care unit. In the ICU he required near continuous bronchodilators, 

high-dose intravenous steroids, a neuromuscular blockade for management of his severe exacerbation of asthma and COPD. He remained intubated in the ICU for 9 days. He stayed in the hospital 

for 24 days. He was discharged to acute pulmonary rehabilitation 

48 

to regain strength and conditioning. Eight weeks later, he was finally able to return to work. 

Absent the exposure to air pollution, my patient could have expected to live a fairly healthy life. Instead, air pollution nearly 

killed him. His brief exposure to diesel particulate and gases combine with his underlying asthma and COPD led to this 9-day intensive care stay, 24-day hospital stay with all the associated costs, 

approximately about $413,000. So these are my costs. 

And there are 86,000 hospital admissions per year, 86,000 emergency room visits, 1.7 million asthma attacks and on top of that, 

160,000 deaths. So these are my costs. But on this ledger, they are 

called benefits, but they are real costs. And I would just as soon 

not incur these costs as a physician. We really should prevent all 

of these diseases. 

So when the air pollution is bad, the above scenarios are repeated across the U.S. My written testimony is full of the research 

articles that show air pollution causes a host of adverse health effects including mortality and morbidity in the form of asthma attacks, heart attacks, COPD exacerbations, birth defects, low birth 

weight. Recent studies also link air pollution to loss of diabetes 

control, even in-utero exposure leading to cancer in children, presented this week. 

The evidence is clear. Air pollution is bad for human health. The 

research is equally clear that reducing air pollution is good for 

human health and the economy. Recently, EPA stated the direct 

benefits of the 1990 Clean Air Act amendments and associated programs significantly exceed their direct costs. And even under the 

most conservative cost-benefit analysis that assumes no mortality 

from ozone and particulate matter, the $137 billion in economic 

benefits of the 1990 Clean Air Act protections more than double the 

$65 billion in costs. If we include the mortality benefits, is a 30- 

to-1 ratio. 

Lastly, I would note that in the past few years the House of Representatives has frequently passed legislation that would block, 

weaken, or delay EPA’s authority to improve our Nation’s air quality. Often the legislation is justified on avoiding the economic burden of compliance costs. Such thinking is shortsighted and it fails 

to recognize the wealth of studies that show clean air standards actually improve our economy by preventing death and disease. Such 

thinking also fails to recognize that we as a society are already 

paying for air pollution indirectly through avoidable emergency 

room visits, hospital stays, missed work and school days, and 

death. Both our Nation and our economy would be better served by 

paying the compliance costs up front and reaping the benefits of a 

healthier population. Thank you. 

[The prepared statement of Dr. Rom follows:] 

49 


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MONICA KRAFT, MD 

President 

PATRICIA W. FINN, MD 

President-Elect 

NICHOLAS S. HILL, MD 

Immediate Past President 

THOMAS W" FERKOL, MD 

Vice President 

ATUL MALHOTRA, MD 

Secretary-Treasurer 

National Headquarters 

25 Broadway, 18th Floor 

New York" NY 10004 

p" (212) 315 - 8600 

F. (212) 315 - 6498 

STEPHEN C, CRANE, PhD, 

MPH 

Executive Director 

GARY EWART 

Senior Director 

Government Relations 

NUALA MOORE 

Senior Legislative 

Representative 

Government Relations 

Testimony of the American Thoracic Society 

before the House Energy and Power Subcommittee 

of the House Energy and Commerce Committee 

Presented by William N. Rom M.D., MPH 

On Friday, April 12, 2013 

On behalf of the 15,000 members of the American Thoracic Society, I want to 

thank the committee for opportunity to testify before the Energy and Power 

Subcommittee of the House Energy and Commerce Committee. 

The goal of my written comments is to provide a brief summary of the 

overwhelming evidence that air pollution - especially fine particulate matter 

pollution (PM2.5) and ozone - has a severe and negative impact on human 

health. Additionally, I will provide some summary information on the cost 

effective of science-based Clean Air Act standards. 

Adverse Health Effects Caused By Particulate Matter 

Research has shown definitively that PM,", causes premature mortality in 

infants and adults; triggers systemic inflammation, alters vascular reactivity, 

and alters cardiac rhythms; and worsens asthma, chronic 

bronchitis, and other cardiopulmonary iIInesses. 1 These conclusions are 

widely-accepted in the scientific community and are further supported by 

recently released studies. 

PM,", kills,' The risk of premature mortality caused by exposure to PM,", is 

widely accepted. 3 Chronic exposure to PM,", increases the risk of dying from 

lung cancer and cardiovascular diseases. 4 

~~:c~o~U "~='----+----- International Activities 1 Pope CA III, Dockery DW. Health Effects of Fine Particulate Air Pollution: lines that Connect.} Air 

Washington Office 

1150 18th Street, NW" 

Suite 300 

Washington, D"C 20036 

P (202) 296 - 9770 

F. (202) 296 - 9776 

www,thoracic.org 

Waste Mange Assoc 2006; 56:709-742. 

2U.S.EPA, Expanded Expert Judgment Assessment of the Concentration-Response 

Relationship Betv.leen PM25 Exposure and Mortality: Final Report, vii, 3-23, 3-24 (September 

21,2006)" 

3 Health Effects Institute. Reanalysis ofth~ Harvard Six Citi8S Study and the Amen"can Cancer 

Society Study of Particulate Air Pollution and Mortality, 2000. 

4C. Arden Pope III e1 aI., Cardiovascular Mortality and YeaHound Exposure to Particulate Air 

Pollution: Epidemiological Evidence of General Pathophysiological Pathways of Disease, 109 

Circulation 71 (2004) (10~g/m3 increase in PM2 5 increased mortality risk by 8~18%); C. Arden 

ATS 2013 ' International Conference' May 17 ·22 • Philadelphia' Pennsylvania 
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82183.022

Acute exposure increases the risk of death from respiratory and cardiovascular causes. 5 It is 

important to note that these premature deaths do not represent the culling of unhealthy and 

frail individuals who would have likely succumbed to death from other caused. Rather these 

premature deaths are in people who could have otherwise continued to live full and productive 

lives. 

Recent studies not only support this conclusion regarding the morbidity effect of PM2.5, but also 

indicate that the risk of mortality from particulate matter is greater than previously believed. 6 

An observational study of 66,000 women in 36 U.s. cities (the first study to rely on direct 

measurements of PM2.S) found an increased relative risk of death from cardiovascular disease 

of 1.76 for every 10 ~g/m3, where previous, less specific studies only found an increased 

relative risk of 1.12 per 10 ~gl m3

.

7 These studies show that even incremental reductions in 

PM2.S exposure save lives. 8 

PM2.S induces a number of biological processes that contribute to cardiovascular morbidity and 

other life-threatening diseases. 9 Systemic inflammation caused by PM2.S affects the vascular 

system in a variety of ways.l0 Changes in platelet function can contribute to clots, heart attacks 

or strokes.ll Changes in vascular reactivity can change the caliber of blood vessels and affect 

Pope II! et aI., Lung Cancer Cardiopulmonary Mortality and Long-Term Exposure to Fine Particulate Air Pollution, 287 J, Am. Med. 

Ass'n 9 (2002). 

~ Meredith Franklin et al., Association Between PM?? and All-Cause and Specific-Cause Mortality in 27 U,S. Communities, 17 J. 

Exposure Sci. and Envtl. Epidemiology 279,285 (2007) (finding association between PM2.5and daily mortality three times larger 

than mortality risk from PM10); Cathryn Tonne et aI., A Case Control Analysis of Exposure to Traffic and Acute Myocardiallnfarctioo, 

115 EnvtL Health Persp. 53, 53 (2007) (exposure to PM25 and other traffic emissions was associated wjth increased risk of heart 

attack); Yun-Chul Hong et aI., Effects of Air Pollutants on Acute Stroke Mortality, 110 Envtl. Health Persp. 187, 190 (2002) 

1demonstrating link between air pollution and stroke mortality) 

Henry A. Roman et at, Expert Judgment Assessment of the Mortality Impact of Changes in Ambient Fine Particulate Matter in the 

U.S., 42 Envtl. ScL Tech. 2268 (2008) (EPA~conducted "expert elicitation" of 12 of the world's leading experts on health effects of air 

pollution revealed substantial agreement regarding likelihood of causal connection between exposure and premature death and 

suggesting larger estimates of saved lives from improved air quality): C. Arden Pope III, Mortality Effects of Longer Term Exposures 

to Fine Particulate Air Pollution: Review of Recent Epidemiological Evidence, 19 Inhalation Toxicology 33 (200?) (reviewing recent 

epidemiological studies to conclude that short-term exposure studies capture only a small amount of the overall health effects of 

long-tenn repeated PM exposure). See also Michael Jerrett et aI., Spatial Analysis of Air Pollution and Mortality in los Angeles, 16 

Epidemiology 727, 732 (200S) (reviewing data from past study and finding that people living in more polluted neighborhoods are at 

~reater risk than previously believed). 

Kristen A. Miller et. at, long-Tenn Exposure to Air Pollution and Incidence of Cardiovascular Eyents in Women, 3S6 New England 

J. Med, 447 (2007); Douglas W. Dockery & Peter H. Stone, Cardiovascular Risks from Fine Particulate Air Pollution, 365 New Eng!. 

J. Med. 511. 511 (2007) (editorial explaining significance of study). 

8 Francine Laden, et al.. Reduction in Fine Particulate Air Pollution and Mortality: Extended FollowMup of the Harvard Six Cities 

.§1!!dy, 173 Am. J. of Respiratory and Critical Care Med. 667 (2006) (In cities where the long-term average concentrations were 

below 13.4 JJg/m3

, the linear dose-response association between PM25 concentrations and total mortality persisted even at lower 

concentrations). 

9 AntoneUa Zanobetti & Joel Schwartz, The Effect of Particulate Air Pollution on Emergency Admissions for Myocardial Infarction: A 

Multicitv Case-Crossover Analysis, 113 Envtl. Health Persp. 978 (200S); Daniela D'ippoiiti et al., Air Pollution and Myocardial 

Infarction in Rome: a Case-Crossover AnalYsis, 14 Epidemiology 528 (2003). 

10 See e.g., Robert D. Brook et al., Air Pollution and Cardiovascular Disease: A Statement for Healthcare Professionals from the 

Expert Panel on Population and Prevention Science of the American Heart Association, 109 Circulation 2655, 2663-2665 (2004) 

(describing physiological responses to pollution leading to mortality and morbidity); Jiu-Chiuan Chen & Joel Schwartz, Metabolic 

Syndrome and Inflammatory Responses to Long Term Particulate Air Pollutants, 116 Envtl. Heaijh Persp. 612, 616 (2008) 

(inflammatory response associated with long-term exposure to particulate matter); Andrew J. Ghio et aL, Concentrated Ambient Air 

Particles Induce Mild Pulmonary Inflammation in Healthy Human Volunteers, 162 Am. J. Respir. & Critical Care Med. 981 (2000) 

1airway inflammation induced in healthy volunteers after short-tenn exposure to PM2.5 indicated risk for vascular events). 

1 Andrea Baccarelli et a!', Exposure to Particulate Air Pollution and Risk of Deep Vein Thrombosis, 168 ArChives of Internal Med. 

920, 926 (2008) (finding association between blood clots in legs and exposure to PM1 0); Andrew J. Ghio et aL, Exposure to 

Concentrated Ambient Air Particles Alters Hematologic Indices in Humans, 1S Inhalation Toxicology 1465 (2003) (blood changes in 

healthy volunteers after PM exposure). 

2 
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the amount of blood that gets to organs like the heart or brain. 12 PM z.5 can also inhibit the 

body's ability to vary the heart rate in response to environmental or situational changes,13 

which can result in arrhythmia, the immediate cause of death for most heart attacks. 14 In fact, 

studies have linked short-term increases in PM to increased hospitalization for cardiovascular 

diseases. 15 . 

PMz.5 can also affect blood vessel reactivity,16 reducing the ability of blood vessels to provide 

adequate blood flow, and potentially reducing the effectiveness of medicines designed to 

increase blood flow. Year-round exposure to PM can significantly damage the small airways of 

the lungs.17 

More recent studies have strengthened the conclusion that exposure to PM causes decreased 

lung function, even at levels below the NAAQS,18 and that improvement in air quality can 

improve lung function. 19 

PMZ.5 can be particularly dangerous for vulnerable populations. Exposure to PMz.5 and ozone 

increases the risk of pulmonary exacerbations and a significant loss in lung function for patients 

with cystic fibrosis. zo PMZ.5 also affects children and infants. 21 Infants face 9% greater risk of 

bronchiolitis for each 10 ).lg/m3 increase in PMZ.5. 22 

Exposure to PMz.5 also has non-morbid effects that are expensive, harmful, and inconvenient. It 

can aggravate asthma. z3 Asthma is a medical condition in which the smooth muscles of the 

bronchial wall tighten in response to stimulants, like allergens, or pollutants. 

12 Miriam Lemos et aI., Chronic Exposure to Urban Air Pollution Induces Structural Alterations in Murine Pulmonary Coronary 

Arteries, 1 B Inhalation Toxicology 247 (2006) (study of mice exposed to PM and other traffic pollutants developed significant 

thickening of arterial wall); Robert D. Brook et at, Inhalation of Fine Particulate Air Pollution and Ozone Causes Acute Arteria! 

Vasoconstriction in Healthy Adults, 105 Circulation 1534, 1535 (2002) (vasoconstriction caused by short-term inhalation of PM2,S 

reflects risk for myocardial infarction, stroke, or other cardiovascular events). 

13 RB. Devfin et al., Elderly Humans Exposed to Concentrated Air Pollution Particles Have Decreased Heart Rate Variability, 21 

European Respiratory. J. 76s (Supp. 2003):Y.C. Huang et aI., The Role of Soluble Components in Ambient Fine Particles-Induced 

~hanges in Human Lungs and Blood, 15 Inhalation Toxicology 327 (2003). 

S. Vedal et al., Air Pollution and Cardiac Arrhythmias in Patients with Implantable Cardioverter Defibrilators, 16 Inhalation 

Toxicology 252 (2004) (link between S02 exposure and implanted defibrillator activation). 

15 Francesca Dominici et aL Fine Particulate Air Pollution and Hospital Admission for Cardiovascular and Resoiratory Diseases, 295 

J. Am. Med. Assoc, 1127 (2006) (increase in hospital admissions associated with PM;1.5); Shang~Shyue Tsai et aI., Evidence for an 

Association Between Air Pollution and Daily Stroke Admissions in Kaohsiung Taiwan, 34 Stroke 2612 (2003). 

nrSruce Urch, Relative Contributions of PMZ5 Chemical Constituents to Acute Arterial Vasoconstriction in Humans, 16 Inhalation 

Toxicology 345 (2004) (exposure to PMl .:> and ozone increased blood pressure). 

17 Andrew Churg et aI., Chronic Exposure to High Levels of Particulate Air Pollution and Small Airway Remodeling, 111 Envtl. Health 

Persp. 714, 716 (2003). 

"Morton Uppman, Health Effects of Airbome Partkoulate Matter, 357 New Eng!. J. Med. 2395, 2396 (2007) (data from two recent 

studies indicate that low levels of airborne particles have adverse effects on hUman health). 

19 Sara H. Downs et aI., Reduced Exposure to PM10 and Attenuated Age·Related Decline in Lung Function, 357 New Eng/. J. Med, 

2338,2346 {2007) (concluding that relatively small reductions in particulate pollution could have measurable benefits for !ung 

function). Schindler C, Keide! D, Gerbase MVV. et al. Improvements in PM10 Exposure and Reduced Rates of Respiratory 

Symptoms in a Cohort of Swiss Adults (SAPALDIA). Am. J, Respiratory and Critical Care Med, 2009; 179: 579·587. 

20 Christopher H. Goss et aI., Effect of Ambient Air Pollution on Pulmonary Exacerbations and Lung Function in Cystic Fibrosis, 169 

Am. J. Respiratory and Critical Care Med. 616 (2004). 

21 See e.g., Thais Mauad, Chronic Exposure to Ambient Levels of Urban Particles Affects Mouse Lung Development, 178 Am, J. 

Respiratory and Critical Care Med. 721. 727 (2008) (research findings suggest that exposure to ambient levels of PM2.5 and other 

urban pollutants may adversely impact lung growth and development), 

21 Catherine Karr et aI., Effects of Subchronic Exposure to Ambient Air Pollutants on Infant Bronchiolitis, 165 Am. J, Epidemiology 

553. 557 (2007). 

23 Verena Morgenstem et aL, AtopiC Diseases Allergic Sensitization and Exposure to Traffic-Related Air Pollution in Children, 177 

Am. J, Respiratory and Critical Care Med. 1331 (2008) (finding link between allergic sensitivity, including asthma, and PM25 

exposure). 

3 
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The decreased radius of the bronchial tube increases the effort of breathing by the power of 

four. Asthma attacks can be frightening. The onset is often sudden, and it feels like breathing 

through a straw. Patients often say that they feel like they are suffocating or smothering. 

Besides this painful suffering and inconvenience, untreated asthma can scar the lungs and 

bronchial tubes, reducing lung function by as much as sixty percent. 

These non-fatal health effects exact a toll on lives and budgets. Short-term increases in PM are 

linked to a rise in hospitalizations for children with aggravated asthma attacks. 24 

Hospitalization is expensive. It can also cause lost work or lost school days. 

Reductions in PM2.5 yield public health benefits. 25 In 2009, a study explored the effect of 

improved air quality by comparing data on PM2.5 pollution and life expectancy in 51 cities 

throughout the U.S. for two periods of time-from the late 1970s and early 1980s and from the 

late 1990s to the early 2000s. After controlling for socioeconomic, demographic, and social 

factors (like smoking), the study revealed that a decrease of 10 Jlg/m3 of fine particulate matter 

was associated with an increase in life expectancy of six months to two years, and reductions in 

air pollution accounted for as much as 15% of the overall increase in life expectancy seen in the 

study areas. 26 Following up on those communities, a study published this winter looked at 

mortality in 545 counties in the U.S. in 2000-2007 and found that cleaner air in those counties 

was associated with four additional months added to the average person's life.27 Other studies 

released since trial also show that reductions in air pollution could be expected to produce 

substantial improvements in public health. 28 

Adverse Health Effects Caused By Ozone 

like PM2.5, ozone endangers and inconveniences the health of children and adults, even at 

levels below the NAAQS. The EPA recently published it Integrated Science Assessment for 

Ozone, concluding that ozone causes respiratory harm, and likely causes premature death, 

cardiovascular harm, and is suggestive of causing central nervous system effects and 

24 James C. Slaughter et aL, Effects of Ambient Air Pollution on Symptom Severity and Medication Use in Children with Asthma, 91 

Annals of Allergy. Asthma, & Immunology 346 (2003) (PM,s associated with aggravated asthma attacks); S. Lin et aI., Childhood 

Asthma Hospitalization and Residential Exposure to State Route Traffic. 88 Envtl. Res. 73 (2002); Gary Norris et al., An Association 

Between Fine Particles and Asthma Emergency Department Visits for Children in Seattle, 107 EnvtL Health Persp. 489 (1999); 

Paige E. Tolbert et ai., Air Quality and PediatriC Emergency Room Visits for Asthma in Atlanta Georgia, 151 Am. J. Epidemiology 

798 (2000). 

25 Joel Schwartz et a!., The Effect of Dose and Timing of Dose on the ASSOciation between Airborne Particles and Survival, 116 

Envtl. Health Persp. 64, 68 (2008) (finding no evidence of a threshold in the association between exposure to PM2.5 and the risk of 

death, suggesting that efforts to reduce particle concentrations as low as feasible is the most effective way to improve public health). 

26 C. Arden Pope III et aI., Fine Particulate Air Pollution and Ufe Expectancy in the United States, 360 New Eng. J. Med. 371 (2009). 

27 Corriea AW, Pope CA III, Dockery OW, Wang y, Ezzarti M, Domenici F. Effect of Air Pollution Control on Life Expectancy in the 

United States: An Analysis of 545 U.S. Counties for the Period from 2000 to 2007. Epidemiology, 2013; 24: 23-31. 

28 Antonella Zanobetti & Joel Schwartz, The Effect of Fine and Coarse Particulate Air Pollution on Mortality: a National Analysis, 117 

Envtl. Health Persp. 898, 902 (June 2009) (concluding that the strong association between particle pollution and deaths suggests 

that tens of thousands of early deaths per year could be avoided by reducing particle concentrations and recommending controls on 

power plants); Robin C. Puett et aI., Chronic Particulate Exposure Mortality and Coronary Heart Disease in the Nurses' Health 

§!yQy. 168 Am. J. Epidemiology 1161. 1167 (Oct. 2008) ("[OJur findings add to a growing coherence of literature across multiple 

time scales indicating that the public health benefits of reducing particle concentrations will be realized within years, not decades, of 

the reduction."); Antonetta Zanobetti et al., PartiCUlate Air Pollution and Survival in a COPD Cohort, 7 Environ Health 48 (Oct. 2008) 

(concluding that results of study heightens the urgency for pollution control measures because "reductions in air pollution should be 

followed quickly by improvements in public health"). 

4 
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reproductive and developmental effects. 29 These conclusions reflect consensus in the scientific 

community and are further supported by recently released studies. 

Short-term exposure to high levels of ozone can shorten life.3D "A series of recently published 

meta-analyses and primary national scale epidemiological studies have documented consistent 

associations between premature mortality and ozone exposures below the current 8-hour 

national ambient air quality standard.,,31 In 2008, a report by the National Academy of Sciences 

confirmed that the premature deaths caused by ozone are not restricted to people who are 

already near death, and that the relationship between reductions in ozone concentrations and 

reductions in premature mortalities is generally linear, even below the NAAQS.32 In other 

words, reducing ozone concentrations saves lives. 

Exposure to ozone endangers children and adults. It has been linked to increased 

hospitalizations, emergency room visits, and decreased pulmonary function in children. 33 "The 

relation between ozone and respiratory illness is so well-established that emergency 

admissions have been suggested as a surrogate measure of ozone . ..34 In Canada's largest cities, 

ozone was associated with increased hospitalization for respiratory problems in babies under 1 

month. 35 In another study, Virginia infants had difficulty breathing when exposed to ozone 

levels lower than the current NAAQS.36 Children are among those most vulnerable to ozone 

pollution because they have a higher level of activity and higher minute ventilation, increasing 

the effective dose of inhaled pollutant.37 

Additionally, because 80% of the essential air sacs in the lungs (alveoli) grow after birth and 

because lung growth continues through adolescence, exposure to pollution, including ozone, is 

particularly harmful to children. 38 Harm from this exposure to high ozone levels can stay with 

29 u.s. EPA. Integrated Science Assessment of Ozone and Related Photochemical Oxidants (Final Report). U.S. Envjronmental 

Protection Agency, Washington, DC, EPAl6DOIR-101076F, 20n 

30 Michelle L. Bell et a!., A Meta-Analvsis of Time-Series Studies of Ozone and Mortality with Comparison to the National Morbidity 

Mortality and Air Pollution Study. 16 Epidemiology 436, 442 (2005); Jonathan I. Levy et aI., Ozone Exposure and Mortality: An 

Empiric Bayes Metaregression Analvsis, 16 Epidemiology 458 (2005); Kazuhiko Ito et al.. Associations Semeen Ozone and Daily 

Mortality: Analysis and Meta-Analysis, 16 Epidemiology 446 (2005); Steven N. Goodman. The Methodologic Ozone Effect, 16 

Epidemiology 430 (2005); Michelle L. Bell et aI., Ozone and Short-Term Mortality in 95 US Urban Communities 1987-2000,292 J. 

Am. Med. Ass'n 2372, 2377 (2004); Alexandrus Gryparis et al.. Acute Effects of Ozone on Mortality from the "Air Pollution and 

Health: A European Approach" Project. 170 Am. J. Respiratory & Critical Care Med. 1080, 1083 (2004). 

3i Kent E. Pinkerton et ai., Ozone a Malady for All Ages, 176 Am. J. Respiratory and Critical Care Med., 107 (2007). 

32 National Research CounCil, Estimating Mortality Risk Reduction and Economic Benefits from Reducing Ozone Air Pollution: 

Executive Summary 8, 9 (April 2008). 

33 Jennifer L. Peel et al., Ambient Air Pollution and Respiratory Emergency Department Visits, 16 Epidemiology 164 (2005); Toby C. 

Lewis et aI., Air-Pollution Associated Changes in Lung Function Among Asthmatic Children in Detroit, 113 Envtl. Health Persp. 1068 

(2005); Richard T. Bumett et aI., Association Between Ozone and Hospitalization for Acute Respiratory Diseases in Children Less 

than 2 Years of Age, 153 Am. J. Epidemiology 444, 449 (2001); George D. Thurston et al .. Summertime Haze Air Pollution and 

Children with Asthma, 155 Am. J. Respiratory & Critical Care Med. 654 (1997). 

34 David V, Bates, Ambient Ozone and Mortality, 16 Epidemiology 427,428 (2005). 

35 Robert E. Dales et at, Gaseous Air Pollutants and Hospitalization for Respiratory Disease in the Neonatal Period, 114 Env. 

Health Persp. 1751, 1754 (2006); 

35 Elizabeth W. Triche et at, Low~level Ozone Exoosure and Respiratory Symptoms in Infants, 114 Env. Health Persp. 911, 915 

\2006). 

7 Pinkerton et aL,,§!,!12@ 30 at 107. 

"Janice J. Kim et aI., Ambient Air Pollution: Health Hazards to Children, 114 Pediatrics 1699, 1699-1700 (2004) (policy statement 

by American Academy of Pediatrics, Committee on Environmental Health); W. James Gauderman et aL, The Effect of Air Pollution 

on Lung Development from 10 to 18 Years of Age, 351 New Engl. J. Med. 1057, 1063 (2004) ('the greatest effect of pollutionrelated deficits may occur later in life, since reduced lung fUnction is a strong risk factor for complications and death duTing 

adulthood."). 

5 
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children for life. In California, a study followed 3535 children from schools in twelve southern 

California communities for up to five years and found that children who played team sports in 

communities with high daytime ozone concentrations had a 3.3% greater risk of developing 

asthma.39 A study of 255 college freshmen found that students who grew up in areas with 

more ambient ozone had decreased lung function, a risk factor for lung disease later in life.40 

Ozone endangers adults as well,41 leading to decreased lung function 42,increased susceptibility 

to respiratory infections,43 and asthma exacerbations. 44 Controlled human exposure studies of 

healthy adults demonstrate reduced lung function, respiratory symptoms, changed airway 

responsiveness, and airway inflammation following exposure to ozone at and, for some, below 

the current NAAQS.45 A clinical study published this summer confirmed that healthy adults 

exposed to ozone concentrations below the current NAAQS experienced significant reductions 

in lung function and subjective respiratory symptoms-the higher the level of ozone exposure, 

the greater the decrease in lung function.46 

Ozone also exacerbates asthma. Health experts warn that air pollution, including ozone, is "one 

of the most under-appreciated contributors to asthma exacerbation.,,47 Asthma exacerbations 

are dangerous, expensive, and inconvenient because they can lead to hospitalization, increased 

medicine use, and potentially permanent scarring. 

Dr. Peden's testimony that he typically sees a rise in hospitalizations and receives more 

requests for inhalers or anti-inflammatory asthma medication refills 24 to 48 hours after an 

ozone event is consistent with the studies cited above.48 Hospitalization and medication are 

expensive. An emergency visit begins at $1,300 to $1,500, and admission to the hospital 

averages a minimum of $5,000. Asthma medication is also expensive. 

J9 Rob McConnell et al.. Asthma in Exercising Children Exposed to Ozone: a Cohort Study. 359 Lancet 386 (2002). 

40 Ira B. Tager et ai., Chronic Exposure to Ambient Ozone and Lung Function in Young Adults, 16 Epidemiology 751 (2006). 

41 Helene Oesqueyroux et aI., Effects of Air Pollution on Adults with Chronic Obstructive Pulmonary Disease, 6 Archives Envtl. 

Health 554 (2002): Peter HOppe et al.. Environmental Ozone Effects in Different Population Subgroups, 206 Int'! J. Hygiene & Envtl. 

Health 505 (2003); Ralph J. Delfino et al., Emergency Room Visits for Respiratory Illnesses Among the Elderly in Montreal: 

Association with Low Level Ozone Exposure, 76 Envtl. Res. 67 (1998); John M. Peters et aI., A Study of Twelve Southem California 

Communities with Differing Levels and Types of Air Pollution II: Effects on Pulmonary Function, 159 Am. J. Respiratory & Critical 

Care Med. 768 (1999); Patrick l. Kinney & Mortin Lippmann, Respiratory Effects of Seasonal Exposures to Ozone and Particles, 55 

Archives Envtl. Health 210 (2000). 

42 Chang-Chuan Chan & Tsung-Huan Wu. Effects of Ambient Ozone Exposure on Mail Carriers' Peak Expiratory Flow Rates, 

Environ Health Perspec 2005; 113:735-738, Ira Tager, et al. Chronic Exposure to Ambient Ozone and Lung Function in Young 

Adults. Epidemiology 2005; 16:751-759. 

43 John Hollingsworth et aI., Ozone and Pulmonary Innate Immunity, 4 Proc. Am. Thoracic Soc'y 240, 243-44 (2007). 

44 Helene Desqueyroux et aI., Short-Term Effects of Low-Level Air Pollution on Respiratory Health of Adults Suffering from Moderate 

to Severe Asthma, 89 Envtl. Res, 29 (2002); Richard T. Burnett et aI., Association Between Ozone and Hospitalization for 

Respiratory Diseases in 16 Canadian CiUes, 72 Envt!. Res, 24 (1997). 

45 See e.g., William C. Adams Comparison of Chamber 6.6 Hour Exposures to .04-.08 PPM Ozone Via Square-Wave and 

Triangular Profiles on Pulmonary Responses, 18 Inhalation Toxicology 127 (2006); Williams C, Adams, Comparison of Chamber 

and Face-Mask 6.6 Hour Exposures to Ozone on Pulmonary Function and Symptoms Responses, 14 Inhalation Toxicology 745 

(2002) (finding effects on lung and respiratory symptoms as low as ,06 ppm); RB. Devlin et aI., Exposure of Humans to Ambient 

Levels of Ozone for 6.6 Hours Causes Cellular and Biochemical Changes in the Lung, 4 Am. J. Respiratory Cell Molecular Biology 

72 (1991); D.H. Horstman et aI" Ozone Concentration and Pulmonary Response Relationships for 6.6 Hour Exposures with Five 

Hours of Moderate Exercise to 0.08 .10 and .12 ppm, 142 Am. Rev Respir Dis 1158 (1990). 

46 Edward S. Schelegle et al., S.S-Hour Inhalation of Ozone Concentrations from 60 to 87 Parts Per Billion in Healthy Humans, 180 

Am. J. Respiratory & Critical Care Med. 265 (2009). 

47 George D. Thurston & David V. Bates, Air Pollution as an Underappreciated Cause of Asthma Symptoms, 290 J. Am, Med. Ass'n 

1915, 1915 (2003). 

46 See e.g., National Research Council ~ note 32. 

6 
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A patient with mild symptoms may take only one type of medicine, at $200 a month; while 

more severe asthmatics or asthmatics with allergies may spend up to $800 a month for as many 

as six types of medicine. This cost is borne by the state and federal government in Medicare, 

Medicaid and other federal health program payments as well as individuals. Ozone exacerbates 

reactions to allergens, which can also trigger asthma attacks and increased use of medication. 

Even in healthy adults, ozone can inflame the lungs and cause immediate discomfort, including 

shortness of breath, chest pain, wheezing and coughing. 49 William Steven Harlan, a 

competitive distance runner who runs everything from marathons to 100-mile races, found 

himself incapacitated by this effect. On July 19, 2003, as he ran along the Tennessee-North 

Carolina border through the Great Smoky Mountains National Park, he began feeling lightheaded, tightness in his chest, and an inability to inhale deeply. lQ. at 873-74. Eventually, his 

breathing became so labored that he could only walk 100 yards at a time before he had to sit 

down on the trail to catch his breath. This experience, the first time in Mr. Harlan's life that he 

could not breathe, happened on an ozone alert day.50 

Other Pollutants 

While most research has focused on ozone and PM2.S other air pollutants, like mercury, lead, 

acid gases, NOx, sax, and heavy metals are equally well documented in their adverse human 

hea Ith effects. 

Recently, studies have found more evidence linking air pollution to birth defects and pediatric 

cancers. A study published in the American Journal of Epidemiology linked exposure to air 

pollution - in this case carbon monoxide and nitrogen oxides - in the first two months of 

pregnancy to increased chance of neural tube defects. 51 In a study presented Tuesday at the 

American Association of Cancer research, scientist presented evidence linking exposure to from 

roadway vehicle exhaust with increased odds of developing pediatric cancer of the eyes and 

cells that develop into the reproductive system.52 

Benefits of the Clean Air Act 

The health and economic benefits of the Clean Air Act far exceed compliance costs. External 

analysis of 1990-2020 benefits of the Clean Air Act standards estimate that the $65 billion spent 

to comply with pollution standards will result in $2trillion in avoided health expenditures by 

2020. Even under the most conservative cost benefit analysis - which removes the cost savings 

attributed to air pollution control driven reductions mortality - Clean Air Act standards will still 

generate $137 billion in benefits versus an estimated $65 billion in compliance costs. 

49 Ian S. Mudway & Frank J. Kelly, An Investigation of Inhaled Ozone Dose and the Magnitude of Airway Inflammation in Healthy 

Adults. 169 Am. J. Respiratory and CriUcal Care Med. 1089, 1093 (2004); WF. McDonnell et aI., Ozone-Induced Respiratory 

Symptoms: Exposure-Response Models and Association with Lung Function, 14 European Respiratory J. 845 (1999). 

5'Trial Tr. vol. 4A, 864-65. (July 17, 2008). 

51 Padula AM, Tager IB, Carmichael SL, Hammond K, Lurmann F, Shaw GM. The Association of Ambient Air Pollution and Traffic 

Exposures with Selected Congenital Anomalies in the San Joaquin Valley of California. Am J Epidemiology 2013; doi: 

10.1093/aje/kws367. 

52 Ostrow, Nicole, "Air Pollution Expousre in Pregnancy Linked to Cancers," Bloomberg, April 9, 2013. Available at 

http://www.bloomberg.com/news/print/2013~04~09/air-pollution-exposure-in-pregnancy-linked-to-cancers.html. 

7 
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Below is a table that list the estimated adverse health events avoided by Clean Air Act 

standards. 

(source: The Benefits and Costs of the Clean Air Act from 1990 to 2020: Summary Report, page 14) 

Summary 

The adverse health effects of air pollution are well known and fully documented in the sd~ntific 

literature. Equally well established are the health and economic benefits associated with 

reductions in air pollution. For these reasons, the American Thoracic Society strongly urges 

Congress to reject any legislation that limits, weakens or delays the ability of the Environmental 

Protection Agency to implement the science based standards of the Clean Air Act. 

8 
57 

Mr. WHITFIELD. Thank you. Ms. Steinzor, you are recognized for 

5 minutes. 

STATEMENT OF RENA STEINZOR 

Ms. STEINZOR. Mr. Chairman, Ranking Member Rush, and members of the subcommittee, I appreciate the opportunity to testify 

today. My testimony makes four points. 

One, the Energy Consumers Relief Act has no basis in law or fact 

and would enable some of the largest companies in the world to 

continue making record profits at the expense of public health and 

the environment. 

Two, the real danger we face is under-regulation. In fact, rampant deregulation of Wall Street is the reason why we have hurtled 

into the persistent recession that has impoverished millions. 

Three, regulation is vital to the quality of life we take for granted 

in America. Most of the rules targeted by this bill were not 

dreamed up in the basement of EPA, by an administrator drunk 

on her own whiskey, but rather were required by the Clean Air Act 

amendments that were crafted by members of this committee. The 

beauty of the legislation from a corporate perspective is that it 

would gut the Clean Air Act, which remains overwhelmingly popular with the public, without ever mentioning its name. 

Four, Congress should focus on ways to reinvigorate the EPA 

rather than pursuing legislation that would kneecap the agency. 

The ECRA is nothing more and certainly nothing less than the latest attempt to shield some of the wealthiest and most heavily subsidized corporations in the history from the relatively modest cost 

of preventing the chronic harm to people and the environment 

caused by toxic air pollution. It would force a shotgun wedding between EPA, the beat cop that polices the most intractable sources 

of pollution; and the Department of Energy, the government’s 

booster for energy products nationwide. The inevitable outcome 

would be a marriage made in hell that stymies EPA’s most important efforts to carry out its regulatory mission, indifference to its 

salesperson spouse. 

The best way to think about ECRA is as a huge subsidy for companies that are already pocketing billions in government largess. 

The energy companies that would reap this giant windfall include 

the big five oil companies—BP, Chevron, ConocoPhillips, 

ExxonMobil and Shell—which raked in more than $119 billion in 

profits in 2012. Among the most profitable corporations, 

ExxonMobil finished at the top of the 2012 Fortune 500 list bringing in profits of more than 41 billion. Chevron and ConocoPhillips 

finished third and fourth on the list, bringing in annual profits of 

nearly 27 billion and over 12 billion, respectively. 

The legislation would relieve these companies from internalizing 

the high social cost of their pollution. This regulatory subsidy 

comes on top of the massive subsidies that highly profitable fossil 

fuel producers already receive. In 2012, the big five oil companies 

received more than $2.4 billion in various tax breaks from the Federal Government. The International Monetary Fund estimates that 

the fossil fuel industry receives more than 1.9 trillion in total global subsidies annually, an amount equal to 2.5 percent of the global 

gross domestic product. 

58 

The rules in the legislation’s crosshairs are among the most beneficial safeguards the U.S. regulatory system has ever produced. A 

2011 report assessing the EPA’s Clean Air Act regulations found 

that in 2010, these rules saved 164,000 adult lives and prevented 

13 million days of work loss and 3.2 million days of school loss due 

to pollution-related illnesses such as asthma and cardiovascular 

disease, as Dr. Rom explained so eloquently. Even when measured 

against the rubric of cost-benefit analysis, the EPA’s regulations revealed to be huge winners for society. 

The 2011 report on EPA’s Clean Area Act regulations concluded 

that these safeguards have produced benefits worth $2 trillion annually by 2020, dwarfing the $65 billion in compliance costs. 

My written testimony gets into more specific criticisms of the 

bill. It also offers some suggestive reforms for the EPA that would 

help the Agency carry out its statutory mission of protecting the 

people and the environment in a more effective and timely manner. 

Thank you. I would be pleased to answer any questions. 

[The prepared statement of Ms. Steinzor follows:] 

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TESTIMONY OF 

Rena Steinzor 

Professor, University of Maryland Carey School of Law 

and 

President, Center for Progressive Reform (www.progressivereform.org) 

before the 

Committee on Energy and Commerce 

Subcommittee on Energy and Power 

U.S. House of Represent.atives 

Legislative Hearing on 

The Energy Consumers Relief Act of2013 

April 12,2013 

Mr. Chairman, ranking member Rush, and members ofthe subcommittee, I appreciate the 

opportunity to testifY today on the importance of the Environmental Protection Agency's (EPA) 

safeguards and how the legislation under consideration today would unduly inhibit the agency's 

ability to carry out its congressionally-mandated mission of protecting people and the 

environment against unreasonable risks. 

I am a law professor at the University of Maryland Carey School of Law and the 

President of the Center for Progressive Reform (CPR) (http://www.progressivereform.org/). 

Founded in 2002, CPR is a network of sixty scholars across the nation dedicated to protecting 

health, safety, and the environment through analysis and commentary. We have a small 

professional staff funded by foundations. I joined academia mid-career, after working for the 

Federal Trade Commission for seven years and the House Energy and Commerce Committee for 

five years. For seven years, I served as the lawyer for small, publicly-owned electric systems. 

My work on environmental regulation includes four books, and over thirty articles (as author or 

co-author). My most recent book, published by the University of Chicago Press, is The People's 

Agents and the Battle to Protect the American Public: Special Interests, Government, and 

Threats to Health, Safety, and the Environment, co-authored with Professor Sidney Shapiro of 

Wake Forest University's School of Law, which comprehensively analyzes the state of the 

regulatory system that protects public health, worker and consumer safety, and natural resources, 

and concludes that these agencies are under-funded, lack adequate legal authority, and 

consistently are undermined by political pressure motivated by special interests in the private 

sector. I have served as consultant to the EPA and testified before Congress many times. 
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My testimony today makes four points: 

The Energy Consumers Relief Act would only reinforce and amplifY the problem of 

under-regulation, enabling some of the largest companies in the world to continue 

making record-making profits at the expense of public health and the environment. 

Regulation is vital to the quality of life we take for granted in America, saving lives, 

preserving health, afld safeguarding the flatural environmefltfor our children. 

The real danger we face is one of under-regulatiofl, particularly with respect to public 

health afld eflvironmefltal safeguards. 

Congress sllOuldfocus on ways to invigorate the EPA, rather thafl pursuiflg legislatiofl 

that would to kneecap the agency. 

The Eflergy Consumers Relief Act Puts Corporate Profits Ahead of Public Health afld 

Eflviroflmental Protectiofl 

The Energy Consumers Relief Act (ECRA) would block certain EPA regulations that 

corporations in the energy industry find inconvenient. We could evaluate this bill in stuffy 

economic terms-that is, we could talk about how the bill prevents the EPA from advancing 

economic efficiency goals by forcing energy industry corporations to internalize the full costs of 

their polluting activities. While undoubtedly correct, this narrow economic view fails to capture 

the moral outrage that this bill richly deserves. The ECRA is nothing more-and certainly 

nothing less-than yet another attempt by certain members of Congress to shield some of the 

wealthiest and most heavily subsidized corporations in history from the relatively modest 

financial costs associated with carrying out their businesses in a manner that does not place 

people and the environment at unreasonable risk of harm. 

Let's take a closer look at some of the energy industry companies that would reap a giant 

windfall from the ECRA. They include the Big 5 oil companies-BP, Chevron, ConocoPhillips, 

Exxon Mobil, and Shell-which raked in more than $119 billion in profits in 2012. 1 Exxon 

Mobil finished at the top ofthe 2012 Fortune 500 list, bringing in profits of more $41 billion; 

Chevron and ConocoPhillips finished third and fourth on the list, bringing in annual profits of 

nearly $27 billion and over $12 billion, respectively. Electric utilities would also benefit greatly 

from the Energy Consumers Relief Act. Exelon was number 145 on the Fortune 500 list, the 

highest ranking among electric utilities, bringing in profits of nearly $2.5 billion. Other highprofiting utilities include AES Corporation (151 on the Fortune 500 list with profits of$58 

million in 2012) and Southern Company (152 on the Fortune 500 list with over $2.2 billion in 

profits in 2012). 

The best way to think about the ECRA is as a huge subsidy for the highly profitable 

companies that comprise the fossil fuel industry-adding to the already massive subsidies these 

companies already receive. The ECRA has the effect of a subsidy, because it systematically 

shields these companies from some ofthe costs of doing business-namely, doing their part to 

I Jackie Weidman. BP Rakes In $11.6 Billion In Profits For 2012. CUMATEPROGRESS. Feb. 5. 2013, 

http://thinkprogress.orgiclimate/20 13/02105/154270 1Ibp-rakcs-in-116-billion-in-profits-for-20 121 (last visited Apr. 

8,2013). 

2 
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ensure that their activities don't hann people and the environment. In 2012, the Big 5 oil 

companies received more than $2.4 billion in various tax breaks from the federal government.2 

A January 2013 report by the International Monetary Fund estimates that every year the fossil 

fuel industry receive more than $1.9 trillion in total global subsidies-an amount equal 2.5 

percent of the global gross domestic product.) Roughly, $480 billion of those subsidies come in 

direct fonn-that is, in the fonn of tax breaks and other government handouts. The remaining 

$1.4 trillion comes in indirect fonn-that is, through the absence of government policies that 

would force energy companies to internalize the costs of their hannful side effects. In other 

words, the "regulatory subsidy" that the ECRA seeks to provide the energy industry would fall 

into this second category. 

Beyond this large fundamental objection to the ECRA, my more specific criticisms 

include the following: 

'Id. 

The ECRA ignores regulatory benefits. The ECRA requires that certain EPA 

regulations be subjected to two new sets of analyses-one by the EPA and a second by 

the head of the Energy Department. By intentional designed, however, neither set of 

analyses accounts for regulatory benefits. As a result, these analyses are guaranteed to 

distort the true value of these regulations, just as the drafters of this legislation had 

intended. After all, even the best policies-including ones that generate enormous net 

benefits-will appear to be a huge drain on the economy if only their costs are 

considered. The cost-only focus of the ECRA's analyses reveals a telling shift in strategy 

by the anti-regulatory crowd. For years, they espoused cost-benefit analysis, confident 

that its inherently anti-regulatory methodology (i.e., the systematic overestimation of 

regulatory costs combined with systematic underestimation of regulatory benefits) would 

be sufficient to quash effective regulations. They hadn't counted on regulations being 

such a good deal for society that they still managed to pass this dubious and biased test. 

So now, regulatory foes have moved the goalposts again in the regulatory debate by 

seeking to focus on the discussion entirely on the costs side of the ledger. This cost-only 

analysis of regulation can provide no useful information about regulations, and therefore 

serious policymakers should disregard the misleading results it produces. 

The ECRA could capture a lot of the EPA's rules. Under the ECRA, any EPA rule 

meeting the $1 billion statutory trigger is eligible to be blocked. The drafters of the 

ECRA have cleverly designed this trigger to be as expansive as possible. First, the 

definition is not limited to annual costs, much as other laws and policies impacting the 

regulatory process do. (For instance, Executive Order 12866 defines "economically 

significant" regulations as those having an annual economic impact of$IOO million or 

more.) Consequently, a rule that has recurring costs of $1 00 million or more for 10 years 

can be subject to the ECRA. To put this in perspective, the U.S. Census estimated that 

there were nearly 115 million households in the United States in 20 II. 4 If a rule raised 

energy costs for each of these households by an average of just $0.87 per year for ten 

3 INT'L MONETARY FUND, ENERGY SUBSIDY REFORMS: LESSONS AND IMPLICATIONS (2013), available at 

hltp:ll www.imf.org/externallnplpp/cngi20I3/012813.pdf. 

4 See U.S. Census Bureau, State & County QuickFacts: USA, http://quickfacts.census.gov/qfd/statcs/OOOOO.htmi 

(last visited Apr. 9, 2013). 

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years (or $8.70 total), then it would be sufficient to trigger the ECRA's requirements. In 

addition, the ECRA $1 billion trigger includes the aggregate of both a rule's direct and 

"indirect" costs. The sheer expansiveness of the ECRA's statutory definition of indirect 

costs is mindboggling. It includes any costs that might be "incurred in related markets or 

experienced by consumers or government agencies not under the direct scope of the 

regulation." With a little creativity, there's almost no limit to how far this open-ended 

definition could be stretched. As a result, a generous application ofthe concept of 

indirect costs could sweep in a huge number ofthe EPA's rules, making them all eligible 

to be blocked under the ECRA. 

The ECRA would subject EPA regulation to still more rounds of meaningless 

analysis. The additional EPA and Energy Department analyses mandated by the ECRA 

come on top of the slew of analytical and procedural requirements that already clog up 

the rulemaking process, preventing timely and effective regulatory action.5 These anew 

nalyses will do nothing to improve the quality of EPA regulations; instead, they will 

simply waste scarce agency resources on quixotic attempts to determine some of the 

rules' highly attenuated-and fundamentally unknowable-future impacts. Here are the 

future impacts that these analyses must somehow divine: 

• "Indirect costs"; 

• Impacts on future energy prices (including gasoline and electricity prices); 

• Employment effects ("including potential job losses and shifts in employment"); 

• Impacts on energy prices for consumers ("including low-income households, 

small businesses, and manufacturers"); 

• "Impacts on fuel diversity of the Nation's electricity generation portfolio or on 

national, regional, or local electrical reliability"; and 

• "Any other adverse effect on energy supply, distribution, or use (including a 

shortfall in supply and increased use of foreign supplies)." 

Ultimately, the analyses required by the legislation would be so ridden with uncertainty 

that their numbers would be not just meaningless but deceptive. 

The ECRA would authorize the head of the Energy Department to make 

monumental decisions based on technical matters outside his field of expertise. The 

bill gives the head ofthe Energy Department ultimate veto authority over certain EPA 

rules. Amazingly, the bill charges him to wield this authority based upon his decidedly 

non-expert determination of whether the regulation at issue "will cause significant 

adverse effects to the economy, taking into consideration impacts on economic 

indicators, including those related to gross domestic product, unemployment, wages, 

consumer prices, and business and manufacturing activity." These sorts of assessments 

would likely overwhelm even the best economists in the country, let alone the head of a 

department that lacks any institutional expertise in such matters. For decades, Congress 

5 See P\ffiLiC CITIZEN, THE FEDERAL RULE?vlAKING PROCESS, ffi'ailable at 

http://,,ww.citizen.org/docUOlcnts/Reguiations-FJowchart.pdf. 

4 
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has trusted EPA's expert judgment on developing environmental and public health 

safeguards. That this bill would now seek to empower the head of the Energy 

Department to overrule this expert judgment based on considerations well outside the 

scope of his expertise defies any rational explanation. 

The ECRA is a textbook example of poor legislative draftsmanship, which would 

lead to needless litigation and regulatory uncertainty. This bill is rife with poorly 

defined terms and vague concepts. Here are just a few examples: 

• With respect to the bill's definition of "energy-related rule that is estimated to 

cost more than $1 billion," it is unclear what is meant by a rule that "regulate any 

aspects of the ... use of energy" (emphasis added). An EPA regulation to restrict 

uses of a particular toxic chemical could plausibly have an indirect effect on 

energy use (e.g., the user of the chemical might have to use an alternative that 

involves greater energy use). Does that rule trigger this bill's applicability? 

• When the head of the Energy Department makes his "determination on adverse 

effects to the economy," what exactly constitutes a "significant adverse effect[] to 

the economy"? In other words, how adverse an effect must it be before it crosses 

the line into "significant" territory? The bill doesn't specifY. Does it have to be 

equal to at least a certain percentage of the ODP? Does it have to result in some 

minimal increase in the unemplo)'ment rate? What if the rule is projected to 

significantly reduce the employment rate (a beneficial economic effect) but 

significantly increase energy prices (possibly an adverse economic effect)? 

In addition, how, if at all, will the provisions of this bill be enforced? Can the public 

challenge the quality of the EPA's or Energy Department's analysis ofa rule? What if 

the public disagrees with a determination by the head of the Energy Department that a 

particular rule should be blocked because it will have an adverse economic impact? 

Until these and other questions are resolved, this bill would lead to needless litigation 

wasting scarce agency and judicial resources. It could also perpetuate regulatory 

uncertainty, as the final status of pending rules remain indeterminate, pending the 

outcome ofrelevant litigation. 

Tile Vital Importance of Effective Regulatory Safeguards 

One does not need to look far to see how essential regulations are. Just ask anyone 

whose life was saved by a seat belt, whose children escaped brain damage because the EPA took 

lead out of gas, who turns on the faucet knowing the water will be clean, who takes drugs for a 

chronic illness confident the medicine will make them better, who avoided having their hand 

mangled in machinery on the job because an emergency switch was there to cut off the motor, 

who has taken their kids on a trip to a heritage national park to see a bald eagle that was saved 

from the brink of extinction-the list goes on and on. 

The EPA's regulations-which the legislation under consideration today would attempt 

to block-are among the most beneficial safeguards the U.S. regulatory system has ever 

produced. For example, a 2011 report assessing the EPA's Clean Air Act regulations found that 

in 2010 these rules saved 164,300 adult lives and prevented 13 million days of work loss and 3.2 

5 
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million days of school loss due to pollution-related illnesses such as asthma. By 2020, the 

annual benefits of these rules will include 237,000 adult lives saved as well as the prevention of 

17 million work loss days and 5.4 million school loss days.6 

Even when measured against the rubric of cost-benefit analysis-the inherently antiregulatory yardstick espoused by corporate interests and small government ideologues-the 

EPA's regulations are revealed to be huge winners for society. The 2011 report on EPA's Clean 

Air Act regulations concluded that these safeguards would produce benefits worth $2 trillion 

annually by 2020, dwarfing the $65 billion in compliance costs.7 Similarly, a recent report by 

the Economic Policy Institutes (EPI) evaluated the total impact of major EPA rules developed 

during the Obarna Administration. The report derived its results by simply aggregating the costbenefit analyses that the EPA has prepared for these rules. It found that the major EPA rules 

issued during the first two years ofthe Obama Administration produced total annualized benefits 

of between $44 billion and $148 billion, as compared to total annualized costs of between just 

$6.7 billion and $12.5 billion. The EPI report also found that four ofthe EPA's then-pending 

proposed major rules generated total annualized benefits of between $173 billion and $457 

billion, as compared to total annualized costs of between just $14 billion and $15 billion.8 

The damage that the ECRA would do to the public health and environment is 

immediately apparent when one looks at some ofthe recent or pending EPA regulations this bill 

seeks to block. For example, EPA's boiler MACT rule, which sets strong limits on toxic air 

pollution from industrial and commercial boilers, will annually prevent up to 8,100 premature 

deaths, 5,100 non-fatal heart attacks, and 52,000 asthma attacks. In addition, EPA's greenhouse 

gas standards for cars and light trucks together are projected to save Americans more than $1.7 

trillion in fuel costs. For a comprehensive summary ofthe benefits of EPA's recent and pending 

rules, please see the chart produced by the Natural Resources Defense Council, which I have 

attached to this testimony as Appendix A. 

Importantly, these EPA rules have brought great benefit to the United States without any 

significant economic dislocation. A recent CPR report reviewed all 30 of the available 

retrospective rule reviews that the EPA has conducted pursuant to section 610 of the Regulatory 

Flexibility Act, and each of these reviews concluded that the regulations were still necessary and 

that they did not produce significant job losses or have adverse economic impact on the regulated 

industries, including on small businesses. Specifically, all of these reviews reached the 

following findings: 

• There is a "continued need" for the regulation, meaning that a significant risk to 

public health or the environment exists, and that the controls called for in the 

regulation continue to be successful in reducing that risk. 

• The regulations did not require any major modification to increase their 

effectiveness or reduce their costs. 

6 See ENVTL. PROTECTION AGENCY, THE BENEFITS AND COSTS OF THE CLEAN AIR ACT FROM 1990 TO 2020 (Mar. 

201l), m'ailable at http://,,,''v.epa.~ov/oarlscct812/fcb 11/fullreport.pdf. 

7 Id. 

S Isaac Shapiro. Tallying Up the Impact oflv'ew EPA Rules: Combined Costs ofObama EPA Rules Represent a 

Sliver of the Economy and are Far Outweighed by Cumulative Benefits (Eeen. pory Inst., Briefing Paper No. 311, 

2011), m'ailable at http://w3.cpi.data.orgi(cmp2011IBriefingPaper311.pdf. 

6 
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• The regulations have not been unduly costly on industry nor did it have a 

significant adverse impact on the industry. 

• Existing regulations were often supported by regulated entities, and when this was 

not the situation, regulated entities supported reform of the regulation, not its 

elimination. In several cases, the EPA received no comments from regulated 

entities when it reviewed a regulation. 

Despite the vast evidence supporting the value of regulation, self-righteous crusaders 

against regulation have become accustomed to telling only half the story to the American people: 

they pretend that exaggerated regulatory costs are the only result of the system, and ignore the 

considerable benefits described above. Conversely, they suggest that if we dismantled the 

regulatory system, we would suffer no negative consequences and instead reap a windfall in 

saved money. 

The ECRA is clearly intended to advance this strategy of willful deception. The analyses 

it mandates are clearly calculated to present the EPA's regulations in the worst light possible-as 

senseless drains on the economy that invariably impose large costs on businesses, kill jobs, and 

raise energy prices. Meanwhile, the bill makes no effort to account for the overwhelmingly 

larger benefits these rules produce. Worse still, it pretends that there are no costs to blocking or 

delaying the EPA's rules. There are, of course. Preventable deaths, heart attacks, aggravated 

asthma symptoms, and chronic lung disease, to say nothing of quashing our last best efforts at 

averting the worst consequences of climate change, will be the inevitable result ifthe ECRA 

should become law. 

In short, the ECRA does not eliminate regulatory costs for polluting industries. Rather, it 

ensures that American public continues to shoulder these burdens, in the unconscionable form of 

a degraded environment, debilitated health, and, in too many cases, lives cut tragically short. 

The Problem of Under-Regulation 

The regulatory system created by Congress and implemented by agencies is designed to 

protect the American people against unacceptable risks to important values such as a safe and 

healthy environment, but the destructive convergence of inadequate resources, political 

interference, and outmoded legal authority often prevents regulatory agencies from fulfilling this 

task in a timely and effective manner. Unsupervised industry "self-regulation," which has often 

filled the resulting vacuum, is not an adequate substitute, as the predictably catastrophic results 

of inadequate regulation regularly demonstrate. 

The consequences of inadequate regulation and enforcement are obvious-from the BP 

oil spill in the Gulf of Mexico to the Upper Big Branch Mine disaster that claimed the lives of29 

men; from the decaying natural gas pipeline networks running beneath our homes to the growing 

risk of imported food tainted with salmonella, botulism, or other contaminants showing up on 

grocery store shelves. And, of course, inadequate regulation of the financial services industry 

helped trigger the current economic recession and left millions unemployed, financially ruined, 

or both. 

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The EPA provides a clear illustration of the problem of under-regulation, as the agency 

has been prevented from adequately addressing several pressing environmental and public health 

threats: 

• Climate change. The EPA has made some important strides toward addressing 

the threat of climate change through strengthened controls on mobile sources and 

by encouraging energy efficiency. The agency's efforts to limit greenhouse gas 

emissions from the largest sources-including fossil-fueled power plants and oil 

refineries-will likely remain delayed for several years. 

• Toxic chemicals. Of the 40,000 unique chemicals in existence, the EPA has 

managed to test only a few hundred, and has imposed adequate restrictions to 

protect public health and the environment on far less. The agency has barely even 

scratched the surface of addressing the threats human health consequences that 

can result when people are exposed to combinations ofthese chemicals. 

• Fracking. The EPA has thus far taken only a few small steps toward addressing 

the various environmental and public health risks associated with fracking, which 

include conventional and toxic air pollution, water pollution, and drinking water 

contamination. 

• Ozone. Excessive ground-level ozone can trigger asthma attacks and cause 

permanent lung damage. The EPA has not updated its national ozone standard in 

more than 15 years, even though the agency's science advisors have known since 

at least 2006 that the existing standards were inadequate to protect public health 

and the environment. Under the Clean Air Act, the EPA is supposed to update 

this standard at least once every five years. 

Even the EPA's most recent regulatory successes-including first-time limits on toxic air 

pollution from power plants and a further tightening of its nationwide fine particulate matter 

standards-were the subject of several years of inexcusable delays. 

If enacted, the ECRA would only reinforce and amplify the problem of under-regulation 

at the EPA, preventing the agency from addressing many ofthe environmental and public health 

risks noted above. This result would no doubt elate corporate interests by helping them protect 

their already healthy bottom lines. But, the toll it would take on the general public would be 

unconscionable. 

The EPA Must Be Invigorated, Not Blocked 

The proponents ofthis bill are partially right one thing: The EPA is not carrying out its 

statutory mission of protecting people and the environment as well as it could be. Their 

diagnosis ofthe problem, however, is completely off the mark. To fix the problem, the EPA 

must be reinvigorated, not burdened with new analyses and threatened with unilateral vetoes of 

their pending rules by non-expert officials in other executive branch agencies. 

To reinvigorate the EPA, I suggest the following reforms: 

Empower the EPA Administrator to run EPA. It sounds somewhat absurd, but the 

reality of the situation is that that the EPA Administrator does not in fact run the EPA. 

8 
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82183.037

Instead, the head of the White House Office oflnformation and Regulatory Affairs 

(OIRA) has defacto authority over the final substance of EPA rules and whether the rules 

even see the light of day, as detailed in a recent law review article by former EPA official 

Lisa Heinzerling.9 The ECRA would in fact worsen the situation by deputizing yet 

another non-expert in the executive branch to squash the EPA's pending rules. The EPA 

alone has the unique expertise to design regulations that best comport with applicable law 

and the best available science. The EPA Administrator must be permitted to ensure that 

this expertise provides the sole basis for regulatory decision-making. 

Provide agencies with the resources they need. One of the reasons that the EPA cannot 

fulfill its statutory mission is that its financial resources and available personnel have 

been reduced or maintained at constant levels in recent years. This has been occurring as 

the EPA's mission has become more complex, forcing the agency to effectively do more 

with less. And the situation is getting worse, not better. For example, the recent 

sequestration cuts slashed EPA's already inadequate $8.4 billion budget by another $700 

million. Among other things, these new cuts would force the agency to scrap several air 

pollution monitoring sites and scale back its program for assessing the human health 

impacts of several potentially harmful chemicals. To reverse this situation, the President 

and Congress must work together to identify and actually provide the minimal resources 

that the EPA needs to fulfill its mission in as effective and timely manner as possible. 

Reform the rulemaking process to reduce corporate dominance and level the 

playing field for the general public. Over the past few decades, the rulemaking process 

has become encumbered by a growing number of analytical and procedural requirements. 

These analytical obstacles draw upon the EPA's already stretched resources and distract 

the agency from focusing on its regulatory missions without meaningfully improving the 

quality of agency decision-making. More problematically, corporate interests have 

leveraged their superior financial resources to dominate key steps in the rulemaking 

process, enabling them to delay rulemakings and unduly influence the rule's final 

substance. In short, the regulatory process works for corporate interests rather than the 

public interest. This must change. The President and Congress should carefully evaluate 

the various analytical and procedural requirements with an eye toward eliminating or 

consolidating them as much as possible. For the remaining analytical and procedural 

requirements, the President and Congress should consider reforms that would ensure 

meaningful participation by the general public, including providing the public with tools 

such as petition rights to dislodge rules that have become stuck at any chokepoints in the 

rulemaking process. 

Thank you. I'd be pleased to answer any questions you may have. 

9 Lisa Hcinzerling, Who Will Run the EPA?, 30 YALE). ON REG. 39 (2013), available at 

http://jreg.commons.vale.eduillho-will-run-the-epa!. 

9 
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82183.038

Appendix A 

Chart Summarizing the Benefits of Recent and Pending 

Environmental Protection Rules That Could Potentially Be 

Blocked by the Energy Consumers Relief Act 

Prepared by the Natural Resources Defense Council 

EPA Rule Projected Costs and Benefit Health Benefits 

Benefits to 

Cost Ratio 

Tier III $3.4 billion in costs' 2.2 to Once implemented in 2030, each 

standards for 6.8:13 year will avoid': 

motor vehicles, $8 to 23 billion in o Between 820 and 2,400 

proposed benefits' premature deaths 

March 2013 o 3,200 hospital admissions and 

asthma-related emergency room 

(not yet final) visits 

o 22,000 asthma exacerbations 

023,000 upper and lower 

respiratory symptoms in children 

o 1.8 million lost school days, work 

days and minor-restricted activities 

Final Toxic Air Benefits: $27 to 67 Upto Once implemented in 2015, each 

Pollution billionS 29:1' year will avoids: 

Standards for · up to 8,100 premature 

Industrial Costs: annual costs of deaths, 

Boilers ("Boiler approximately 2 billion" · 5,100 heart attacks, and 

MAa"), · 52,000 asthma attacks. 

finalized Dec. 

20,2012 

Final Standards Estimated annual costs Upto Once implemented in 2020, each 

for PM2.5 of implementing the 171:1 year will prevent: 

I U.S. EPA, Draft Regulatory Impact Analysis: Tier 3 Motor Vehicle Emission and Fuel Standards, March 2013, at 

Table 8-3 available at http://,,,,w.epa.Qov/otag/documents/tier3/420dI3002.pdf. 

2 Id, at 8-31. 

'Id 

4 US. EPA, Fact Sheet: EPA Proposes Tier 3 Motor Vehicle Emission and Fuel Standards, available at 

http://www .epa.gov lotaa/documents/tier 31 420fl3 0 16a.pdf. 

5 U.S. EPA, Fact Sheet: Final Adjustments to the Air Toxics Standards for Industrial, Commercial, and Institutional 

Boilers and Process Heaters at Major Source Facilities, available at 

http://www.epa.gov/airqualitv/comhustion/docs/20I21221 boiler major recon fs.pdf. 

6 V.S. EPA, Fact Sheet: Emission Reductions Remain Significant for Comparable Cost, available at 

http://www.epa.Qov/airqualitv/combustion/docs/20 121220 emissions reductions cost.pdf. 

7 U.S. EPA, Fact Sheet: Adjustments for Major and Area Source Boilers and Certain Incinerators Summary 

Oven;iewj available at 

http://www.epa.gov/airqualitv/combustion/docs/20121221 sum overview hailer cis"i fs.pdf. 8 1d. 
69 


82183.039

("PM2.5 standard: (minimum • Up to 1000 premature 

NAAQS") $53 million to $350 of 12:1)." deaths 

Finalized Dec. million9 

• 480 non-fatal heart attacks 

14,2012 · 40,000 asthma 

Benefits of $4 billion to exacerbations 

$9.1 billion per year in 

· 27,000 asthma 

202010 exacerbations 

• 420,000 restricted activity 

days 

National Combined standards: Model Year 2017-2025 Standards: 

Greenhouse projected to save • 110 to 280 lives saved per 

Gas standards Americans $1.7 trillion year by 2030 

and CAFE in fuel costs 

standards to Model Year 2012-2016 Standards: 

reduce GHG Model Year 2017-2025 · 60 to 150 lives saved per 

emissions from standards: year by 2030 

motor vehicles 

(Model Years Benefits: $326 billion to 

2017 and later $451 billion 

finalized Aug. 

2012; Model $150 billion 

Years 2012-

2016 finalized 

April 2010) Model Year 2012-2016 

standards: 

Benefits up to $240 

billion 

Costs: less than $52 

billion 

Mercury and Air $9.6 billion to up to 9:1 Once Implemented, per year will 

Toxics implement" (minimum prevent1S : 

Standards, of 3:1)'4 

finalized Dec. $37 to 90 billion in • Premature Deaths: 

14,2011 health benefits" Up to 11,000 

• Chronic Bronchitis: 2,800 

• Heart Attacks: 4,700 

• Asthma Attacks: 130,000 

9 U.S. EPA, Fact Sheet: Overview of EPA's Revisions to the Air Quality Standards for Particle Pollution 

(Particulate Matter), available at http://w\\,w.epa.gov/pm/2012/decfsoverview.pdf. 

10 Id. 

11Id. 

12 U.S. EPA, Fact Sheet: Mercury and Air Toxics Standards, available at 

http://wwIV.epa.gov/matslpdfs/2011122IMATSsummarvfs.pdf. 

13 U.S. EPA, Fact Sheet: Benefits and Costs of Cleaning Up Toxic Air Pollution from Power Plants. available at 

http://www.epa.f!oY/mats/pdfs!2011122IMATSimpactsfs.pdf. 

14 Id. 

15 Id. 
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82183.040

• Hospital & Emergency 

Room Visits: 5,700 

• Restricted Activity Days: 

3,200,000 

Cross- State Air $120 to $280 in health Once implemented, per year will 

Pollution Rule, benefits". prevent": 

finalized July 6, · Up to 34,000 premature 

2011 $800 million in annual deaths 

costs; $1.6 billion • 19,000 cases of acute 

underway as a result of bronchitis 

implementation of • 15,000 nonfatal heart 

Clean Air Interstate attacks 

Rule.17 • 19,000 hospital and 

emergency room visits 

• 1.8 million days when 

people miss work or school 

• 400,000 cases of 

aggravated asthma, and 

• 420,000 cases of upper 

and lower respiratory 

symptoms. 

Proposed (Costs and benefits Up to 14:1 

Cooling Water figures based on EPA's 

Intake Rule "preferred option" in (minimum 

(not yet the proposed rule) of 7.6 :1) 

finalized) Costs: $384 - 489 

million annually 

Benefits: $3.4 billion to 

5.5 billion 

Final NMQS for Benefits: $13 to $33 Once implemented. will annually 

Sulfur Dioxide, billion annually once avoid": 

Finalized June 3, implemented" · 2,300 to 5,900 premature 

2010 deaths 

Cost in 2020 to fully · 54,000 asthma attacks 

implement the 

standard: $1.5 billion'o 

16 U.S. EPA, Fact Sheet: The Cross-State Air Pollution Rule: Reducing the Interstate Transport of Fine Particulate 

Matter and Ozone available at http://mvw.epa.gov/airtransportlCSAPR/pdls/CSAPRFactsheet.pdf. 

17 Id. 

18 Id. 

19 U.S. EPA Press Release: EPA Sets Stronger National Air Quality Standard for Sulfur Dioxide First new S02 

standard in 40 years will improve air quality for millions, available at 

http://\Osemite.epa.~ov!opaladmpress.nsf!0!F13 7260029B9B4F3 85257737004£521 B. 20 Id. 

21 Id. 
71 

Mr. WHITFIELD. Thank you. 

Dr. Smith, you are recognized for 5 minutes. 

STATEMENT OF ANNE E. SMITH 

Ms. SMITH. Mr. Chairman and members of the subcommittee, 

thank you for your invitation to participate in this hearing. I am 

Anne Smith, an economist and senior vice president of NERA Economic Consulting. My testimony is my own and does not represent 

any position of my company or its clients. 

If EPA and DOE are to be required to estimate employment impacts of energy-related regulations, it would be wise also to require 

that their estimates be made using analysis methods that are credible and suited to the scale of the regulation in question. For major 

energy-related regulations an analysis that accounts for secondary 

or ripple effects through the full economy is the only type that can 

be expected to provide a balanced understanding of overall economic impacts. 

How has EPA been making its employment impacts estimates so 

far? In reviewing how EPA has been estimating employment impacts for its air regulations, I have identified several areas of concern, particularly with regard to its current practices. First, for air 

regulations released from 1997 through 2010, EPA rarely provided 

any employment impact estimates. In the few cases that it did, 

EPA used methods that ranged from a single sector or partial approach to a full economy general equilibrium approach. I found no 

apparent pattern to explain when the full economy approach was 

used or was not used, but the full economy approach is clearly 

within the EPA’s toolkit. 

In 2011, EPA started to routinely provide employment impact estimates for its new regulations. However, these more recent estimates are not credible. They are being calculated in an inappropriately simplistic manner that uses a cookie-cutter multiplier. EPA’s 

formula cannot even be called an analysis. This is what EPA is 

doing: EPA takes its estimate of the cost of complying with the regulation, states it in millions of 1987 dollars, and then, to estimate 

the number of affected jobs, just multiplies that cost by a single 

constant factor. That factor happens to be 1.55. 

So what does that mean? Well, you can do the math yourself. Because the multiplier is positive, this formula guarantees that EPA 

will estimate an increase in jobs for every one of its new regulations no matter what sectors or types of regulation the regulation 

may affect, no matter what years the regulation may take effect in. 

In fact, the higher the cost of the regulation, the greater will be the 

job increase EPA projects for it. 

Furthermore, most of the regulations the EPA has applied this 

simplistic approach to are the very types of rules that are warranting a full economy approach. A full economy analysis is warranted for high-cost regulations that can affect prices of widely 

used commodities. Energy-related regulations over $1 billion would 

fall into this category. Also, the Utility MATS Rule, the Portland 

Cement MACT Rule, the Cross-State Air Pollution Rule, and the 

Industrial Boiler MACT Rule all fall into that category. Yet, all of 

those rules were instead run through EPA’s simplistic job impacts 

multiplier, which predictably estimated that each one of them 

72 

would increase jobs and, at the most costly of them, the Utility 

MATS Rule, would increase jobs the most. 

I have done my own full economy analysis of several of those recent rules. I used NERA’s NewERA Model, which is a full economy 

general equilibrium model, but I assumed EPA’s own estimates of 

those rules’ compliance costs. I ran EPA’s costs through a full economy analysis. And for each of those rules, the full economy analysis 

projected large negative employment impacts in direct contrast to 

the positive job increases EPA had reported. 

For example, for the Utility MATS Rule, EPA had reported an 

increase in employment earnings equivalent to 8,000 jobs. But the 

full economy analysis of that rule projected a reduction equivalent 

to 70,000 jobs. Now, most of those negative employment impacts 

from the full economy analysis were in sectors that do not face any 

compliance obligations under the MATS rule, but they are sectors 

which purchase the regulated sector’s higher-cost product, electricity in this case. 

Partial analysis methods simply cannot identify these secondary 

or ripple effects. Simply put, because commodity price effects can 

cause a significant portion of a regulation’s impacts, high-cost regulations should be analyzed with a full economy general equilibrium 

approach. This is not a tall order. The past shows EPA already has 

the tools and capabilities to do it. Thank you. 

[The prepared statement of Ms. Smith follows:] 

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82183.041

Prepared Statement of 

Anne E. Smith, Ph.D. 

at a Hearing on 

A Discussion Draft Entitled the "Energy Con.mmers Relief Act of 2013" 

hy the 

Suhcommittee on Energy and Power 

Energy and Commerce Committee 

United States House of Representatives 

Washington, DC 

April 12, 2013 

Mr. Chairman and Members of the Subcommittee: 

Thank you for your invitation to participate in today's hearing. I am Anne E. 

Smith, a Senior Vice President ofNERA Economic Consulting. I have perfonned work 

in the area of regulatory cost and economic impacts analysis over the past thirty years, 

including as an economist in the USEPA's Office of Policy, Planning, and Evaluation, as 

a consultant to the USEPA Air Office, and in many consulting engagements since then 

for government and private sector clients globally. I have also served as a member of 

several committees of the National Academy of Sciences focusing on risk-based decision 

making. I received my Ph.D. in economics from Stanford University, including a Ph.D. 

minor in the Engineering School's Engineering-Economic Systems Department. Over 

the years, I have employed a wide variety economic and cost optimization models to 

analyze costs and economic impacts of many U.S. energy and air policies, including fine 

particulate matter (PM2;)' regional haze, ozone, mercury, and climate policies. I have 

also led project teams developing economic and cost models, including bottom-up system 

cost models, electric sector market models, full-economy energy-economic systems 

models, and computable general equilibrium models. 
74 


82183.042

J thank you for the opportunity to share my perspective today on analysis of 

economic impacts of environmental regulations. My written and oral testimonies reflect 

my own opinions, and do not represent any position of my company, NERA Economic 

Consulting or of any of its clients. 

Executive Summary 

This hearing regards a discussion draft of a bill entitled the "Energy Consumers 

Relief Act of2013." One of the requirements of this bill is that the EPA Administrator 

must submit a report to Congress containing estimates of the direct and indirect costs, 

energy price effects, and employment effects for any new energy-related rule out of EPA 

that is estimated to cost more than $1 billion. I recently conducted a review and 

evaluation of EPA's methods for estimating employment impacts in its Regulatory 

Impact Analyses (RIAs) for 57 separate air regulations released between 1997 and 2011. 

Some of my findings from that study are of relevance to this topic: 

• Until 2011, EPA had an inconsistent record of providing employment 

impacts in its RIAs. The few RIAs that contained such estimates used a 

variety of methods (with no apparent pattern), that ranged from simple, 

single-sector models to full-economy general equilibrium estimates. 

• EPA's RIAs for major air rules released since 2010 have more 

consistently provided employment impact estimates. However, these have 

been calculated using an inappropriately simplistic formula that is not 

2 
75 


82183.043

even on a par with the estimates that EPA was providing in its RIAs 

before 2005. 

• The employment impact estimation formula that EPA has been employing 

since 2010 is guaranteed (by design) to estimate that each new regulation 

will result in an increase in jobs. This formula generates the illogical 

result that the higher the estimated direct cost of compliance, the greater 

will be EPA's projected job increase. 

• Most of the regulations to which EPA has applied this inappropriate 

formula are the very types of rules that may have product price effects that 

can cause negative economic impacts, including employment impacts, to 

ripple through many other sectors ofthe economy. A full-economy 

analysis (such as EPA has used in the past) should have been employed 

instead. 

• When the direct costs that EPA has estimated for several of its 2011 air 

regulations are reanalyzed using a full-economy model, negative impacts 

on worker earnings are consistently projected, rather than the positive job 

increases that have been reported in EPA's RIAs for those rules. 

I further explain the above points in the remainder of this written statement. 

attach a full copy of my report for the record, which contains more discussion and 

explanation of the issues than I cover in this statement. 

3 
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82183.044

Summary of Employment Impacts Methods in EPA RIAs from 1997 through 2011. 

Under Executive Orders (EOs) of the President dating back to 1981, regulatory 

agencies have had to submit Regulatory Impact Analyses (RTAs) to the Office of 

Management and Budget for all their new regulations estimated to cost more than $100 

million per year. Such RIAs must contain estimates of costs and benefits ofthe rule, but 

sometimes have also reported estimates of employment impacts. 

EPA only intennittently provided quantitative estimates of employment impacts 

in its RIAs during the period 1997-2010, with such estimates being provided in only 23% 

(II of 48) ofthe air RIAs in that period. There was no apparent pattern to explain which 

RIAs would have such estimates. There was no single method or approach employed 

either. Methods ranged from very simplistic partial analyses that addressed employment 

only in the specific industries being regulated, to full-economy methods that considered 

how price effects on products of the regulated sectors would ripple through the rest ofthe 

economy, as the purchasers of the regulated entities' goods or services face higher costs 

for some of their inputs. 

A comprehensive full-economy approach was used in two RIAs that were 

released in 2005: for the Clean Air Visibility Rule (CAVR) and the Clean Air Interstate 

Rule (CAIR). Both ofthose rules affected energy-related sectors. By using a modeling 

method called "computable general equilibrium" (CO E), it was possible to assess how 

those regulations' effects on the price of energy (particularly of electricity) would impact 

other sectors that were not directly subject to any compliance requirements. This was an 

appropriate methodology to employ for those regulations. However, the review also 

4 
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82183.045

found that EPA has not consistently applied such full-economy analysis to several other 

major energy-related regulations where it would have been even more appropriate to do 

so. 

Starting in 2011, employment impacts were more routinely provided in air RIAs. 

78% (7 of9) RIAs released in 2011 contained employment impact estimates. This 

sudden shift is probably a result of EO 13563 issued by President Barack Obama in 

January 2011. EO 13563, which provided supplemental infonnation on the requirements 

ofRIAs, was the first to specifically mention "job creation" as an effect of interest 

associated with the U.S. regulatory system. 

Although EPA started to more routinely include estimates of employment impacts 

in air RIAs after issuance of EO 13563, EPA also started to use a highly simplistic job 

impact fonnula that is less credible or appropriate than even the partial analysis methods 

that were employed in RIAs during the period 1997-2004. The post-20IO set of 

employment impact estimates appears at first glance to be based on a quite sophisticated 

econometric method, but a closer inspection reveals that the estimates are derived using a 

simple multiplier. One cannot characterize the current formula favored by EPA as an 

economic methodology at all. 

Description of Employment Impact Estimation Method Used by EPA Since 2010 

The source for the jobs multiplier that EPA has been using in RIAs since 2010 is 

an econometric study reported in a 2002 paper by Morgenstern, Pizer and Shih, which I 

5 
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82183.046

will call "MPS."j The original study considers changes in the total payments to workers 

in four different industries: pulp and paper, plastics, petroleum, and steel. The analysis 

uses data from 1979-1981, 1985, 1988, and 1991. MPS splits the effect of regulation on 

industry labor demand into three elements and estimates them all econometrically. The 

elements are changes in payments to labor due to (i) change in the quantity of output 

demanded ("the demand effect"), (ii) change in the cost ofinputs, holding output and 

technology fixed ("the cost effect"), and (iii) change in the mix of factors, such as 

shifting from a dirty to a clean fuel ("the factor-shift effect"). The MPS paper also 

provides an aggregate estimate ofthe combined effect of these three market/production 

phenomena. Net effects on labor spending were found to be positive in three sectors 

(plastics, petroleum, and steel) and negative in one (pulp and paper). 

The entire theoretical fonnulation and associated econometric analysis in MPS is 

based on data on total payments to workers. No measure of actual "numbers of jobs" 

exists in the MPS paper. Once the econometric estimation oflabor payments is 

completed, MPS assumes one 'job" is implied by a change in spending on labor of 

$35,000 ($1987) to produce a summary result that allows labor spending across the four 

sectors to be compared to each other. 2 This summary result varies from -1.13 to 6.90 

1 RD Morgenstern, WA Pizer, JS Shih. 2002. "Jobs Versus the Environment: An Industry-Level 

Perspective." Journal of Environmental Economics and Management. 43(3): 412-436. 

2 This conversion in MPS from labor payments (the data analyzed) to 'jobs" means that any estimates 

based on the MPS paper are actually 'job-equivalents" (i.e .. the equivalent number of jobs that would 

exist if evel)' person in the sector is paid the sarne average annual salary), and not numbers of actual 

employed individuals. The total number of employed individuals could decrease even as jobequivalents rises iftbe new types oflabor required after the regulation is for more skilled, higher-paid 

types of employees. 

6 
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"jobs" per million (1987$) dollars of compliance spending across the four sectors.3 MPS 

also calculates an "average" effect, by weighting the four sectors' impacts based on the 

amount each sector was spending on compliance in the sample period (1979-1991). The 

appropriateness ofthis single average estimate is questionable, but at best it is an average 

over the four sectors and not an economy-wide average. It is 1.55 "jobs" per million 

(1987$) dollars of compliance spending. It is not statistically significant, meaning that it 

cannot be said to be different from zero, or no net impact on aggregate labor payments 

across the four sectors. 

It is this single estimate of 1.55 "jobs" per million (1987$) dollars of regulatory 

cost that EPA has now adopted as a simplistic multiplier to apply to the cost of new 

regulations that it is analyzing in its recent air RIAs. All that EPA does in each RIA is 

take its estimate of the direct cost of compliance to the regulated sector, restate that cost 

estimate in 1987$, and multiply it by 1.55. The result is then reported as the "job impact" 

of that regulation. The fallacy ofthis formula should be apparent to anyone. Since the 

multiplier is always + 1.55, no matter what the cost, period of time, or industry subject to 

the regulation, EPA's simplistic method will always conclude that the new regulation will 

create jobs. Further, the more costly the regulation. the greater the job increase that it 

will project. This effect can be clearly seen in Figure 1 below, taken from my report. 

The figure graphs the estimated cost of each regulation for which EPA has produced an 

MPS-based job impact estimate on the vertical axis against the estimated number of jobs 

3 Morgenstern, Pizer and Shih (2002), Table III, p. 427. 

7 
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82183.048

created on the horizontal axis. The dots for each regulation fall on a line: the more 

costly the regulation, the more positive the estimated job impacts.4 

Figure 1. Relationship between EPA's Estimates of a Rule's Compliance Costs and its Job Impacts 

for Air RIAs that Used MPS-Based Formula 

$14,000 

$12,000 

Cost/yr. $10,000 

($millions $8,000 2010$) 

$6,000 

$4,000 

$2,000 

$0 

-2000 ° 2000 4000 6000 8000 

The MPS paper's econometric methods are complex, but EPA's use of its 

summary result as a multiplier to project impacts of future new regulations is simplistic. 

It has no methodological merit even for use with relatively low-cost regulations that may 

have little indirect effect on the rest of the economy. The MPS-based multiplier is for 

changes in total labor payments, not numbers of employees, as EPA's RIA imply. It is an 

estimate of how total labor payments changed as a result of past environmental spending 

4 In fact, the slope of the line would be 1.55 per million dollars of regulatory cost, if costs were stated in 

1987$. However, this graph states the cost estimates in 20] 0$). 

8 
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82183.049

not linked to any individual type of regulation. It is an aggregate of four specific sectors, 

none of which was electricity generation. 

The Need for Full-Economy Impacts Estimates in Place of EPA's Method 

Of even more concern, however, MPS was a partial employment impact study, 

meaning it only considered labor spending by the sectors that absorbed the compliance 

spending directly. The MPS study was not designed to address the question of the fulleconomy effects ofregulations. When a regulation's cost may be passed through to the 

regulated sector's customers, regulatory impacts can ripple through the full economy. 

This is a significant concern for regulations that may raise the prices of commodities that 

are widely used throughout all sectors of the economy, such as electricity and fuels. 

This is not an idle concern. In Figure 1, the data point in the far upper right 

comer (i.e., with the highest cost and, according to EPA, the largest job-increasing effect) 

represents the electric generating unit Mercury and Air Toxics Standard (MATS) that was 

promulgated in December 2011. This rule directly affects the cost of generating 

electricity, and it is has the second highest cost of all the air regulations in the set of air 

RIAs reviewed.5 The electricity sector was not among the sectors analyzed in the 

original MPS study. But more importantly, the MATS rule has all of the attributes that 

would indicate the appropriateness of a full-economy analysis. EPA estimates MATS to 

have a direct cost that will be 2.5 to 15 times higher than EPA's cost estimates for CAIR 

and CA VR, respectively, which were the two rules that EPA subjected to full-economy 

5 The highest cost estimate was for the 1997 PM,s and Ozone NAAQS ruling - another regulation that 

affects energy sector costs, for which EPA also did not apply a full-economy impact analysis. 

9 
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analysis in 2005. EPA continues to maintain the CGE model, EMPAX-CGE, that it used 

in its 2005 RIAs for CAIR and CAVR.6 There is no good reason to have applied the 

MPS-based multiplier to MATS. 

Other regulations to which EPA has applied the MPS formula include the CrossState Air Pollution Rule (CSAPR), the Industrial, Commercial and Institutional Boilers 

NESHAP, the Portland Cement NSPS and NESHAP, and the Industrial Solid Waste 

Incineration Units NSPS. None ofthese are among the sectors that were analyzed in the 

MPS econometric study, either. Although not as costly as MATS, all of these rules were 

estimated by EPA to have annualized costs exceeding $250 million/year. Most of these 

rules could affect prices of a wide range of inputs to other sectors and to consumers. 

Again, these are conditions that would indicate need for a full-economy analysis 

approach. (They are also the conditions under which the MPS-based approach would be 

least appropriate.) 

In my recent study, I developed full-economy estimates of the impacts of several 

of the regulations that were among the air RIAs reviewed: for the MATS rule, the 

Industrial, Commercial and Institutional Boilers NESHAP, CSAPR, and an illustrative 

analysis of a 65 ppb Ozone NAAQS.7 These estimates were developed using a CGE 

model of the U.S. economy called NewERA. Model runs were conducted using the same 

6 Indeed, EPA used EMPAX·CGE for its Second Prospective Analysis ofthe Benefits and Costs of the 

Clean Air Act from 1990-2020, released in March 2011. 

7 The costs for the illustrative 65 ppb Ozone NAAQS were based on the incremental cost of a 65 ppb 

standard relative to the 75 ppb standard that was selected in 2008, using the cost data in the 2008 RIA. 

It is illustrative because EPA did not actually select that standard in its 2008 rulemaking, and our 

analysis treats those incremental costs as occurring in the future, as might OCCur if 65 ppb is the 

standard selected as a result of the ozone NAAQS review that is expected to be finalized in 2014. 

10 
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assumptions about direct costs that were provided in the RIAs. It should be noted that the 

COE model is a full-employment model that does not estimate short-tenn, involuntary 

transitional unemployment. Instead, impacts to employment are captured in the fonn of 

changes in the average real wage rate, and in voluntary changes in labor supplied, given 

the scenario's wage rate (also known as labor force participation). The combined effect 

of the two is a change in total payments to labor. This change can be stated in "jobequivalents," which is simply the total labor earnings change divided by the average 

annual salary of one worker. lob-equivalent estimates indicate how many jobs would be 

eliminated if all of the reduction in labor payments were imposed as a 100% loss of wage 

income for certain individuals. The long-tenn reality is more likely to be a small change 

in income spread over a much larger number of individuals, and so ajob-equivalent 

estimate should not be viewed as a projection of numbers oflay-offs or swelling of the 

unemployment rolls. It is, nevertheless, an indicator of the magnitude and direction of 

impact on worker incomes. (As I pointed out above, the MPS estimate also is ajobequivalent estimate, and not an estimate of changes in numbers of people holding jobs.) 

Table 1 summarizes the results of these analyses. In brief, a full-economy 

analysis consistently finds net negative impacts on worker incomes for each regulation. 

A large portion of these negative impacts are projected to occur in sectors that bear no 

direct compliance cost or regulatory burden. For example, the commercial and services 

sectors account for the majority of the labor income reductions, even though these rules 

11 
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impose little or no direct compliance obligation on them.8 These labor effects result from 

the reduced productivity of the overall economy that comes from diverting economic 

resources towards compliance spending, which ultimately comes at the expense of 

financially-productive investments. It appears that regulations affecting the electric 

sector have a larger impact outside of the regulated sector than do non-energy 

regulations. This may be because of the more widespread impact of changes in prices of 

electricity than of other types of commodities. Further analysis is needed to check the 

latter hypothesis. However, the overall implications of these reanalyses is clear: a fulleconomy analysis is needed to properly understand the economic implications of 

regulations that have costs nearing or exceeding $1 billion per year. 

Table 1. EPA's MPS-Based Job Estimates Compared to Those from a Full-Economy Analysis 

Rule Sectors Direct Costs Estimated Change in 

Subject to of Rule Job-Equivalents 

Rule (summarized EPA Full-Economy 

in (MPS-Based) (CGE-Based) 

annualized 

form, stated 

in 2010$) 

MATS(') Electricity $10.4 billion +8,000 -71,000 (-15,000 to 30,000) 

CSAPR EI ectricity $0.5 billion +700 -34,000 (-1,000 to 3,000) 

Industrial Most industry $2.4 billion +2,200 -28,000 BoilerMACT other than ELE (-4, I 00 to 8,500) 

Illustrative 65 All sectors + No estimate in 

ppb Ozone households $26.5 billion EPA's 2008 RIA -609,000 

NAAQS(") 

(0) MATS impact analysis was performed relative to baseline with CSAPR, as in RIA. The other three 

policies were analyzed relative to a baseline with CAIR, for comparability to EPA's RIAs for those 3 rules. 

(") Based on incrementa! cost of65 ppb relative to 75 ppb as estimated in 2008 Ozone NAAQS RIA, with 

65 ppb NAAQS assumed to be promulgated in 2014. 

8 See the addendum to the fun report the I submit with this statement for more details of how the total 

reduction in job-equivalents is distributed among all the sectors of the economy. 

12 
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82183.053

Need for a Broader Understanding of Employment Impacts 

The statement above has been focused on a few key issues about the technical 

issues with EPA's methods of making employment impacts estimates. I will close with 

two broader observations. 

First, even using best practices for estimating impacts of an individual regulation, 

the current practice of estimating the impacts of regulations on a rule-by-rule basis is 

likely to lead to a misunderstanding of the degree to which regulations are affecting the 

overall productivity and growth potential of our economy. With each new regulation, the 

costs of all existing regulations are swept into the baseline, and thus are effectively 

treated as having no cost at all. Attention therefore should also be directed to the 

cumulative impacts of the entire suite of regulations that an economy is absorbing over 

time. Cumulative impact studies are occasionally performed, but perhaps not often 

enough, and not broadly enough.9 

Second, it is important to recognize that "employment impact" is a much broader 

and more complex phenomenon than "numbers of jobs," or even of "job-equivalents." 

Even if an estimate is based on a full-economy analysis, policymakers and the public 

cannot be expected to gain much insight about a regulation's impacts on employment 

when they are provided only estimates of numbers of "jobs affected." This is a 

misleadingly simplistic metric that does not begin to reflect the true issues and concerns 

9 For example, EPA occasionally prepares a report on the total costs of the Clean Air Act (required under 

Section g 12 of the Clean Air Act), but this does not include all environmental regulations, nor any of 

the many non-environmental regulations that impose costs on the productive sectors of our economy. 

13 
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that regulations pose for employment opportunity. Some ofthe important concerns that 

simplistic "jobs" estimates fail to address include: 

• Whether the impact is to reduce the wage rate that would otherwise be earned by 

workers, to change the number of hours of work per week, or literally to eliminate 

job openings. 

• Whether the impact will come in the fonn oflayoffs, or via reduced growth in 

new job positions. 

• Whether new employment opportunities created by the regulation will call upon 

the same sets of skills and education as the employment opportunities ended by 

the regulation. 

• Whether wage rates for lost hours of work are greater or less than wage rates for 

hours of work gained - in other words, whether lower paying jobs are replaced 

with higher paying jobs, or vice versa. 

• In the case of an economy with current underemployment: 

o Whether the new employment opportunities match the skills and 

capabilities of those who are in need of work, or simply increase the 

demand for individuals with skills not greatly affected by the downturn. 

o Whether the change in employment opportunities is expected to occur 

during or after the anticipated end of the downturn. 

• Whether the projected employment impacts would be of short duration (as in the 

case of transition to a new equilibrium) or pennanent (as in the case of reduced 

productivity of the economy). 

14 
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More work needs to be done to develop methods for estimating and characterizing the 

above additional aspects of employment impacts, while striving for more credible and 

appropriate methodologies to replace those that are currently most frequently used by 

EPA in its air RIAs. 

15 
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Copyright © 2013 by the United Slates Chamber of Commerce. All nghts reseMld. No part of this pu~ication 

may be reproduced or transmitted in any form-print, electronic, or otherwise--without the express 

written permission of the publisher. 

The U.S, Chamber of Commerce is the wond's largest business federation representing the interests of 

more than 3 million businesses of aU sizes, sectors, and regions, as weI! as state and local chambers and 

industry associations. 
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OVERVIEW 

William L. Kovacs, Senior Vice President 

Environment, Technology & Regulatory Affairs 

U.S. Chamber of Commerce 

Over the last four years, the U. S. Environmental Protection Agency (EPA) has 

often claimed that its new major, economically significant regulations create 

jobs. As industries have announced job layoffs due to the newly issued 

regulations and the claims that job creation continued, it became necessary to 

undertake a study to understand how EPA reached its conclusions as well as 

the soundness of its findings that its regulations create jobs. To better 

understand the employment impacts of environmental regulations, the Chamber 

in 2012 commissioned the economic research firm NERA to undertake a study 

to review and assess EPA's methods for estimating employment impacts 

related to air quality regulations. 

The Impact of Regulations on Employment 

The impact of regulations on jobs has been debated in Congress for more than 45 years. The earliest 

discussion of the impact of regulations on jobs is found during the congressional debate over the Air 

Quality Act of 1967. As part of the debate, Congress mandated a comprehensive study of the 

economic impacts of air quality standards on the nation's industries and communities. A decade 

later, Congress mandated that the EPA administrator study the potential dislocation of employees due 

to the implementation of environmental laws. This mandate was codified by Congress in Section 

321(a) of the Clean Air Act, which requires EPA to conduct continuing evaluations of potential loss 

and shifts in employment that may result from the implementation and enforcement of the Clean Air 

Act. Unfortunately, EPA has ignored this congressional mandate, thus depriving Congress ofa 

significant body of data that would shed light on the impact of regulations on jobs and employment. 

In 2001, Justice Scalia, writing for a near unanimous U.S. Supreme Court in Whitman v. American 

Trucking Associations, clearly analyzed the regulations versus employment debate: 

[T]he economic cost of implementing a very stringent standard might produce health 

losses sufficient to offSet the health gains achieved in cleaning the air - for example, 

by closing down whole industries and thereby impoverishing the workers and 

consumers dependent upon those industries. That is unquestionably true, and 

Congress was unquestionably aware of it. Thus, Congress had commissioned in the 

Air Quality Act ofl967 (1967 Act) 'a detailed estimate of the cost of carrying out the 

provisions of this Act; a comprehensive study of the economic impact of air quality 

standards on the Nation's industries, communities and other contributing sources of 

pollution.' Sec.2, 81 Stat. 505. The 1970 Congress, armed with the results of this 

study, see The Cost of Clean Air, S. Doc. No. 91-40 (1969) not only anticipated 

compliance costs could injure the public health, but provided for that precise 

exigency.! 

I rVhitman v. American T77Jcking Associations, 531 U.S. 457 (2001) at 466. 
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82183.090

Subsequently, when EPA issued a large number of regulations in 2009, six U.S. senators wrote to 

EPA requesting the results of its Section 321 (a) continuing evaluation of potential loss or shifts of 

employment that would result from those new regulations. On October 26, 2009, EPA responded to 

the six senators stating "EPA has not interpreted CAA Section 321 to require EPA to conduct 

employment investigations in taking regulatory actions." 

Therefore, an inquiry that started 45 years ago when Congress sought to understand the employment 

effects of regulations is still unresolved. Congress has been left without the continuing evaluation of 

job loss and shifts in employment due to regulations. The study is intended to review and assess 

EPA's methods for evaluating employment impacts from new air quality regulations. 

Summary Results oftbe Study 

NERA found that EPA discussed the employment impacts of proposed air quality regulations in only 

II of the 48 rulemakings over the 1995 through 2010 period. After 20 I 0 (since the issuance of 

Executive Order 13563), EPA discussed employment impacts in 7 of 9 rulemakings. NERA 

reviewed each regulatory impact analysis to determine the economic methodologies used and 

evaluated their adequacy. 

The study reveals striking omissions and inconsistencies in EPA's analyses. While the study found 

that many recent EPA regulatory analyses claimed job-creating net benefits for new air quality rules, 

NERA found that the approach on which EPA based such optimistic forecasts was flawed in several 

ways: 

• EPA's analyses use ajobs impact formula that relies on aggregated data from four individual 

industries that do not mirror the industries targeted by recent EPA rules and which was 

derived from 1980s data that are no longer relevant for assessing current impacts. 

• The methods used by EPA considered only part of the potential overall employment impacts. 

EPA's partial analysis methods ignored the effects of regulatory compliance costs on prices. 

NERA concluded that the correct approach for assessment of the overall economic and employment 

impacts of rules with large economy wide costs is to model the impact of regulation compliance cost 

through a whole-economy model. This approach takes into account the cascading effects of a 

regulatory change across interconnected industries and markets nationwide. NERA found that EPA 

possesses the capability to perform such whole-economy modeling and had actually done so in 

connection with two rulemakings in 2005. EPA's failure to use the more comprehensive economic 

analysis tool in its rulemakings partially accounts for the agency's consistently optimistic estimates 

of employment impacts in those rulemakings. 

NERA applied the whole-economy approach to estimate the impact of EPA's 2011 Utility Mercury 

and Air Toxics Standard (MATS). EPA's partial-economy analysis showed that regulation would 

create 46,000 temporary construction jobs and 8,000 net new permanent jobs. By contrast, NERA's 

whole-economy analysis estimated that the MATS rule would have a negative impact on worker 

incomes equivalent to 180,000 to 215,000 lost jobs in 2015, and the negative worker income impacts 

would persist at the level of 50,000 to 85,000 such "job-equivalents" annually thereafter. 

NERA also analyzed three other EPA rules using the whole-economy model and found similar 

results of adverse employment effects: 
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• EPA's Cross State Air Pollution rule would have an impact on worker incomes equivalent to 

the annual loss of34,000 jobs from 2013 through 2037, compared with EPA's claim of700 

jobs per year gained. 

• EPA's Industrial Boiler Maximum Achievable Technology (MACT) rule would have a 

negative impact on worker incomes equivalent to 28,000 jobs per year on average from 2013 

through 2037, compared to EPA's claim of2,200 per year gained. 

EPA's planned ozone National Ambient Air Quality Standard (NAAQS) would reduce 

worker incomes by the equivalent of 609,000 jobs annually on average from 2013 through 

2037. EPA has not yet published an employment impact for the ozone NAAQS. 

The details ofNERA's analyses are contained in the report and appended case study summaries. 

The Impacts of Regulations on Displaced Workers 

Post-Displacement Jobs Pay Less 

Annua1 earnings before and after job loss, January 2012. Full-time 

workers who were displaced between 2009-2011, 

Regulators typically assume that workers 

who are displaced from long-held jobs by 

regulations will find new work quickly. 

In reality, unemployment often has 

serious, continuing impacts on workers 

and their families. In addition to loss of 

income, many workers never return to 

full-time work, and those who do return to 

full-time work often earn less than 

$70.000 

$60.000 

$50,000 

$40,000 

$30,000 

$20,000 

$10,000 

$0 

20 to 29 30 to 45 46 to 59 60 & over 

;;1ost Job 

-Current Job previous wage levels long after 

reemployment. The Bureau of Labor 

Statistics' Displaced Worker Survey in 

January 2012 found that among the 6.1 

million workers who lost long-tenured 

jobs between 2009 and 2011, 44% were 

still unemployed up to three years later. 

Of those who found full-time reemployment, 54% were earning less than their prior jobs had paid, 

and a full one-third were earning at least 20% less, 

Conclusion 

The past 40 years have seen significant declines in the copper mining, steel, textile, fumiture, coal 

mining and forest products industries. While a variety of factors have played a role in the decline of 

these industries, a common thread running through all of them has been the role of regulatory 

mandates and costs. Even when regulations are not the primary cause of change, regulations 

imposed on an industry can provide the tipping point that leads to plant closures and adverse 

economic impacts that otherwise might have been avoided or cushioned over time, While EPA 

continues to issue regulations to protect the environment, it must also be forthcoming and provide 

Congress and the American people with methodologically complete estimates of the impact its 

regulations may have on jobs and communities. 
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Timeline of Air Regulatory Impact Analyses Found to Contain Employment Impact Estimates 

Year of RIAs 

1997 

1998 

1999 

2000 

2001 

2002 

2003 

2004 

2005 

2006 

2007 

2008 

2009 

2010 

2011 

EPA Rule 

Locomotive Emission Standards 

Ozone and PM1 .S NAAQS 

Mt?d1cal Waste Incinerators NSPS 

Hlghway Heavy-Duty Engines 

Pulp &. Paper NESHAP 

NOx SIP Cail & Section 126 Petitions 

Non-Road Diesel Engines 

New Fossil-Fuel-Fired Steam Generating Units 

National VOC Standards 

Phase 2 Nonroad Non-Handheld 51 Engines 

Regional Haze Rule 

Gasoline Sulfur Control Requirements 

Section 126 Petition 

Phase 2 Nonroad Handheld SI Engines 

2004+ Model Year Highway Heavy-Duty Engines 

Stratospheric Owne Reductions 

Heavy-Duty Engine & Fuel Control Requirement 

Nonroad & Recreational Spark-Ignition Engines 

PSD & NSR: Routine Maintenance and Repair 

Auto. & light-Duty Vehicle NESHAP 

Industrial Boilers & Process Heaters NESHAP 

Stationary Redprocating IC Engine NESHAP 

Plywood & Composite Wood Products NESHAP 

Nonroad Diesel Rule 

Clean Air Interstate Rule 

C!eanAirMercury Rule 

Clean Air Visibility Rule/BART Guidelines 

Sec 125 Petition NC; Revs to CA!R & Acid Rain Pgm 

Stationary Compression Jgnition IC Engine NSPS 

PM],; NAAQS 

Control of HAP from Mobile Sources 

Clean Air Fine Particie Implementation Rule 

070ne NAAQS 

Petroleum Refineries NSPS 

Locomotive & Marine Diesel Engines < 30 L/cyl 

Lead NAAQS 

Nonroad Spark,!gnition Engines and Equipment 

Marine C! Engines Emissions Stds :0.30 L/cyl 

GHG Mandatory Reporting Rule 

Ozone NAAQS Reconsideration 

NO: NAAQS 

Existing Stationary Comp-!gnit. Engines NESHAP 

Title V Greenhouse Gas Tailoring Rule and GHG PSD 

light·Duty Vehicle GHG & CAFE Standard 

SO.' NAAQS 

Existing Stationary Spark-lgmL Engines NESHAP 

Portland Cement NSPS & NESHAP 

SE'wage Sludge Incineration NSPS 

Industrial Boiler NESHAP 

Industrial Solid Waste Incinerator NSPS 

Chlor Alkali Plant Hg Emissions NESHAP 

Cross~State Air Pollution Rule 

Employment Impact 

Provided Using 

Partial Analysis 

Employment Impact 

Provided Using 

Computable General 

Equilibrium Analysis 

If no green or orange, 

EPA did not provide an 

employment impact 

estimate 

oil & Gas Industry NSPS & NESHAP 

Heavy-Duty Vehicle GHG & CAFE Std 

Manganese Ferroalloys RTR 

Utility Mercury and Air Toxies Std U,S, CHAMBER Of COMMERCE 
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February 2013 

Estimating Employment Impacts of Regulations: 

A Review of EPA's Methods for Its Air Rules 

Prepared for U.S. Chamber of Commerce 

U,S, CHAMBER OF COMMERCE 

Environment, Technology & Regulatory Affairs Division NERA Economic Consulting 

ns. Chamber of Commerce }255 23rd StreetNW 

1615 H StrcetNW Washington, DC 20037 

Washington, DC 20062 Tel: +1202 466 3510 

Tel: +1 2024635533 http;/!v.'vAv.nera.com 

http:/h. ... 'W\v.uschamber.comietra 
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82183.095

CHAMBER OF COMMERCE 

Copyright © 20 13 by the United States Chamber of Commerce. All rights 

reserved. No part of this publication may be reproduced or transmitted in any 

form--print, electronic, or otherwise-without the express written permission 

of the publisher. 

The U.S. Chamber of Commerce is the world's largest business federation 

representing the interests of more than 3 million businesses of all sizes. 

sectors, and regions, as well as state and local chambers and industry 

associations 
97 


82183.096

Authors' 

Anne E. Smith, Ph.D. 

Will Gans, Ph.D. 

Mei Yuan, Ph.D . 

• The authors acknowledge the valuable research support provided by Shirley Xiong 

and Meredith McPhail in this project. The authors also acknowledge Dr. W. David 

Montgomery for helpful and insightful comments. The opinions expressed herein 

do not necessarily represent the views ofNERA Economic Consulting or any other 

NERA consultants. 

Report Qualifications/Assumptions and Limiting Conditions From NERA 

Information furnished by others, upon which all or portions ofthis report are based, is believed 

to be reliable but has not been independently verified, unless otherwise expressly indicated. 

Public information and industry and statistical data are from sources we deem to be reliable; 

however, we make no representation as to the accuracy or completeness of such information. 

The findings contained in this report may contain predictions based on current data and historical 

trends. Any such predictions are subject to inherent risks and uncertainties. NERA Economic 

Consulting accepts no responsibility for actual results or future events. 

The opinions expressed in this report are valid only for the purpose stated herein and as of the 

date ofthis report. No obligation is assumed to revise this report to reflect changes, events or 

conditions, which occur subsequent to the date hereof. 

All decisions in connection with the implementation or use of advice or recommendations 

contained in this report are the sole responsibility of the client. This report does not represent 

investment advice nor does it provide an opinion regarding the fairness of any transaction to any 

and all parties. There are no third-party beneficiaries with respect to this report, and NERA 

Economic Consulting does not accept any liability to any third party. 
98 


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Contents 

EXECUTIVE SUMMARY ...........•....•........•.....................•.................•..........•.....................•...•.... 1 

I. Introduction •......•..•.....•.•.•...•..•.•...•...••.•...•..•......•............•.•...................••...•.••.••••••.•••••..••..•.. 6 

II. What is an Employment Impact? ..................................................................................... 9 

A. Partial! Direct Approach ..................................................................................................... 9 

B. Full-Economy Approach .................................................................................................... 10 

C. A Need for Broader Assessment of Employment Impacts ................................................ 12 

III. The Morgenstern, Pizer, and Shih Paper .......•.......•..........•.•............•....•...•.•..•.•..•.•••.•••. 14 

IV. 

A. What the MPS Paper Does ................................................................................................. 14 

B. How EPA Uses the MPS Estimates in its RIAs ................................................................. 16 

A. 

B. 

C. 

Review of Employment Impacts Estimation Methods in EPA Air RIAs ................... 17 

Summary of Findings ......................................................................................................... 17 

Graphical Analysis of EPA's Estimates ............................................................................ 22 

Evaluation of Estimation Practices in EPA's RIAs ........................................................... 23 

I. Insufficient Use ofCGE Modeling .............................................................................. 23 

2. Excessive Use ofMPS-Based Approach ..................................................................... 24 

V. Case Study: Employment Impacts of the 20ll Utility MATS Rule Based on a 

CGE Analysis ........•........••.••••...••..•.•..•..•................•.......•.•.•..........•.•......•.•..•.•......•........••.. 26 

A. EPA's Approach ................................................................................................................ 26 

B. A CGE-Based Estimate ..................................................................................................... .27 

VI. Conclusions ....................................................................................................................... 30 

VII. References .••••.•.••.•.••.....•.•.•...•..•.....•.•••.......•.•......•........•.•.•..•.•.....•..•.................•.•..•...........• 32 

APPENDIX A - Key CGE Model Features Compared to the MPS Approach ..•.•........•.••.••• 34 

A. General Approach ............................................................................................................. .34 

B. Impact Mechanism ............................................................................................................. 35 

C. Labor Market .................................................................................................................... .35 

APPENDIX B - Additional Details on the NewERA Model ..................................................... 36 

A. Overview ........................................................................................................................... .37 

B. Electric Sector Model ....................................................................................................... .38 

C. Macroeconomic Model ..................................................................................................... .40 

I. Overview ..................................................................................................................... .40 

2. Regional Aggregation ................................................................................................. .44 

3. Sectoral Aggregation .................................................................................................. .44 

4. Natural Gas and Oil Markets ...................................................................................... .45 

5. Macroeconomic Outputs .............................................................................................. 46 

D. Integrated NewERA Model ................................................................................................ .46 

E. References to the Appendix .............................................................................................. .47 

ii 
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List of Figures 

Figure I: EPA Regulatory Impact Assessments Reviewed for this Study ................................... 18 

Figure 2: Timing of Air RlAs Found to Contain Employment Impact Estimates ........................ 20 

Figure 3: Employment Impact Estimation Methodologies Found in Air RIAs ............................ 21 

Figure 4: Summary of Employment Impact Estimates Found in Air RIAs .................................. 21 

Figure 5: Relationship between EPA's Estimates ofa Rule's Compliance Costs and its Job 

Impacts MPS-Based Estimates (right panel); All Other Partial-Analysis Estimates (left 

panel) ................................................................................................................................ 22 

Figure 6: Compliance Costs of EPA and NERA Approaches ...................................................... 28 

Figure 7: Utility MATS Rule Labor Impact Estimates: Comparison of EPA's MPS-Based 

Analysis to a CGE-Based Analysis ................................................................................... 29 

iii 
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EXECUTIVE SUMMARY 

Although employment impacts per se are not viewed as either benefits or costs in standard 

benefit-cost analysis, they are a regulatory impact of substantial interest to policymakers and the 

public. Employment impacts are also conceptually complex and frequently discussed in 

oversimplified ways, leading to chronic misunderstanding. Often, analysts simply report an 

estimate of'jobs lost" or "jobs gained" with little or no explanation of what type of estimate has 

been performed, or of the limitations of that particular type of estimate. Frequently the reported 

estimate is based only on a "partial" analysis of the avenues by which employment may be 

affected. Partial estimates of a regulation's 'job impacts" can be either positive or negative, 

depending on which aspects of the policy's impacts have been omitted from the analysis. 

Consumers of the policy analyses are left to sort out for themselves why opposing sides of the 

regulatory debate can come up with directionally inconsistent estimates. 

Even if the estimate is based on a comprehensive analysis, policymakers and the public cannot 

be expected to gain much insight about a regulation's impacts on employment when they are 

provided only estimates of numbers of ' jobs affected." This is a misleadingly simplistic metric 

that does not begin to reflect the true issues and concerns that regulations pose for employment 

opportunity. Some ofthe important concerns that simplistic 'jobs affected" estimates fail to 

address are: 

• Whether the impact is to reduce the wage rate that would otherwise be earned by 

workers, to change the number of hours of work per week, or literally to eliminate job 

openings. 

• Whether the impact will come in the form of layoffs, or via reduced growth in new job 

positions. 

• Whether new employment opportunities created by the regulation will call upon the same 

sets of skills and education as the employment opportunities ended by the regulation. 

• Whether wage rates for lost hours of work are greater or less than wage rates for hours of 

work gained - in other words, whether lower paying jobs are replaced with higher paying 

jobs, or vice versa. 

• In the case of an economy with current underemployment: 

• Whether the new employment opportunities match the skills and capabilities of those 

who are in need of work, or simply increase the demand for individuals with skills not 

greatly affected by the downturn. 

• Whether the change in employment opportunities is expected to occur during or after 

the anticipated end of the downturn. 

• Whether the projected employment impacts would be of short duration (as in the case of 

transition to a new equilibrium) or permanent (as in the case of reduced productivity of 

the economy). 
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This paper reports on a study to review and evaluate the practices of one major U.S. regulatory 

agency in estimating the employment impacts of its regulations, and in communicating about 

those impacts to policymakers and the public. The methodologies found are evaluated in their 

own right, and also in the context ofthe full set of relevant concerns listed above, to identifY 

areas for improvement. This review focuses on how the U.S. Environmental Protection Agency 

(EPA) has been estimating the employment impacts of its air regulations in the Regulatory 

Impact Analyses (RIAs) that EPA must provide to the Office ofthe President for all of its major 

regulations. 

In this review, we consider the methods EPA has applied dating back to 1997, when the fine 

particulate matter (PM25) National Ambient Air Quality Standard (NAAQS) was first 

promulgated. RIAs extend farther back in time, but the first PM2.5 NAAQS rule can be 

considered a turning point in the magnitude and scope of EPA air regulation. This natural 

breakpoint, and a desire to avoid reviewing practices that may be obsolete, led us to limit our 

review of air regulation RIAs to those dating 15 years back. 

Our findings regarding EPA's employment impact estimation practices in that fifteen-year record 

of air RIAs are as follows: 

• Until 2011, EPA only intermittently provided employment impact estimates in its RIAs. 

The shift coincides with an amendment to the Executive Order mandating RIAs that 

specifically mentions 'Job creation" as an important concern to address in RIAs. For the 

years prior to 2011, we could not discern why some RIAs provided employment impact 

estimates and others did not. 

• With only two exceptions (in 2005), EPA's employment impacts estimates have been 

narrowly limited to job counts, and have been "partial" estimates, meaning none ofthem 

have addressed the impact of a regulation's costs on the rest of the economy beyond 

those sectors directly bearing the compliance costs and their suppliers.! 

• Although some of the job estimates have shown net job losses, the majority ofthem have 

reported net gains. This is traceable to the partial nature ofthose estimates. 

• In some cases, job impact estimates are provided separately for short-term jobs associated 

with the period in which compliance investments are being made, and longer-term job 

impacts after the construction demand spike of capital investments for compliance. In 

other cases, it is unclear exactly what types of job counts have been reported. 

• Over the years there has been little attempt in the RIAs to explain or explore the broader 

set of issues that exist with regard to employment impacts. EPA did not elucidate these 

issues even in the two RIAs in 2005 that did provide a different type oflabor impact 

estimate than job counts. 

1 The two exceptions were for the Clean Air Interstate Rule (CAIR) and for the Clean Air Visibility Rule and Best 

Available Retrofit Technology Guidelines (CAVRlBART). Both of these RIAs were released in 2005, and both 

used a method called Computable General Equilibrium (CGE) modeling, which addresses labor market impacts in 

the context ofthe full economy and full employment. CGE models do not directly measure employment impacts in 

the form of ' Job counts." More on this point is discussed below. 

2 
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Below we discuss three overarching conclusions about EPA's employment impact estimation 

methods and areas for improvement in the future: 

(i) EPA makes insufficient use of full-economy models. 

(ii) EPA makes excessive and inappropriate use of a 2002 paper by Morgenstern, Pizer, 

and Shih as a basis for its most recent job impact estimates. 

(iii) EPA needs explicit and sound method selection criteria that will be consistently 

applied in future RIAs. 

Insufficient Use of Full-Economy Modeling. A comprehensive assessment of labor impacts 

across the entire economy requires a full-economy model. This class of model can address how 

compliance costs that are passed from the regulated businesses to their customers may affect 

downstream businesses. Economists consider computable general equilibrium (CGE) models as 

the most appropriate for this task. 

EPA has several CGE models available for use in its RIAs, and has used them for two air rules 

that we reviewed. Those RIAs, both issued in 2005, were for the Clean Air Interstate Rule 

(CAIR), and for the Clean Air Visibility Rule and Best Available Retrofit Technology 

Guidelines (CAVRlBART). In both instances, EPA noted that the rule would have effects on 

energy prices that could impact energy-purchasing companies across the rest ofthe economy not 

directly facing compliance obligations under that rule. This is the type of situation in which use 

of a full-economy modeling approach is important. In both of those RIAs, the net effect of the 

regulations on labor was reported to be effectively nil.2 These results stand in contrast to EPA's 

partial impact analyses in all of the other RIAs (which mostly project positive job impacts). 

Despite the two examples ofCGE modeling found in the RIA record, EPA has not been 

consistent in its decision on when it is appropriate to use CGE modeling. EPA appeared to 

choose the CGE approach for CAIR and CA VRIBART when it concluded that the regulations 

might have significant costs that could be passed through to other sectors ofthe economy. Yet, 

EPA used partial impact analyses for its analyses of two of the most costly air rules covered in 

this review: the 1997 PM25 NAAQS rule and the 20 II Utility Mercury and Toxic Substances 

(MATS) rule. EPA chose not to use a CGE approach for the latter two rules even though it had 

estimated direct compliance costs for both that were about four times larger than EPA's 

estimated costs for CAIR or CA VRfBART. As a result of applying only partial analysis 

methods, EPA reported large positive job impacts for MATS and the 1997 PM25 NAAQS - the 

two most expensive of all its air rules. There was no technical reason why EPA could not have 

performed a CGE-based analysis of its own for all of its large rules, as it had the tools available 

in-house to do so. In both cases, analyses by outside parties that considered the full-economy 

impacts of their cost increases found a net negative impact to labor in the U.S. as a whole (see 

Smith et ai., 1997, and Smith et ai., 2012). Section V of this report compares the CGE analysis 

of the MATS rule (Smith et ai., 2012) to EPA's partial analysis of MATS. 

2 EPA's CGE analysis results are not internally consistent, however, which raises questions about their quality. This 

issue is discussed further in the body of this paper. 
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Excessive Use of Morgenstern. Pizer and Shih (2002). A 2002 paper by Morgenstern, Pizer, 

and Shih (MPS) applies sophisticated econometric methods to develop an ex post empirical 

estimate of the labor spending impacts of early environmental regulations on four specific 

sectors of the economy (steel, pulp and paper, plastics, and petroleum). This econometric 

analysis of past regulations accounts for three different ways that a sector's total labor 

expenditures could have been affected by the costs ofa regulation. MPS's results varied by 

sector, and the average net effect over all four sectors had a confidence interval spanning from 

negative to positive, although the central estimate that was slightly positive. MPS concluded that 

their analysis suggested that past regulations had not caused any significant change in total 

payments to workers in those affected industries. 

Starting in 2010, EPA adopted the slightly positive but statistically-insignificant four-sector 

average estimate from MPS as a simple multiplier, which EPA then used to generate job impact 

estimates in its RIAs for a wide range of different types of sectors and regulations than those 

studied by MPS. This "MPS-based" multiplier method is not appropriate for all such 

applications, and EPA is aware of that. For example, in two of its RIAs released in 2011, EPA 

chose not to use the MPS-based approach on the sound grounds that the affected sectors were 

different from the four studied in MPS. However EPA has not been consistent in its decisions 

about when to apply the MPS-based approach, just as it has not been consistent in when it 

chooses to apply CGE. EPA has provided an MPS-based estimate of job impacts in several other 

RIAs in which the regulated sectors also were very different from the four MPS studied. Most 

salient of these is the RIA for the Utility MATS rule. As explained above, this rule was costly 

enough to warrant a full-economy analysis based on EPA's own criteria for employing its CGE 

models; instead EPA used the MPS-based approach for MATS, even though the utility sector 

affected by MATS is nothing like the four sectors that MPS studied. The result was that EPA 

reported that the Utility MATS rule would generate a small net job increase over the long-term. 

Section V demonstrates how a full-economy, CGE approach indicates a much different 

conclusion. 

EPA's recent use of estimates in the MPS paper to extrapolate to sectors and rules far from its 

empirical base is clearly inappropriate. As a consequence, results for specific RIAs such as the 

Utility MATS rule are not credible. In any event, the MPS approach is a partial analysis and thus 

omits impacts that happen beyond the directly affected sector(s). By conducting major analyses 

that are inconsistent with sound methodology-selection criteria, EPA undercuts the confidence 

one can place in its RIAs. 

A Constructive Path Forward. The path to greater credibility demands that the economics 

profession articulate explicit model-selection criteria, and that EPA adhere to those criteria. In 

our opinion, full-economy modeling using CGE methods is always the more credible choice. 

Discrepancies between full-economy modeling and a partial analysis may be relatively small 

when the regulation is relatively narrow in scope. However, CGE analyses should be required 

for any regulation that affects the costs of inputs to large parts of our economy, such as any 

regulation affecting energy supply. EPA has the relevant tools and know-how to accomplish 

this. 
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In addition, RlAs (and all other related regulatory impact analyses within or beyond the Agency) 

would benefit greatly from more thoughtful discussion of the many important attributes of 

employment impacts other than a simple "job count." When job counts are provided, an 

explanation ofthe range oftypes of impacts on labor that might be implicit in "a job" should be 

provided. Any employment impact estimate based on a partial analysis should be explicitly 

caveated that it counts only direct job gain or losses and that any offsetting effects in the rest of 

the economy are ignored. 

This study's review was limited to EPA's employment impact estimation practices in its RIAs 

for air rules. To the extent that non-governmental groups have adopted the same methods as 

those in EPA's air RIAs, points made in this report also may be useful for interpreting those 

other studies and estimates. Assessments of other methods that were not covered in this study 

(because EPA has not used them) could be helpful additional research. An even higher priority 

for further research, however, would be to advance new methods for assessing the range of 

employment impact attributes listed at the outset ofthis Executive Summary. Without such 

research, policy discussions about employment impacts will continue to be anchored to 

misleading and misunderstood estimates of')ob counts." 
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I. INTRODUCTION 

Regulations force a change in the economy by requiring companies to change their practices to 

meet new guidelines or standards. In theory, a case exists for governments to regulate when 

there is a clear market failure. An example is when the unconstrained operation of private 

incentives in a free market leads to detrimental impacts on others that occur outside of market 

transactions. This phenomenon is called a "negative externality." Properly designed, regulation 

to address negative externalities or other market failures will balance the incremental costs to the 

regulated parties with the incremental benefits to individuals across society at large. Benefit-cost 

analysis (BCA) is the method developed by economists to help guide this balancing act. Ifthis 

balancing act is accomplished successfully, the overall welfare of the society can be improved 

relative to the situation with no regulation on the externality. 

Even the best designed regulations, however, can have an impact on employment. Although 

employment impacts per se are not viewed as either benefits or costs in standard BCA practice, 

they are a regulatory impact of substantial interest to policymakers and the public. This category 

of regulatory impact is also conceptually complex and frequently discussed in oversimplified 

ways leading to chronic misunderstanding. Often, analysts simply report an estimate of 'Jobs 

lost" or 'Jobs gained" with little or no explanation of what type of estimate has been perfonned, 

or of the limitations of that particular type of estimate. 

This study was designed to provide a review of the practices of one major U.S. regulatory agency 

in estimating and communicating the employment impacts of its own regulations. The review 

focuses on how the U.S. Environmental Protection Agency (EPA) has been estimating the 

employment impacts ofits air regulations. In particular, it seeks to detennine whether EPA's 

assessments of employment impacts have been complete, and, if not, to identifY what has been 

left out. 

One ofthe main avenues where EPA has assessed the employment impacts of its regulations is in 

regulatory impact assessments (RIAS).3 RIAs are intended to provide a structured assessment of 

the costs, benefits, and impacts of individual regulations. In this review, we consider methods 

EPA has applied in its air RIAs dating back to 1997, when the first PM25 NAAQS rule was 

promulgated. RIAs extend back farther in time, but the first PM2.5 standard can be considered a 

turning point in the magnitude and scope of EPA air regulation. This natural breakpoint, in 

addition to a desire to avoid excessive effort reviewing practices that may be obsolete, caused us 

to limit our review of air regulation RIAs to those dating 15 years back. 

RIAs have evolved over the years; a review oftheir purpose and history infonns their current 

role in the regulatory process. Federal regulatory agencies are required by Executive Order (EO) 

3 EPA is also required to consider employment effects as part of the original enabling legislation under the Clean Air 

Act, but has apparently not done so. 42 USC 85:111 § 7621: "(a) Continuous evaluation of potential loss or shifts 

of employment - The Administrator shall conduct continuing evaluations of potential loss or shifts of employment 

which may result from the administration or enforcement of the provision of this chapter and applicable 

implementation plans, including where appropriate, investigating threatened plant closures or reductions in 

employment allegedly resulting from such administration or enforcement." 

6 
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to submit RIAs for all "significant" regulations to the Office of Management and Budget. 4 

(Independent agencies, such as the Securities and Exchange Commission or the Federal Trade 

Commission, are exempt from the requirement to produce RTAs.) The first formal requirement 

for RTAs dates back to 1981 when President Ronald Reagan issued EO 12291. EO 12291 

required that each new major rule be demonstrated, in an RIA, to provide greater benefits than its 

costs.5 Because employment impacts are not viewed as either benefits or costs in standard BCA, 

and given the original focus ofthe RIA requirement on BCA specifically, early RIAs did not 

always make an effort to address employment impacts. This situation larrly continued to be the 

case when President Clinton replaced EO 12291 with EO 12866 in 1993. In 2011, however, 

President Barack Obama issued EO 13563 to supplement EO 12866. EO 13563 states that "our 

regulatory system must protect public health, welfare, safety, and our environment while 

promoting economic growth, innovation, competitiveness, andjob creation.,,7 It was only with 

this recent amendment that EPA started to routinely include estimates of employment impacts in 

its RTAs.8 

Given this background information on RTAs, the rest ofthis paper undertakes a review and 

comments on how employment impacts have been estimated in EPA's air rule RTAs. Section II 

provides a brief discussion from an economics perspective of the key concerns and attributes of a 

comprehensive assessment of employment impacts, to establish some context for understanding 

the scope of EPA's actual practices. Section III describes a particular estimation method that 

EPA has been relying on since 2010, based on an empirical analysis by Morgenstern, Pizer, and 

4 As spelled out in EO 12866, "Significant regulatory action" means any regulatory action that is likely to result in 

a rule that may: (I) Have an annual effect on the economy of $ I 00 million or more or adversely affect in a material 

way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or 

safety ~ Of State, local, or tribal governments or communities; (2) Create a serious inconsistency or otherwise 

interfere with an action taken or planned by another agency; (3) Materially alter the budgetary impact of 

entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) Raise 

novel legal or policy issues arising out ofIegal mandates, the President's priorities, or the principles set forth in this 

Executive order."' 

5 Section 2 of EO 12291 specifically required, inter alia, that "(b) Regulatory action shall not be undertaken unless 

the potential benefits to society for the regulation outweigh the potential costs to society; ( c) Regulatory objectives 

shall be chosen to maximize the net benefits to society; (d) Among alternative approaches to any given regulatory 

objective, the alternative invoh·ing the least net cost to society shall be chosen." These are overtly the 

requirements of standard BeA-based decision making, 

6 However, EPA's Statu/DIY and Administrative Requirements for Economic Analysis of Regula/ions do indicate an 

awareness that employment impacts were a relevant consideration in RIAs. EPA's document states: "The first set 

of impacts to be included in an assessment of a regulation are those specifically cited in EO 12866. Many of these 

impacts may be addressed in an economic analysis; however, the analyst may find it desirable to address some of 

these impacts separately, depending on the nature of the regulation under consideration. The impact analysis 

requirements mentioned in EO 12866 include the impact of the regulation on: the efficient functioning of the 

economy and private markets, including productivity, employment, and competitiveness; distribution of impacts 

and equity; and discrimination or bias." 

7 EO 13 563, Section I, emphasis added. 

8 It is important to note that, guidance on the merits and intention of the regulation notwithstanding, the ultimate 

RIA is at the discretion of the agency. The RIA is not subject to any formal public or peer review process other 

than review by OMB's Office of Information and Regulatory Affairs (OJRA). 

7 
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Shih (2002). Section IV then summarizes the trends observed in EPA's methods for estimating 

employment impacts in air RIAs, and comments on them. Section V illustrates the insufficiency 

of EPA's "partial analysis" method with a specific example ofa more comprehensive analysis 

for the Utility MATS rule. Section VI concludes with recommendations. 
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II. WHAT IS AN EMPLOYMENT IMPACT? 

An employment impact is a difficult concept to characterize and measure. All relevant measures 

of economic impact are tied to either a consumer welfare measure or to a distributional impact. 

From a consumer welfare standpoint (which is the foundation of the benefit-cost paradigm), the 

most relevant measure for employment impacts is the change in income from employment, or the 

"payments to labor." This can take many different forms, however, including loss in average 

wage rates without any actual loss of jobs . However, much ofthe analysis of regulatory 

employment impacts emphasizes a different measure: a "number" of jobs lost or gained. Such a 

metric lacks a recognition that employment impacts emerge in many different forms, such as 

shifts between higher-paying and lower-paying jobs, between the mix of full-time and part-time 

jobs, and in the distribution of local employment and its implication for net national changes. 

To assess employment impacts with accuracy, one might wish to build a model to account for 

every business and every market relationship in the economy; but the data necessary for such an 

undertaking makes it impractical. Instead, economists take two paths in economic impact 

modeling: a "top-down" approach and a "bottom-up" approach. A top-down approach 

approximates the relationships between all the activities in the economy, grouped as "sectors," 

and simulates what happens if something changes (e.g., a new regulation). A bottom-up 

approach starts with a particular sector of the economy - the industry directly subject to a new 

regulation - and approximates the links between that sector and other sectors. The bottom-up 

approach usually ends up limited to a few closely-related sectors, due to the data complexity that 

it entails, and is thus often characterized as a "partial" market analysis. 

There are drawbacks to either approach; their suitability depends on the specific regulation. In 

the case of a small sector that supplies to narrow niches of the rest of the economy, a partial 

bottom-up approach might be suitable. An approach that does not account for price-related 

impacts throughout the economy may be sufficient ifthose effects are so small as to be 

immaterial to the economy at large. In contrast, a new regulation affecting the production of 

electricity or other products consumed by most homes and businesses is more likely to require a 

model ofthe entire economy. This is a situation more suitable for a top-down approach. 

A. Partial/Direct Approach 

A partial approach accounts for only a portion ofthe economy: typically, the directly-regulated 

sector and the sectors that supply it. Partial approaches to employment impact estimation 

include narrow 'compliance cost' accountings, which measure the specific effects directed by the 

regulation (e.g., the additional personnel to install and maintain required pollution control 

equipment). They also include input/output models, which assume historic patterns in quantities 

of inputs per unit of production to estimate labor-input changes expected if a new regulation will 

affect a sector's output levels. Both of the former methods preclude effects due to changes in 

prices of goods or services. At a higher level of sophistication within the partial analysis 

category is a partial equilibrium model. Such a model typically estimates how increased costs 

affect production processes and market shares, but still only includes a subset of the economy in 

the analysis. 

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Partial analysis methods conform readily with the simplest conceptualization of employment 

impacts, which is that associated with the direct impacts of a regulation. The direct impact of the 

regulation would be the lost productivity resulting from the costs absorbed by those companies 

or individuals directly subject to a regulation. These include new equipment purchases, more 

expensive inputs, as well as training, monitoring, and reporting. 

However, impacts are not limited to directly affected entities, and a majority of overall economic 

impacts (including employment impacts) may derive from the indirect costs. For example, 

suppose that a new regulation requires all electricity to be generated with wind. The full impacts 

of such a regulation would extend beyond the directly affected companies (electricity generators) 

to include industries that sell products to the regulated industry. Some of the indirect impacts 

may be positive, as in the case of companies that provide supplies that are needed for compliance 

(e.g., wind turbine manufacturers); other indirect impacts may be negative, as in the case of 

companies whose inputs can no longer be purchased (e.g., steam turbine manufacturers, as well 

as coal or natural gas suppliers, in the example). Partial analyses often address these types of 

indirect effects too. 

Partial analyses may appear to be complete if they report that they have considered both direct 

and indirect impacts such as those described above. However they sti11 omit certain more 

indirect types of impacts that may be important in major regulations. For example, ifthe costs of 

compliance are passed through into a company's product prices (e.g., an increase in the cost of 

electricity), the price-mediated impacts on labor income can become larger than the impacts to 

the more directly affected sectors. When the affected product is widely purchased by other 

entities throughout the economy (as in the case of most forms of energy), regulatory impacts can 

be spread across many other sectors ofthe economy. These downstream effects are not among 

the indirect effects that partial types of employment impact analyses capture. Indirect effects in 

partial analyses are usually limited to changes in demand/or inputs for the directly regulated 

entities, and thus limited to impacts upstream of the regulated entities' supply chain. 

More sophisticated economic analyses are needed to address changes in prices by the regulated 

entities, which affect the businesses downstream of the regulated entity. Thus, when 

downstream price-related effects are ignored, the analysis can be characterized as "partial," and 

it wi11 not address all ofthe ways a regulation can affect employment opportunities throughout 

the economy. 9 

B. Full-Economy Approach 

A CGE model simulates the full-economy implications of price effects of regulation 

simultaneously with indirect impacts from changes in input demands, essentially accounting for 

all the ways the affected sector's costs migrate throughout the rest of the economy. In contrast to 

partial analysis models, CGE models can produce estimates of macroeconomic impacts. This 

"top-down" type of approach is especially important to consider using in the case of high-cost 

regulations of sectors that produce broadly-consumed goods (e.g., energy). 

'In a similar point, two seminal papers (Jorgenson and Goettle, 1993, and Hazilla and Kopp, 1990) have 

demonstrated that the overall economic costs from environmental regulation may be much larger (e.g., up to 30% 

larger) than an accounting of their aggregate compliance costs. However, (he focus in this discussion is on 

assessment of employment-related impacts speeifically, rather than overall welfare or GDP impacts. 

10 
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Very briefly, a CGE model solves a series of equations of supply and demand for all the goods in 

the economy to establish market equilibrium. Changes in this equilibrium (for example, due to a 

policy change) are then used to estimate direct and indirect demand-related and price-related 

policy impacts. Appendix A provides a more detailed description of the key elements of a CGE 

approach, while the focus here will remain on how employment impacts are represented. 

With respect to employment impacts, CGE models are typically "full employment" models, in 

which all inputs are fully used, including the labor supply available at the prevailing wage. The 

employment-relevant outputs of a CGE model are changes in real wages and in total willingness 

to work (labor supply) at those wages, not numbers of jobS.1O A CGE model solves for labor 

supply changes in response to policy changes. For example, a hypothetical policy may impose 

pollution controls on power production. The costs of compliance with the policy can drive down 

the productivity of labor and with it the equilibrium real wage rate. That can result in less labor 

supplied, and thus less total worker income. Offsetting that effect, as power prices rise, firms 

may substitute into relatively less expensive inputs, which may lead to a rise in demand for labor, 

and offsetting real wage increases. Yet other effects will be set into motion within the model. 

The resulting net impacts ofthe policy will be a mix of shifts in labor among sectors, changes in 

total hours supplied, and in real wages earned per hour worked. These are the various forms of 

employment impacts produced by the typical CGE model. They account for impacts in all 

sectors ofthe economy, even those not directly linked to the regulated sector. 

A full accounting of employment impacts also considers the hidden costs to the economy. While 

a dollar spent on regulation may spur some additional employment activity (e.g., in the example, 

wind turbine manufacturers may hire additional staff to meet the surge in orders), more money is 

being absorbed to produce every unit of the same commodity (i.e., electricity in this example). 

That leaves less money available to invest in equipment or workers that would generate more 

real output for the economy. The long-term effect of these hidden costs can be reduced 

economic growth, and reduced prospects for worker income levels on a widespread and 

permanent basis. Thus, accounting for the inter-related economic impacts of regulation is 

difficult. Some, but not all, CGE models are able to address such productivity impacts on 

economic growth. 

In theory, an approach based upon CGE modeling captures all effects ofthe regulation on the 

economy (including employment). However, much depends on the exact parameterization of the 

model, and on the scenario assumptions underlying the analysis. It is time-consuming to 

construct a CGE model with detailed specifications, and it requires knowledge to understand 

impact channels and interpret the results. Sometimes, the scope of a regulation is small enough 

to reasonably employ a partial equilibrium approach instead. However, EPA employed a CGE 

10 Labor supply is represented by hours available to work, not persons available to work. Because a 'job" is usually 

thought of as pertaining to a person, there is a natural disconnect between the CGE structure and the concept of 

"positions" to be filled by individuals. Thus, the closest CGE metrics to impacts onjobs are change in labor supply 

(%) and change in payments to workers ($). The latter is sometimes expressed, for context, as an equivalent 

number of jobs at the average wage (,job-equivalents"), by dividing it by the average annual worker pay. It is 

important to note, however, that the change in numbers of people employed may be unchanged, while all of the 

change may come from changes in the wage earned by workers, consistent with the concept offull-employment. 

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model on just two of the 18 occasions in which its air RIAs offered any employment impact 

estimates. As we will argue later in this paper, two was too few. 

C. A Need for Broader Assessment of Employment Impacts 

Policymakers and the public cannot be expected to gain much insight about a regulation's 

impacts on employment when they are provided only estimates of numbers of "jobs." Even if 

estimated in a comprehensive manner, this is a misleading metric that does not begin to reflect 

the true issues and concerns that regulations pose for employment opportunity. In fact (as 

discussed above), full-economy CGE models naturally produce a more textured representation of 

employment impacts than counts of job positions, but that also is less than is needed. Some of 

the important attributes of employment-relative impacts that simplistic "jobs" estimates fail to 

address include: 

• Whether the impact is to reduce the wage rate that would otherwise be earned by 

workers, to change the number of hours of work per week, or literally to eliminate job 

openings. 

• Whether the impact will come in the fonn oflayoffs, or via reduced growth in new job 

positions. 

• Whether any new employment opportunities created by the regulation will call upon the 

same sets of skills and education as the employment opportunities ended by the 

regulation. 

• Whether wage rates for lost hours of work are greater or less than wage rates for hours of 

work gained - in other words, whether higher paying jobs are replaced with lower paying 

jobs or vice versa. 

• In the case of an economy with current underemployment: 

• Whether the new employment opportunities match the skills and capabilities ofthose 

who are in need of work, or simply increase the demand for individuals with skills not 

greatly affected by the downturn. 

• Whether the change in employment opportunities is expected to occur during or after 

the anticipated end of the downturn. 

• Whether the larger concern for employment impacts is tied to the transitional impacts of a 

regulation, which will be a one-time cost, or to reduced productivity of the economy, 

which will translate into less growth in worker income levels over the long term. 

The difference between long-run and transitional employment impacts deserves special 

discussion. New regulatory requirements typically also have transitional employment impacts 

such as decreases injobs of one form offset by increases in jobs of another form. The new jobs 

may require a different set of skills than the declining jobs, and they may be in different 

locations. These types of short-term changes may sum to a net zero job impact, yet still result in 

a short-term increase in unemployment (e.g., individuals facing lay-offs may not be able to 

immediately reconfigure their skill sets and locations). 

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For the individual employees who are laid off as the result of new regulation, informational 

barriers may impede their ability to find one ofthe new job openings even if they are qualified; 

"matching" the available worker supply to the new worker demands may be slow. Thus, 

involuntary unemployment can be a real economic cost, as well as a drain on individual wellbeing (emotional as well as financial) during a transitional period.!O 

Transitional employment impacts are difficult to quantify and measure. Conceptually, transition 

costs are often treated as a distributional impact rather than a true economic impact of lasting 

duration. Yet, if these transition impacts occur during a period of macroeconomic decline (e.g., 

currently), and ifthe jobs are substantially different in skills and locations from the types of jobs 

being lost, some of the displaced workers may find themselves placed in a position that they 

could only view as long-term unemployment. This suggests a real loss of economic productivity 

rather than just a distributional impact. 

Estimating these transitional impacts requires different types of modeling approaches than are 

most commonly used in current regulatory policy impact analyses. For example, CGE models 

usually project only long-run conditions after return ofthe economy to equilibrium. Such 

models thus may not be able to estimate any aspect of transitional employment impacts, even 

while they are helpful for understanding the long-run impacts to the full economy. Thus, even 

comprehensive models may need to be supplemented with models that are suited to projecting 

short-run market outcomes, such as short-term econometric models used to analyze businesscycle effects. I I 

Thus, a thorough understanding of employment impacts will require use of multiple different 

types of models. Some ofthe dimensions of impact above are not even amenable to current 

modeling methods, and may merit empirical research. Ideally, in time multiple approaches will 

come to be used in combination, to assess the multiple dimensions of employment impacts. For 

any ofthis to be fruitful, however, policy makers also will need to develop a greater appreciation 

for the multiple relevant dimensions of employment impacts. 

10 Livermore el aI., 2012 also make this point. 

11 Additionally, it might be feasible to use bottom-up studies to estimate direct spending on labor in detail, then 

transfer those costs to a full-economy model as changes in labor productivity, energy cost per unit of output, or 

changes in capital or factor productivity. Sector-specific transitional labor costs may be possible estimated in this 

fashion. 

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III. THE MORGENSTERN, PIZER, AND SHIH PAPER 

MPS refers to a paper that examines the relationship between past environmental regulations and 

past changes in employment in four specific U.S. sectors. It is described in some detail in this 

section because our review found that EPA has begun to rely on estimates from this paper for a 

majority of its recent air RIA employment impacts estimates. The contents of the MPS paper, 

and how EPA is using its results in its RIAs, therefore merit explanation before Section IV 

describes the results of our review of all of EPA's employment impact estimation methods. 

A. What the MPS Paper Does 

The MPS paper considers direct employment changes in four different industries: pulp and 

paper, plastics, petroleum, and steel. 12 The analysis covers the years 1979-1981, 1985, 1988, and 

1991. MPS splits the effect of regulation on industry labor demand into three elements and 

estimates them all econometrically. The elements are changes in payments to labor due to (i) 

change in the quantity of output demanded ("the demand effect"), (ii) change in the cost of 

inputs, holding output and technology fixed ("the cost effect"), and (iii) change in the mix of 

factors, such as shifting from a dirty to a clean fuel ("the factor-shift effect"). Each of these 

effects is explained below. 

(i) The demand effect. In economics, the "law of demand" holds that as a product costs more, 

people buy less of it. This explains why consumers go to the movies less as ticket prices go up, 

or make shorter phone calls if they are in a roaming area. This inverse relationship between 

price and quantity holds for almost all goods, and a summary of its steepness is the elasticity of 

demand. If compliance costs lead to reduced demand for a sector's products, then less will be 

produced, and so, ceteris paribus, there will be less demand for labor to help make those 

products. MPS uses historical data to estimate the demand elasticity for output for each of the 

four industries. l3 It estimates, consistent with theory, that the demand effect of compliance 

spending was negative in each sector studied. 

(m The cost effect. The cost effect addresses the following question: if a company is to keep 

producing the same amount, with the same ratio of ingredients, but with additional spending per 

unit of output for compliance, how much labor spending will arise? As long as there are any 

labor costs associated with production, then this will be a positive effect, ceteris paribus. For 

example, if regulation is projected to cost an additional 2% to the industry, and labor accounts 

for 50% of the added costs, the industry will spend 1 % more on its labor inputs as it complies, so 

the cost effect would be 1% of the industry labor force. Another way to consider the cost effect 

in terms of employment would be: how many people does a company have to hire to comply 

with the new regulation? MPS estimates, consistent with expectations, that this effect was 

positive in each of the four sectors studied. 

12 No theoretical justification for the selection of these industries is given (or for the absence of other industries): the 

authors classifY them as 'heavily-polluting', but the choice seemingly is based upon the data that they had 

available. 

13 MPS define labor productivity as the log difference between annual input price and output price. They use 

productivity changes to map the industry-specific demand curves (and thus, to identify the demand elasticity). 

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(iii) The factor shift effect. The final effect estimated in MPS is the "factor-shift." Instead of 

holding the proportions of inputs per unit of production fixed, response to the regulatory 

requirement may also cause a shift in the input mix per unit of production. This could result in 

an decrease in labor demand, ceteris paribus, ifthe new, compliant production process is less 

labor-intensive than the pre-regulatory processes. For example, ifnew regulation prompted a 

company to replace a production worker with a new machine, this would be a 'factor shift.' The 

likely direction of the factor shift effect was not anticipated a priori. MPS estimates it was 

positive in three of the four sectors studied, and close to zero in the fourth. This essentially 

implies that regulatory compliance in those sectors was more labor-intensive than the original 

production processes themselves. 

The MPS paper also provides an aggregate estimate of the combined effect of these three 

market/production phenomena. MPS estimates that in these four sectors, compliance with the 

regulations implemented in the 1980s did have an incremental negative effect on labor payments 

as product demand decreased, but this was largely offset by greater use oflabor inputs for 

compliance. The positive labor-implication of spending on compliance appears to have been 

reinforced by those compliance-related activities being more labor-intensive than the sectors' 

original productive processes. Net effects on labor spending were found to be positive in three 

sectors (plastics, petroleum, and steel) and negative in one (pulp and paper). 

It is important to point out that the entire theoretical formulation and associated econometric 

analysis in MPS is based on payments to labor reported by these sectors. No measure of ' job 

counts" enters the analysis until all of the estimation has been completed. At that stage alone, 

MPS aggregates the annual expenditures, including depreciation for pollution-abatement capital, 

and divides them by the sample mean to construct industry-specific normalized costs. MPS 

assumes one 'job" is implied by a change in labor spending of $35,000 ($1987). They thus 

normalize their results to allow comparison across industries by expressing results as changes in 

'jobs" per million dollars in environmental spending. The paper's econometric methods are 

complex and sophisticated, but this summary result (i.e., change in jobs per $ million compliance 

spending) can be a misleading way of summarizing for those who have not read the details 

behind it. 14 

This summary result varies from -1.13 to 6.90 "jobs" per million dollars of compliance spending 

across the four sectors. b MPS also calculates an "average" effect, by weighting the four sectors' 

impacts based on the amount each sector was spending on compliance in the sample period 

(1979-1991). The appropriateness ofthis single average estimate is questionable, but at best it is 

an average over the four sectors and not an economy-wide average. It is 1.55 'Jobs" per million 

dollars of compliance spending, and is not statistically significant. Even if the simplistic 

summaries have some use for purposes of discussion, it should be kept in mind that these are 

estimates ofthe net labor effects that occurred in the past, and only reveal that total spending on 

workers in those four sectors did not decline when those sectors spent their way to environmental 

compliance. 

14 This conversion in MPS from labor payments (the data analyzed) to 'Jobs" for a summary metric also means that 

any estimates based. on that summary metric are actually 'job-equivalents.H 

15 Morgenstern, Pizer and Shih (2002), Table III, p. 427. 

15 
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82183.114

MPS does not present these findings as evidence that environmental regulations increase 

employment in the economy. If anything, MPS itself describes the estimated change in labor 

income as an "insignificant change.,,]6 This appears to refer to the weak statistical significance 

of many ofthe paper's estimates more than to the small quantitative magnitude of the average 

estimate net effect. 

Possibly lost from view to the reader is that this econometrically-sophisticated method is 

nevertheless a partial-equilibrium analysis. The analysis considers only the net labor spending 

impacts in the directly regulated sectors. There is no consideration in MPS of indirect impacts to 

upstream industries (e.g., coal mining supplying power plants that were forced to retire). There 

also is no consideration in MPS of downstream effects on businesses that must pay for higher 

costs of products from the regulated firms. It is a partial equilibrium analysis. 

B. How EPA Uses the MPS Estimates in its RIAs 

EPA's MPS-based approach to estimating job impacts in its RIAs is far from sophisticated. EPA 

does not use the statistical methods ofMPS to re-estimate the likely impacts in each sector 

subject to a new regulation. Rather, EPA treats the average four-sector statistically-insignificant 

parameter reported in the MPS paper as a fixed multiplier, and uses it to extrapolate from the 

MPS analysis to new regulations in other sectors. In other words, EPA does no more than take 

an RIA's estimate of the compliance cost ofthat regulation, state that cost as millions of 1987 

dollars, and multiply that number by 1.55. In this manner, all sectors and all regulations are 

being assumed to have the same overall employment response per dollar spent. Clearly, the 

result is always going to be a positive impact on jobs, no matter what the regulation's actual cost 

or modes by which those costs filter into the economy. 

It merits repeating that EPA's multiplication represents an extrapolation of job impacts that 

occurred in regulations that were imposed 20 to 30 years ago. The extrapolation is across 

decades of economic and regulatory change, and into entirely different sectors. These labor 

impact estimates are also only reflective of partial, direct sector-only impacts, even if applied to 

only the four sectors that were originally studied 

As complex as the MPS paper is itself, EPA's use ofMPS to generate employment impact 

estimates in its RIAs for new regulations is not credible. EPA's approach sidesteps any 

consideration of actual effects ofthe regulation in question by borrowing a single parameter 

estimated in MPS and using it as one-size-fits-all assumption. Readers of EPA's RIAs should 

not infer that EPA's new MPS-based approach is a step forward in its employment impacts 

estimation methods just because it cites a sophisticated econometric analysis as the source of that 

assumption. EPA's MPS-based multiplier is not a credible analytical substitute even for a partial 

analysis of a new regulation affecting different sectors. It is no substitute at all for regulations 

warranting an economy-wide employment impacts modeling approach. 

J6 Morgenstern, Pizer, and Shih (2002), p. 429. 

16 
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82183.115

IV. REVIEW OF EMPLOYMENT IMPACTS ESTIMATION METHODS 

IN EPA AIR RIAs 

A. Summary of Findings 

Like other federal agencies, EPA is required to produce RIAs of all of its major regulations. 

Over the past 15 years, EPA has used a variety of approaches to estimate employment impacts. 17 

Of the 57 separate air rule RIAs that NERA reviewed (Figure I), only about 23% of the pre-2011 

RIAs (II of 48) contained any discussion of employment impacts. In contrast, 78% ofRIAs 

from the year 2011 (i.e., after EO 13563 was issued) estimated employment impacts. EO 13563 

clearly affected the willingness of EPA to prepare estimates of employment impacts in its RIAs. 

We have discerned no pattern to explain why some of the pre-20 I I RIAs did include estimates of 

employment impacts, while most did not. Figure 2 (three pages hence) presents a timeline 

showing the years when certain RIAs did provide employment impact estimates, which reveals 

the apparent randomness of employment impact estimates prior to the surge in 20 II. 

Ofthe 18 RIAs with an employment impact estimate, all but two provided a simple 'job count" 

rather than estimating the broad and varied ways that employment opportunities might be 

affected by a regulation. All but four suggested that the employment impact of regulation was 

either positive or negligible. We therefore explored whether certain methods of estimation led to 

positive or negative estimated job impacts. 

Among the RIAs reviewed, two distinct alternatives emerge in how EPA estimates employment 

impacts (see Figure 3, four pages hence). One approach takes an economy-wide view of the 

impacts of regulation, and uses CGE models to estimate the direct, upstream demand-related, and 

downstream price-related effects ofthe policy on employment. The second category of approach 

encompasses a variety of partial analysis methods. As described in Section II, all of these 

different methods assess only direct effects ofthe regulation and (in some cases) the upstream 

impacts on jobs in sectors supplying the directly regulated businesses. As explained below and 

shown in Figure 4 (four pages hence), we found that EPA has favored partial approaches. 

In our review of the RIAs, we found no formal description by EPA of criteria for deciding which 

type of approach it would use under different regulatory circumstances. The clear evidence that 

EPA has used several different types of models and analyses for seemingly similar situations 

suggests no formal criteria exist. Moreover, as we will discuss further below, while EPA has 

made ad hoc statements in some RIAs suggesting the appropriateness or inappropriateness of 

certain methods, EPA has failed to use the same reasoning when warranted in other RIAs. 

17 As part of Executive Order 12866. EPA is instructed to consider the impact of regulation on small businesses. 

Generally, EPA expresses the impact in terms of compliance costs borne by small businesses (as a fraction of the 

total burden), and also includes projected closures and operational changes. EPA uses employment in these 

analyses to gauge whether the entity is question is, in fact. a small business, and to inform the calculation of 

regulatory burden. This sometimes, but not always, includes an estimate of employment impact from the 

regulation. Thus, the discussion of direct compliance (within-industry) impacts also pertains generally to EPA's 

consideration of small business impacts. 

17 
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82183.116

Figure 1: EPA Regulatory Impact Assessments Reviewed for this Study 

Highway Heavy-Duty Engines and Diesel Engines 

Medical Waste Incinerators NSPS and EG (HMIWI) 

1997 Locomotive Emission Standards 

Ozone and PMz5 NAAQS 

1998 

1999 

2000 

Pulp & Paper NESHAP 

National VOC Standards for Architectural Coatings 

Non-Road Diesel Engines (Tier 2 and Tier 3) 

NOx SIP Call & Section 126 Petitions 

New Fossil-Fuel-Fired Steam Generating Units 

Final Section 126 Petition Rule 

Gasoline Sulfur Control Requirements 

Phase 2 Non-road Non-handheld Spark Ignition Engines 

Regional Haze Rule 

2004+ Model Year Highway Heavy-Duty Engines 

Heavy-Duty Engine & Fuel Sulfur Control Requirement 

Phase 2 Non-road Handheld Spark Ignition Engines 

Protection of Stratospheric Ozone Reductions 

Automobile & Light-Duty Vehicle NESHAP 

Industrial Boilers & Process Heaters NESHAP 

2004 Non-Road Diesel Engines (Tier 4) 

Plywood & Composite Wood Products NESHAP 

Stationary Reciprocating Internal Combustion Engine NESHAP 

Clean Air Interstate Rule 

2005 Clean Air Mercury Rule 

2006 

2007 

Clean Air Rule/BART Guidelines 

Inclusion of Delaware and New Jersey in CAIR 

PM25 NAAQS 

Sec 126 NC; Revisions to CAIR & Acid Rain 

Compression Ignition Internal Combustion Engine NSPS 

Clean Air Fine Particle Implementation Rule 

Control of HAP from mobile sources 

v 

v 

v 

v 

v 

v 

18 
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82183.117

Lead (Pb) NAAQS 

Locomotives & Marine Diesel Engines <30 L per Cylinder 

2008 Non-road Spark-Ignition Engines & Equipment 

OzoneNAAQS 

2009 

2010 

2011 

Petroleum Refineries NSPS 

GHG Mandatory Reporting Rule 

New Marine Compression >30 L inder 

EPAlNHTSA Joint Light-Duty GHG & CAFES 

Existing Stationary Compression Ignition Engines NESHAP 

Greenhouse Gases PSD and Tailoring Rule 

N02 NAAQS 

Ozone Reconsideration NAAQS 

Portland Cement NSPS & NESHAP Amendment 

Existing Stationary Spark Ignition Engines NESHAP 

S02 NAAQS 

Industrial Solid Waste Incineration Units NSPS 

GHG from Medium & Heavy-Duty Vehicles 

Cross State Air Pollution Rule (CSAPR) 

Industrial, Commercial, and Institutional Boilers NESHAP 

Manganese Ferroalloys RTR 

Chlor Alkali Plant Mercury Emissions NESHAP 

Oil & Gas Industry NSPS & NESHAP Amendment 

Sewage Sludge Incineration NSPS 

MATS Rule 

" " " " " 

" 

" 

19 
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Figure 2: Timing of Air RIAs Found to Contain Employment Impact Estimates 

Year of RIAs 

1997 

1998 

1999 

2000 

2001 

2002 

2003 

2004 

2005 

2006 

2007 

2008 

2009 

2010 

2011 

EPA Rule 

Locomotive Emission Standards 

Ozone and PM2.5 NAAQS 

Medical Waste Incinerators NSPS 

Highway Heavy-Duty Engines 

Pulp & Paper NESHAP 

NOx SIP Call & Section 126 Petitions 

Non-Road Diesel Engines {Tiers 2 and 3) 

New Fossil-Fuel-Fired Steam Generating Units 

National voe Standards 

Phase 2 Nonroad Non-Handheld 51 Engines 

Regional Haze Rule 

Gasoline Sulfur Control Requirements 

Section 126 Petition 

Phase 2 Nonroad Handheld SI Engines 

2004+ Model Year Highway Heavy~Duty Engines 

Stratospheric Ozone Reductions 

Heavy-Duty Engine & Fuel Control Requirement 

Nonroad & Recreational Spark-Ignition Engines 

PSD & NSR: Routine Maintenance and Repair 

Auto. & Light-Duty Vehicle NESHAP 

Industrial Boilers & Process Heaters NESHAP 

Stationary Reciprocating Ie Engine NESHAP 

Plywood & Composite Wood Products NESHAP 

Nonroad Diesel Engines (Tier 4) 

Clean Air Interstate Rule 

(lean Air Mercury Rule 

Clean Air Visibility Rule/BART Guidelines 

Sec 126 Petition NC; Revs to (AIR & Add Rain Pgm 

Stationary Compression Ignition Ie Engine NSPS 

PM~5 NAAQS 

Control of HAP from Mobile Sources 

(lean Air Fine Particle Implementation Rule 

Ozone NAAQS 

Petroleum Refineries NSPS 

locomotive & Marine Diesel Engines < 30 L/cyi 

lead NAAQS 

Nonroad Spark-Ignition Engines and Equipment 

Marine (I Engines Emissions Stds >30 l/cyl 

GHG Mandatory Reporting Rule 

Ozone NAAQS Reconsideration 

NO, NAAQ5 

Existing Stationary Comp-Ignit. Engines NESHAP 

Title V Greenhouse Gas Tailoring Rule and GHG PSD 

light-DUty Vehicle GHG & CAFE Standard 

S0, NAAQS 

Existing Stationary Spark-lgnit. Engines NESHAP 

Portland Cement NSPS & NESHAP 

Sewage Sludge Incineration NSPS 

Industrial Boiler NESHAP 

Industrial Solid Waste Incinerator NSPS 

Ch!or Alkali Plant Hg Emissions NESHAP 

Cross-State Air Pollution Rule 

Oil & Gas Industry NSPS & NESHAP 

Heavy-Duty Vehicle GHG & CAFE std 

Manganese Ferroalloys RTR 

Utility Mercury and Air Toxies Std 

Employment Impact 

Provided Using 

Partial Analysis 

Employment Impact 

Provided Using 

Computable General 

Equilibrium Analysis 

If no green or orange, 

EPA did not provide an 

employment impact 

estimate 

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1997 

1997 

1998 

1999 

2004 

2004 

2004 

2004 

2005 

2005 

2010 

2011 

2011 

2011 

2011 

2011 

2011 

2011 

• Ifa range 

Figure 3: Employment Impact Estimation Metbodologies Found in Air RIAs 

Input/Output Table 

Direct Compliance Costs 

Partial Equilibrium 

Pizer Shih 

Partial 

Partial 

Figure 4: Summary of Employment Impact Estimates Found in Air RIAs 

Ozone and PM2.5 NAAQS Partial 6140 

Pulp & Paper NESHAP 1/0 -4300 to -11200 

National VOC sl'ds for architectural Partial -7 to-40 coatings 

Final Section 126 Petition Rule Partial 764 

Automobile & Light-Duty Vehicle Partial -37 NESHAP 

Industrial Boilers & Process Heaters Partial (negligible) NESHAP 

Plywood & Composite Wood Partial -225 Products NESHAP 

Stationary Recip IC Engine NESHAP Partial (negligible) 

Clean Air Interstate Rule CGE (+0.005% ti) 

Clean Air Visibility RulelBART CGE (+0.001 % til Guidelines 

Portland Cement NSPS & NESHAP MPS +300 (-600 to 1,300) 

Amendment Direct -1.500 

Industrial Solid Waste Incineration MPS +700 (-1,400 to +2,800) Units NSPS 

GHG from Medium & Heavy-Duty MPS (negligible) Vehicles 

Cross Slate Air Pollution Rule MPS +1,000 (-1,000 to +3,000) 

(CSAPR) Direct +2,230 

Ind., Comm. & Inst. Boilers NESHAP MPS +2,200 (-4,100 to +8.500) 

Manganese FerroaHoys RTR Partial +4FTE 

Oil & Gas Industry NSPS & NESHAP Partial +101.6 FTE Amendment 

2011 MATS Rule MPS +8,000 (-15,000 to 30,000) 

Direct +46,000 

$13,855 

$170 

$29.6 

$1533 

$176 

$1,101 

$164 

$321 

$4,082 

$656 

$516 

$285 

$8,177 

$833 

$1,426 

$4 

$754 

$9,994 

costs both listed. 

21 
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82183.120

B. Graphical Analysis of EPA's Estimates 

When one graphs the employment impact estimates in Figure 4, patterns begin to emerge. 

Figure 5 plots EPA's compliance cost estimate for each rule against its employment impact 

estimate. The right panel does this for the RIAs that used the MPS-based multiplier approach 

and the left panel does this for all other RIAs listed in Figure 4 as having used some other partial 

methodology. First, Figure 5 shows that most of the estimates are positive (i.e., job gains are 

usually projected). Second, the amount of projected gain in jobs is correlated with the size of the 

cost ofthe rule. The similarity of the MPS-based relationship to that for the other partial 

approaches is unsurprising because it is just another partial approach, as Section III explained. 

However, the fact that all ofthe MPS-based estimates are positive is symptomatic of the more 

simplistic nature ofthe MPS-based multiplier approach compared to even many of EPA's other 

partial approach estimates. 

Clearly, regulations cannot perpetually generate positive impacts on jobs in the economy, with 

ever greater job increases as the regulation becomes more costly. This illogical pattern in EPA's 

partial-analysis job impacts estimates reflects the clear limitations of using partial analyses. 

Partial analyses focus on select industries, usually those directly affected and/or those directly 

supplying them. This results in a greater chance of omitting some of the relevant detrimental 

impacts, particularly downstream. The MPS-based multiplier approach, however, guarantees a 

positive employment impact, because it simply multiplies a positive 1.55 jobs per million dollars 

(1987$) of compliance cost against the compliance cost estimate of the rule in question. Simply 

put, if the MPS-based approach is applied, higher costs of compliance will always be projected 

to generate larger numbers of jobs. This is, quite clearly, not credible. 

Figure 5: Relationship between EPA's Estimates ofa Rule's Compliance Costs and its Job Impacts 

UPS-Based Estimates (right panel); All Other Partial-Analysis Estimates (left panel) 

$14,000 

§ $12,000 

M Fl $10,000 

~ $8,000 

c 

.2 $6,000 

~ $4,000 

-7000 a 2000 4000 6000 

Partial Jobs Estimate 

$14,000 

$12,000 

$10,000 

$8,000 

$6,000 

$4,000 

$2,000 

$0 

8000 ·2000 

0 

Q:fl 0 

0 2000 4000 6000 8000 

MPS Jobs Estimate 

22 
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82183.121

The high-cost "outlier" cases (with large costs and large positive job impacts) in each panel of 

Figure 5 deserve further mention. Those two cases turn out to be rules for which no partial 

analysis method should ever have been applied. The outlier on the left chart comes from the 

1997 PM25 and Ozone NAAQS RIA, while the outlier on the right chart comes from the 2011 

Utility MATS rule RIA. Both rules had substantial impacts on the electricity sector, were very 

costly, and were expected to generate electricity price increases that would filter through the rest 

ofthe economy. These rules were prime candidates for application of full-economy modeling, 

and a partial approach guaranteed an understatement of any negative employment impacts by 

omitting consideration of the potentially widespread price-related effects on the economy that 

they would engender. 

C. Evaluation of Estimation Practices in EPA's RIAs 

1. Insufficient Use of CGE Modeling 

As Section II explained, a comprehensive assessment oflabor impacts across the entire economy 

requires a full-economy model. This class of model can address how compliance costs that are 

passed from the regulated businesses to their customers may affect downstream businesses. 

Economists consider COE models as the most appropriate for this task. 

As Figure 4 showed, EPA employed a COE model in its air RlAs on two occasions: for the 

CAIR rule and the CAVRlBART rule, both in 2005. In those cases, EPA purportedly used the 

COE approach due to the high estimated cost of those rules, and the potential for price pass 

through in a widely used commodity. Notably, however, those two rules had smaller estimated 

costs than either the 1997 PM25 and ozone rule RIA, or the 20 II Utility MATS rule RIA 

(compare their costs in Figure 4), both of which EPA elected to analyze partially instead. Lack 

of access to a COE model could not have been an excuse: at the time of the 1997 RIA EPA was 

actively using a COE model in another major economic impact analysis. 18 Similarly, in 2011 it 

had - on the shelf- an enhanced and fully peer-reviewed version of the EMPAX-COE model 

that it had used in the two 2005 RIAs.19 Thus, EPA has been inconsistent in its decisions to use 

COE modeling, and has not used COE modeling to a sufficient degree. 

In the two 2005 RIAs where a COE approach was used, EPA did not make much effort to 

elucidate the meaning ofthe rather different labor impact measures that those analyses produced. 

COE models assume the economy will always find its way to full-employment, thus, "job 

counts," if they could be predicted, would simply be equal to the number of people wanting a 

job. Instead, COE models represent impacts on labor as changes in leisure and in wage rates 

(which combine to cause changes in household labor income). In both these RIAs, the net effect 

of the regulations on labor was reported to be a negligible change in employment. However, the 

RIAs provided no useful explanation to readers about what these results meant other than to 

suggest that they were too small to be a concern. 

18 EPA was using a CGE model in its Section 812 Retrospective Analysis qfthe Costs and Benefits of the Clean Air 

Act 1970-1990 (EPA, 1997) during the years the PM25 and owne RIAs were in process. 

19 See, for example, the EMPAX-CGE documentation (RTllntemational, 2008). 

23 
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82183.122

These two RIAs were also unforthcoming about inconsistencies in their CGE results, as well as 

an unusual finding reported in one. For example, in the analysis ofCAIR, EPA used two models 

(lGEM and EMPAX) to project employment impacts from the rule. The IGEM model projected 

an increase in real wages and an increase in labor, while the EMPAX model projected a decrease 

in wages and a decrease in labor. The reasons for these conflicting results were not discussed 

and should have been to make the analysis useful to readers. Meanwhile, the EMPAX analysis 

for CA VRIBART projected a decrease in real wages, but an increase in labor. The latter effect is 

only expected to occur when a policy is so costly that the effect ofthe rule on income levels 

overwhelms the underlying preference to work fewer hours when wage rates are lower.2o The 

RIA did not even mention that this was an unusual finding or attempt to explain it. This unusual 

finding deserved discussion in its own right, but the inconsistency between the apparent impacts 

of the CA VRiBART rule and the CAIR rule when using the same model also deserved 

discussion that was not provided. 

Thus, even when EPA has used CGE models, it has reported without comment both contrary and 

counterintuitive results. The job impact sections have made little attempt to explain the meaning 

ofthe different types of job estimates, and merely reported the technical fact that those models' 

outputs reflect changes in hours oflabor supp lied. In addition, those RIAs did not report change 

in labor income, which would reflect the true net effect on workers, and is the most basic of a 

CGE model's outputs with respect to labor. 

More important than those shortcomings in the two extant CGE-based RIAs, EPA has not been 

consistent in its decisions on when it should use CGE. As noted above, there were at least two 

other, larger rules that also should have been addressed using CGE, but were not. Section V 

demonstrates how directionally incorrect estimates can result from applying the MPS-based 

approach to a regulation that has significant costs and downstream price impacts. 

2. Excessive Use of MPS-Based Approach 

Recently, EPA has adopted an MPS-based approach, relying upon results in a paper by 

Morgenstern, Pizer, and Shih, (2002) that was described in Section III. The original paper finds 

a statistically insignificant estimate of 1.55 jobs created per $1 million ($1987) in expenditure on 

regulatory cost. EPA, for its new RIAs, treats this estimate oflabor change per unit of cost as a 

simple multiplier. EPA multiplies this value against its estimates for cost of compliance with 

different environmental regulations, in a more recent time period, and in different sectors to 

project the job impacts in its new RIAs. 

Section III explained the shortcomings of EPA's MPS-based approach. Despite these 

shortcomings, as Figure 4 shows, EPA has adopted MPS in nearly all of its RIAs since 2010. 

Interesting, however, is the case ofthe two 2011 RIAs in which EPA refrained from using the 

MPS approach (i.e., for the Ferroalloys and the Oil and Gas NESHAPs). In the Ferroalloys RIA, 

EPA expressed concern that the industry was too different, and the affected sector too small, to 

20 This is called a backward-hending labor supply condition. 

24 
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82183.123

be comparable to the MPS analysis.2! Similar concerns about MPS's transferability to the Oil 

and Gas industry were raised in the NESHAP RIA.22 Yet among the RIAs that did use the MPSbased approach, just one (the industrial boiler MACT) directly affects the specific industries that 

MPS analyzed. It is not obvious that the other sectors (Portland Cement, Waste Incinerators, 

Heavy Duty Vehicles, and Utilities) are closer to those industries examined in MPS than the two 

that were excluded. By inconsistently applying MPS, EPA raises the question of which criteria it 

used to evaluate the suitability of the industry to MPS, and whether those criteria were uniformly 

followed, or appropriate. 

We conclude that EPA's recent use ofthe MPS study to extrapolate to sectors and rules far from 

its base is inappropriate. Results for specific RIAs, such as the Utility MATS rule, are, as a 

consequence, not credible. In any event, the MPS approach is a partial analysis and thus omits 

impacts that happen beyond the directly affected sector(s). Section V provides a case study of 

the bias that EPA's MPS-based approach has created in its application to the Utility MATS rule. 

In that section the MPS-based estimates in the Utility MATS rule are contrasted to the estimates 

that emerge from a more appropriate CGE-based analysis of the same rule's costs. By 

conducting major analyses that are inconsistent with sound methodology-selection criteria, EPA 

undercuts the confidence one can place in any of its RIAs. 

2l "While the steel industry is one of the industries studied by Morgenstern el aI., and ferroaHoys is an important 

input to steel production, the differences in the two industries are significant enough to lead to questions about how 

applicable are the parameters in Morgenstern el al. in this analysis." FerroaHoys RIA (EPA 201Ib), p. 5-11. 

22 "Because of the likelihood of negative compliance costs for the proposed NSPS and the segments ofthe oil and 

natural gas industry affected by the proposals are not examined by Morgenstern el al., we decided not to use the 

parameters estimated by Morgenstern el al. to estimate within-industry employment effects for the proposed oil 

and natural gas NESHAP amendments and NSPS." Oil and Gas NESHAP RIA (EPA 201Ia), p. 7-28. 

25 
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V. CASE STUDY: EMPLOYMENT IMPACTS OF THE 2011 UTILITY 

MATS RULE BASED ON A CGE ANALYSIS 

Prior sections ofthis report have explained why a credible analysis of the economic (and 

employment) impacts of the Utility MATS rule requires a CGE approach. Restated briefly, it is 

that the rule is very costly (approximately $10 billion per year after annualization of capital 

costs), and it affects electricity generation, which is used by virtually all sectors and individuals 

of the U.S. economy. This creates the groundwork for impacts in many sectors other than the 

directly regulated electricity generation sector and its key suppliers. Its large requirement for 

up front capital to construct lower-emitting generation technologies also indicates a significant 

potential for detrimental economic impacts from crowding out of capital. Despite this, EPA 

applied a simple extrapolation of partial impact estimates from the MPS study. 

In 2012, NERA used its NewERA CGE model ofthe U.S. to analyze the impacts ofthe Utility 

MATS rule on a full-economy basis. It projected large and negative employment impacts, in 

contrast to the rosy picture of net positive job impacts that EPA had reported. This section 

briefly summarizes the two sets of results. A more detailed description ofthe CGE analysis by 

NERA is available in a separate report (Smith et al., 2012). 

A. EPA's Approach 

In the RIA for the Utility MATS rule, EPA uses a combination of two approaches to produce 

their employment impact estimate: a short-term, compliance-based method of employment 

impact based engineering cost estimates, and an approach based upon MPS. Admittedly, EPA 

introduces several caveats in the discussion ofthe scope ofthe analysis in the RIA. EPA states it 

did not estimate any of the following: 

Changes resultingfrom labor needed to operate the needed pollution controls, increased demand 

for materials used in pollution control operation. shifts in demand for fuel in response to the rule, 

changes in employment resultingfrom additional coal retirements, and changes in other 

industries due to changes in the price of electricity and natural gas. 

Impacts on employment as a result of the increase in electricity and other energy prices in the 

economy. 

Other employment changes in industries that support and supply the pollution control industry. 

Employment impacts beyond the pollution control and regulated sectors. 

Impacts due to an increase labor productivity by improving health. 23 

In other words, EPA acknowledges that its RIA estimates direct impacts from the regulation, and 

is a partial representation ofthe full economic impacts. Nevertheless, EPA adopts, without 

further question, the MPS jobs-per-dollar multiplier to generate a MATS-rule employment 

impact: a net of 8,000 new "jobs" over the long term. (EPA also used engineering cost 

estimates to estimate a short-term employment impact of 46,000 jobs during the implementation 

phase of the policy.) Such a partial approach, while failing to consider indirect impacts, also 

inadequately considers the direct impacts: labor is a scarce resource, and the supply oflabor has 

23 Utility MATS RIA (EPA, 2011c), p. 6-11. 

26 
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82183.125

to be accounted for - employing 46,000 people, even for a short period, deprives other 

businesses that utilize the same labor pool, and raises their costs. This impacts the rest of the 

economy. 

As explained in Section III, MPS provides an econometric, partial equilibrium approach based 

on the 20 to 30-years prior experience of four sectors in the economy. While more robust partial 

approaches may be suitable to apply to a small fragment of the economy, it is problematic to 

extrapolate the statistics from MPS to a larger part of the economy because the approach does 

not take into account interdependence between sectors, nor does it extend to ensure that all 

markets clear and budget constraint is satisfied for the economy. A more extensive discussion of 

the differences between general equilibrium models and MPS is included in Appendix A to this 

report. 

B. A CGE-Based Estimate 

In a separate analysis, NERA used NewERA, a macroeconomic, economy-wide CGE model to 

estimate the economic impacts of the MATS rule.24 NERA's approach included inter-industry 

links, production functions with substitutability among factors of inputs (e.g., labor, capital, and 

energy), economy-wide supply and demand, and consumer choices on how much labor to 

supply. The NewERA model also contains a detailed, bottom-up representation of all the 

generating units serving U.S. electricity load, in regional electricity markets. This model is 

ideally suited to assess the direct costs of air regulations affecting the utility sector and to 

simultaneously assess the general economic impacts to the U.S. economy when such regulatory 

costs may be absorbed by electricity generators. 

NERA's analysis of the Utility MA TS rule assessed the cost of complying with the MATS Rule 

relative to a Baseline with CAIR, and relative to a Baseline with Cross-State Air Pollution Rule 

(CSAPR). The inclusion ofCSAPR had little effect on the results. NERA's analysis relied on 

the same compliance cost assumptions that EPA used in its RIA's cost analysis. Unsurprisingly, 

the NERA analysis derived very similar estimates of the direct costs of compliance. Figure 6 

compares EPA's annualized compliance cost estimates (developed with the IPM model) to those 

estimated with the NewERA model. 

Because the NewERA model is an integrated model ofthe entire economy, we are able to identify 

the economic impacts outside of the electric sector, which EPA did not. These macroeconomic 

impacts included declines in the rate of growth of the U.S. economy as measured by GDP and 

declines in consumption, or household disposable income. All of these impacts are inconsistent 

with EPA's statement, based on its partial analysis, that the Utility MATS rule would increase 

net jobs. 

24 The N,wERA model is an economy-wide economic model that includes a detailed representation of (he electric 

sector. It has been designed to assess, on an integrated basis, system costs to the power sector to meet any 

specified policy scenario as well as the overall macroeconomic impacts of that policy scenario. For additional 

technical details on the N,wERA model see Appendix B ofthis report or http://www.nera.com/67_7607.htm. 

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Figure 6: Compliance Costs of EPA and NERA Approaches 

EPA (IPM) 

NERA (N",ERA) 

$9.7 

$10.4 

$8.0 

$10.8 

$7.7 

$11.9 

$89.9 

$94.8 

Like other CGE models that EPA has used, NewERA assumes full-employment and long-run 

equilibrium occurs immediately. It thus does not find any literal change in the ability of workers 

to be employed after a transition phase that attends all regulatory changes. Further, a CGE 

model finds impacts to workers in a more general manner than 'Job counts." It assesses changes 

in the real wages paid to workers per hour worked, and changes in hours of work that households 

are prepared to supply at those wages. This is also reported as a change in total labor income to 

households. These estimates are always inclusive of all the increases in labor demand from 

compliance spending. Although it is not possible to predict how much of the projected labor 

income reduction would come in the form of reduced hours per job, shifts in the mix of full-time 

vs. part-time jobs, or simply reduced average payments per hour worked, it is possible to 

describe the magnitude of the loss in worker income in terms ofthe number of "job-equivalents" 

that would produce that income loss. 

The CGE-based analysis ofthe Utility MATS rule using NewERA projected a net negative 

impact to labor income (inclusive of labor increases associated with installing retrofits and 

building new power plants). In 2015, the projected loss was equivalent to 180,000 jobs, 

compared to the CSAPR baseline. The reduction in 2015 labor income was projected to be 

equivalent in magnitude to 215,000 jobs if compared to a baseline with only CAIR in effect. 

While the largest labor income losses are in 2015, there are enduring labor income losses over 

time as the economy shrinks due to higher energy costs. The specific results are shown in 

Figure 7 (on the next page) and contrasted to those in EPA's RIA based on the MPS 

extrapolation?5 This comparison reveals the significant biases that can come from using the 

simplistic MPS-based approach to assess significant and costly energy sector regulations. 

The results in Figure 6 indicate that the fundamental source of the difference in these two 

estimates ofthe overall impact of the rule on the economy is not differences in the respective 

analysts' estimates of the cost of complying with the MATS rule. The fundamental cause ofthe 

difference is the fact that EPA only considers the impacts of the policy on the electric sector; 

they do not consider the broader economic effects of the rule on the full economy. In short, EPA 

adopted a partial approach, which underestimates the impact ofthe regulation in a high-cost rule 

such as utility MATS. By examining only directly affected sectors (electric utilities) and 

ignoring indirect impacts ofthe MATS rule (e.g., rising electricity prices), EPA's analysis omits 

the majority ofthe economic impact of the rule - both in terms of employment impacts and in 

other broader measures of economic impact, such as household spending power and GDP. 

25 Although EPA's RIA describes its estimates as 'Jobs," that estimate also is in "job-equivalents." (See discussion 

in Section III for more details.) 

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Figure 7: Utility MATS Rule Labor Impact Estimates: Comparison of EPA's MPS-Based Analysis to a CGEBased Analysis 

MATS (relative to CSAPR) -180,000 5,000 -60,000 -50,000 

MATS (relative to CAIR) -215,000 -15,000 -75,000 -85,000 

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VI. CONCLUSIONS 

In this review, we examined EPA air rule RIAs dating back to 1997 to document their 

employment impact methodologies. Our findings regarding EPA's general practices are as 

follows: 

• Until 2011, EPA only intermittently provided employment impact estimates in its RIAs. 

The shift coincides with an amendment to the Executive Order that specifically mentions 

'job creation" as an important concern to address in RIAs. For the years prior to 2011, 

we could not discern why some RIAs provided employment impact estimates and others 

did not. 

• With only two exceptions in 2005, EPA's employment impacts estimates have been 

narrowly limited to assessing 'job counts,,,26 and have been "partial" estimates, meaning 

none of them have addressed the impact ofa regulation's costs on the rest of the economy 

beyond those sectors directly bearing the compliance costs and their suppliers. 

• Although some of the job estimates have shown net job losses, the majority of them have 

reported net gains. This is traceable to the partial nature of those estimates. 

• In some cases, job impact estimates are provided separately for short-term jobs associated 

with the period in which compliance investments are being made, and longer-term job 

impacts after the construction demand spike of capital investments for compliance. In 

other cases, it is unclear exactly what types of job counts have been reported. 

• Over the years there has been little attempt in the RIAs to explain or explore the broader 

set of issues that exist with regard to "employment impacts." EPA did not elucidate these 

issues even in the two RIAs in 2005 where it did report a different type of labor impact 

estimate than "job counts." 

More broadly, we conclude that EPA has made insufficient and inconsistent use of full-economy 

models. We also conclude that EPA has made excessive use ofa 2002 paper by Morgenstern, 

Pizer, and Shih as a basis for most of its post-2011 job estimates. The combined effect ofthese 

two problematic aspects of EPA's employment impacts estimation practice has resulted in biased 

estimates of impacts for one of the largest air rules in the record, the 2011 Utility MATS rule. 

EPA's inappropriate use of its partial MPS-based approach indicates positive job increase while 

a more appropriate full-economy analysis of the same compliance spending indicates negative 

overall impacts to worker income. 

By conducting major analyses that are inconsistent with sound methodology-selection criteria, 

EPA undercuts the confidence one can place in any of its RIAs. The path to a more credible set 

of employment impact estimates will first require that the economics profession articulate clear 

model-selection criteria, and then that EPA adhere explicitly to those criteria. In our opinion, 

26 The exceptions were for the Clean Air Interstate Rule (CAIR) and for the Clean Air Visibility Rule and Best 

Available Retrofit Technology Guidelines (CAVRlBART). Both of these RIAs were released in 2005, and both 

used a method called Computable General Equilibrium (CGE) modeling, which addresses Jabor market impacts in 

the context of the full economy and full employment. CGE models do not directly measure employment impacts in 

the form of'Jobs." More on this point is discussed below. 

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full-economy modeling using CGE methods is always the more credible choice. Discrepancies 

between full-economy modeling and a partial analysis may be relatively small when the 

regulation is relatively narrow in scope. However, CGE analyses should be required for any 

regulation that affects the costs of inputs to large parts of our economy, such as any regulation 

affecting energy supply. EPA has the relevant tools and know-how to accomplish this. 

In addition, RlAs (and all other related regulatory impact analyses within or beyond the Agency) 

would benefit greatly from more thoughtful discussion of the many important attributes of 

employment impacts other than a simple 'job count." When job counts are provided, an 

explanation ofthe range of types of impacts on labor that might be implicit in "a job" should be 

provided. Any partial analysis should be explicitly caveated that it counts only direct job gain or 

losses and that any offsetting effects in the rest ofthe economy are ignored. 

This study's review was limited to EPA's employment impact estimation practices in its RlAs 

for air rules. To the extent that non-governmental groups have adopted the same methods as 

those in EPA's air RIAs, points made in this report also may be useful for interpreting those 

other studies and estimates. Assessments of other methods that were not covered in this study 

(because EPA has not used them) could be helpful additional research. An even higher priority 

for further research, however, would be to advance new methods for assessing the range of 

employment impact attributes listed in section II. Without such research, policy discussions 

about employment impacts will continue to be anchored to misleading and misunderstood 

estimates of "job counts." 

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VII. REFERENCES 

EPA. 1997. The Benefits and Costs of the Clean Air Act. 1970 to 1990, prepared for U.S. 

Congress (October). Available at: http://www.epa.gov/oar/sect812/copy.html. 

EPA. 20IIa. Regulatory Impact Analysis Proposed New Source Performance Standards and 

Amendments to the National Emissions Standards for Hazardous Air Pollutantsfor the Oil 

and Natural Gas Industry, July. 

EPA. 2011b. Regulatory Impact Analysis (RIA) for the Proposed Manganese Ferroalloys RTR 

Final Report, November. 

EPA. 2011c. Regulatory Impact Analysisfor the Final Mercury and Air Toxics Standards, 

EPA-4521R-II-011, December. 

EPA. 2012. "Statutory and Administrative Requirements for Economic Analysis of 

Regulations." Available at: http://www.epa.gov/ttnecasl/econdataiRmanuaI212.2.html 

Hazilla, M and R Kopp. 1990. "Social Cost of Environmental Quality Regulations: A General 

Equilibrium Analysis," Journal o.fPolitical Economy, 98(4). 

Jorgenson, DW, RJ Goettle, et al. 1993. "The Clean Air Act and the U.S. Economy," Final 

Report of Results and Findings, Preparedfor the u.s. EPA Office of Policy, Planning and 

Evaluation andfor EPA's Clean Air Act Compliance Analysis Council, Science Advisory 

Board, 8/27/1993. Available at: 

http://yosemite.epa.gov IEE/epa/eerm.nsf/0/5c520c6be7 67b6768525654 70063ee71 ?OpenDoc 

ument. 

Livermore, MA, E Piennar, and JA Schwartz. 2012. The Regulatory Red Herring: The Role of 

Job Impact Analyses in Environmental Policy Debates, Institute for Policy Integrity, New 

York University School of Law, April. Available at: 

http://policyintegrity.orgifiles/publications/Regulatory Red Herring.pdf. 

Nicholas Institute. 2010. Estimating the Employment Impacts of Energy and Environmental 

Policies and Programs: Workshop Summary Report, Nicholas Institute Policy Brief, NI-PB10-06, Duke University, Durham, N.C. (December). Available at: 

http://nicholasinstitute.duke.edu/economics/climatechangepolicy/estimatingemploymentimpacts. 

RTI International. 2008. EMPAX-CGE Model Documentation, Interim Report, prepared for US 

Environmental Protection Agency, RTI Project Number 0209897.002.041, Research Triangle 

Park, NC (March). 

Smith, AE, DW North, JP Bekemeier, NY Chan, F Glasgal, JL Welsh. 1997. Costs, Economic 

Impacts, and Benefits of EPA's Ozone and Particulate Standards, Policy Study 226 of 

Reason Public Policy Institute (June). 

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Smith AE, PM Bernstein, SJ Bloomberg, SM Mankowski, SD Tuladhar. 2012. An Economic 

Impact Analysis of EPA's Mercury and Air Toxics Standards Rule. NERA Economic 

Consulting Working Paper (March I). Available at: http://www.nera.com/67 7631.htm. 

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APPENDIX A - KEY CGE MODEL FEATURES COMPARED TO THE 

MPS APPROACH 

A. General Approach 

A Computable General Equilibrium (CGE) approach solves a system of equations and 

inequalities that represent all sectors in the economy simultaneously. The economic equilibrium 

conditions in the CGE framework include a profit condition that associates the output level with 

profit, a market clearance condition that associates market price with demand and supply 

dynamics, and an income balance that ensures all factor earnings, tax payments and transfers are 

fully exhausted by consumption and savings for future investment. 

A CGE approach connects households and firms through goods and factor markets. Goods 

markets are interdependent as output of one sector can be consumed by another sector as an 

intermediate input. Conventional CGE modeling assumes full employment of resources (capital, 

labor, natural resources), and variations can be introduced to capture the frictions in the reality. 

Government can also be explicitly represented by its function to collect taxes, make public 

investment and redistribute the wealth. 

Production functions in CGE are generally formulated at an aggregate level for computational 

tractability. Some observers critique CGE for its limitation in capturing the rigidity, frictions, 

and imperfections that can be fully accounted in a bottom-up model. A hybrid model can 

integrate a micro model of certain sectors of interest into CGE macro framework, adding a 

bottom-up representation to fill in the need for more concrete sector formulation, all done still 

satisfYing market clearance and income balance conditions. NERA's NewERA model uses such a 

construction (See Appendix B). 

Environmental regulations impose on firms additional costs when diverting resources from 

production to environmental compliance. These resources include not only capital investment 

but also goods and services, and labor input. As a result, more inputs are required to produce the 

same amount of output, leading to higher prices for goods under regulation as well as goods 

consumed for compliance purposes. Conceptually embedded in the CGE framework, such a 

circular flow does not exist in partial types of analysis. 

This has several implications for modeling the labor market. First, analogous to how reallocated 

capital investment for abatement technologies may deprive productive R&D, labor diverted to 

compliance activity could have otherwise been used in productive activities somewhere else. 

Thus,jobs 'created' as a result of environmental regulation in certain sectors destroy jobs in 

other sectors. Second, higher prices due to regulation increase the cost of living, and thus reduce 

real wage income. A net gain of jobs does not consider the price of higher cost of production 

caused by the regulation. Finally, lower factor productivity and reduction in investment in noncompliance production slows down economic growth, thus growth prospective oflabor income. 

A short-term net gain may impact long-term growth. 

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B. Impact Mechanism 

The econometric analysis in the MPS paper decomposes the impact of environmental regulation 

into cost effect, factor shift effect, and a demand effect. A CGE approach accounts for all these 

effects. Moreover, CGE considers what is lacking the MPS econometric analysis: interaction 

across sectors, a budget constraint for every period, and intertemporal optimization. Specifically: 

a) Interaction across sectors: MPS estimates four sectors in isolation. Applying the same 

approach for each and every sector does not reflect the spillover effect along the 

interaction between markets; as a consequence, it does not guarantee all markets clear. 

For example, sectors compete for the same type oflabor (e.g. construction) for regulation 

purposes. Labor supply may not be sufficiently elastic to meet the rising demand at a 

given wage rate. In contrast, CGE takes into account both demand and supply in the 

labor market and thus produces a consistent set of results in price, demand and supply. 

Finally, missing interactions in goods and services market and in capital market lead to 

inconsistent estimates that have indirect impact on labor demand. 

b) Budget constraint: A dollar invested in environment production has an opportunity cost: 

foregone value in either non-compliance production or final consumption. This is 

missing from the MPS approach, as their scope is only a fragment of the economy. 

Applying their approach without considering the budget constraint facing the entire 

economy is not a valid assessment. An analogous fallacy would be to suppose that a 

nation can get rich by borrowing. 

c) Intertemporal optimization: A CGE approach usually establishes a model horizon long 

enough to capture the intertemporal impact over several decades. The intertemporal 

optimization involves equating the marginal utility of consumption of every period. In 

the context of regulation, investment in compliance activity today translates to foregone 

consumption and foregone investment in the future, leading to a slower economic growth 

rate. This will in tum reduce labor income in the future. 

C. Labor Market 

CGE modeling assumes full employment and labor market equilibrium, and thus does not 

typically estimate transitional unemployment impacts. However. there are ways to incorporate 

frictions in the labor market. Cost oflabor movement can be introduced to account for the costs 

incurred during the transfer from one location to another. It would also make sense for the case 

of structural changes where laborers equipped with sector-specific skills incur cost on training to 

fit for another type of work. Choice between labor and leisure is often added to represent a 

friction on the supply side. When regulation results in a lower real wage income, people have 

greater incentive to swap out oflabor hours for leisure. CGE estimates are calculated against a 

counterfactual economic outcome that can never be observed. Such impacts may most 

appropriately reflect the long-term relationship between employment impacts and a regulation's 

effect on the overall economic performance of the economy. It is the only way to address the 

long-term impact on growth of diversion of capital investments from financially-productive 

investments to investments that generate non-financial benefits such as a cleaner environment. 

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APPENDIX B - ADDITIONAL DETAILS ON THE NEwERA MODEL 

NERA developed the NewERA model to forecast the impact of policy, regulatory, and economic 

factors on the energy sectors and the economy. When evaluating policies that have significant 

impacts on the entire economy, one needs to use a model that captures the effects as they ripple 

through all sectors of the economy and the associated feedback effects. The NewERA model 

combines a macroeconomic model with all sectors of the economy (except for the electric sector) 

with a detailed electric sector model. This combination allows for a complete understanding of 

the economic impacts of different policies on all sectors of the economy. 

The macroeconomic model incorporates all production sectors and final demand of the economy. 

Policy consequences are transmitted throughout the economy as sectors respond until the 

economy reaches equilibrium. The production and consumption functions employed in the model 

enable gradual substitution of inputs in response to relative price changes, thus avoiding all-ornothing solutions. 

The main benefit of the integrated framework is that the electric sector can be modeled in great 

detail yet through integration the model captures the interactions and feedbacks between all 

sectors of the economy. Electric technologies can be well represented according to engineering 

specifications. The integrated modeling approach also provides consistent price responses since 

all sectors ofthe economy are modeled. In addition, under this framework we are able to model 

electricity demand response. 

There are great uncertainties about how the U.S. natural gas market will evolve, and the NewERA 

model is designed explicitly to address the key factors affecting future natural gas supply and 

prices. One of the major uncertainties is the availability of shale gas in the United States. To 

account for this uncertainty and the subsequent effect it could have on the domestic and 

international markets, the NewERA model includes resource supply curves for U.S. natural gas 

that can be altered for sensitivity analysis. The model also accounts for foreign imports and U.S. 

exports of natural gas, by using a supply (demand) curve for U.S. imports (exports) that 

represents how the global LNG market price would react to changes in U.S. imports or exports. 

The electric sector model is a detailed model of the electric and coal sectors. Each of the more 

than 17,000 electric generating units in the United States is represented in the model. The model 

minimizes costs while meeting all specified constraints, such as demand, peak demand, 

emissions limits and transmission limits. The model determines investments to undertake and 

unit dispatch. Because the NewERA model is an integrated model of the entire U.S. economy, 

electricity demand can respond to changes in prices and supplies. The steam coal sector is 

represented within the NewERA model by a series of coal supply curves and a coal transportation 

matrix. The NewERA model represents the domestic and international crude oil and refined 

petroleum markets. 

NewERA model outputs include demand and supply of all goods and services, prices of all 

commodities, and terms of trade effects (including changes in imports and exports). The model 

outputs also include gross regional product, consumption, investment, disposable income, and 

changes in "job equivalents" based on labor wage income. 

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Impacts on workers are often considered an important output of policy evaluations. Impacts on 

workers are complicated to estimate and to explain because they can include several different 

impacts, including involuntary unemployment, reductions in wage rates for those who continue 

to work, and voluntary reductions in hours worked due to lower wage rates. No model addresses 

all ofthese potential impacts. The NewERA model is a long-run equilibrium model based upon 

full employment, and thus its results relate to the longer-term effects on labor income and 

voluntary reductions in hours worked rather than involuntary unemployment impacts. It 

addresses long-run employment impacts, all of which are based on estimates of changes in labor 

income, also called the "wage bill" or "payments to labor." Labor income impacts consist of two 

effects: (I) changes in real wage per hour worked; and (2) changes in labor market participation 

(hours worked) in response to changed real wage rates. The labor income change can also be 

expressed on a per-household basis, which represents one of the key components of disposal 

income per household. (The other key components of disposable income are returns on 

investments or "payments to capital," and income from ownership of natural resources). The 

labor income change can also be stated in terms of job-equivalents, by dividing the labor income 

change by the annual income from the average job. A loss of one job-equivalent does not 

necessarily mean one less employed person-it may be manifested as a combination of fewer 

people working and less income per person who is working. However, this measure allows us to 

express employment-related impacts in terms of an equivalent number of employees earning the 

average prevailing wage. 

A. Overview 

NERA's NewERA modeling system is an integrated energy and economic model that includes a 

bottom-up representation of the electricity sector, including all ofthe unit-level details that are 

required to accurately evaluate changes in the electric sector. NewERA integrates the electricity 

sector model with a macroeconomic model that includes all other sectors of the economy (except 

for the electricity sector) using a top-down representation. The model produces integrated 

forecasts for future years; the modeling for this study was for the period from 2013 to 2034 with 

modeling inputs and results for every third year in that period. The model produces a standard 

set of reports that includes the following information. 

Unit-level investments in the electric sector - retrofits in response to environmental policies, 

new builds (full range of new generation technologies represented), retirements based on 

economics. 

Prices - wholesale electricity prices for each of 32 U.S. regions, capacity prices for each U.S. 

region, delivered electricity prices by sector for each of 11 macroeconomic regions in 

NewERA, Henry Hub natural gas prices and delivered natural gas prices to the electric sector 

for each U.S. region, minemouth coal prices for 24 different types of coal, delivered coal 

prices by coal unit, refined oil product prices (gasoline and diesel fuel), renewable energy 

credit (REC) prices for each state/regional renewable portfolio standard (RPS), and emissions 

prices for all regional and national programs with tradable credits. 

Macroeconomic results - gross domestic product (and gross regional product for each 

macroeconomic region), welfare, changes in disposable income. and changes in labor income 

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and real wage rates (used to estimate labor market changes in terms of an equivalent number 

of jobs). 

Figure B-1 provides a simplified representation of the key elements ofthe NewERA modeling 

system. 

Figure B-1: N~ERA Modeling System Representation 

B. Electric Sector Model 

Primary Energy 

(National/Regional) 

Electricity 

(National/Regional/Generating Unit) 

Builds, 

The electric sector model that is part of the NewERA modeling system is a bottom-up model of 

the electric and coal sectors. The model is fully dynamic and includes perfect foresight (under 

the assumption that future conditions are known). Thus, all decisions within the model are based 

on minimizing the present value of costs over the entire time horizon of the model while meeting 

all specified constraints, including demand, peak demand, emissions limits, transmission limits, 

RPS regulations, fuel availability and costs, and new build limits. The model set-up is intended 

to mimic (as much as is possible within a model) the approach that electric sector investors use 

to make decisions. In determining the least-cost method of satisfying all these constraints, the 

model endogenously decides: 

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What investments to undertake (e.g., addition of retrofits, build new capacity, repower unit, 

add fuel switching capacity, or retire units); 

How to operate each modeled unit (e.g., when and how much to operate units, which fuels to 

bum) and what is the optimal generation mix; and 

How demand will respond. The model thus assesses the trade-offs between the amount of 

demand-side management (DSM) to undertake and the level of electricity usage. 

Each unit in the model has certain actions that it can undertake. For example, all units can retire, 

and many can undergo retrofits. Any publicly-announced actions, such as planned retirements, 

planned retrofits (for existing units), or new units under construction can be specified. Coal units 

have more potential actions than other types of units. These include retrofits to reduce emissions 

of S02, NOx, mercury, and CO2• The costs, timing, and necessity of retrofits may be specified 

as scenario inputs or left for the model to endogenously select. Coal units can also switch the 

type of coal that they bum (with practical unit-specific limitations). Finally, coal units may retire 

ifnone of the above actions will allow them to remain profitable, after accounting for their 

revenues from generation and capacity services. 

Most ofthe coal units' actions would be in response to environmental limits that can be added to 

the model. These include emission caps (for SOl, NOx, Hg, and CO2) that can be applied at the 

national, regional, state or unit level. We can also specifY allowance prices for emissions, 

emission rates (especially for toxics such as Hg) or heat rate levels that must be met. 

Just as with investment decisions, the operation of each unit in a given year depends on the 

policies in place (e.g., unit-level standards), electricity demand, and operating costs, especially 

energy prices. The model accounts for all these conditions in deciding when and how much to 

operate each unit. The model also considers system-wide operational issues such as 

environmental regulations, limits on the share of generation from intermittent resources, 

transmission limits, and operational reserve margin requirements in addition to annual reserve 

margin constraints. 

To meet increasing electricity demand and reserve margin requirements over time, the electric 

sector must build new generating capacity. Future environmental regulations and forecasted 

energy prices influence which technologies to build and where. For example, if a national RPS 

policy is to take effect, some share of new generating capacity will need to come from renewable 

power. On the other hand, ifthere is a policy to address emissions, it might elicit a response to 

retrofit existing fossil-fired units with pollution control technology or enhance existing coal-fired 

units to bum different types of coals, biomass, or natural gas. Policies calling for improved heat 

rates may lead to capital expenditure spent on repowering existing units. All of these policies 

will also likely affect retirement decisions. The NewERA electric sector model endogenously 

captures all of these different types of decisions. 

The model contains 32 U.S. electricity regions (and six Canadian electricity regions). Figure 8 -

2 shows the U.S. electricity regions. 

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Figure B-2: N_ERA Electric Sector Model- U.S. Regions 

The electric sector model is fully flexible in the model horizon and the years for which it solves. 

When used in an integrated manner with the macroeconomic model, and to analyze long-term 

effects, the model is usually set up to solve out to twenty to thirty years in three-year time steps. 

C. Macroeconomic Model 

1. Overview 

The NewERA macroeconomic model is a forward-looking dynamic computable general 

equilibrium (CGE) model of the United States. The model simulates all economic interactions in 

the U.S. economy, including those among industry, households, and the government. Additional 

background information on CGE models can be found in Burfisher (2011). 

The NewERA CGE framework uses the standard theoretical macroeconomic structure to capture 

the flow of goods and factors of production within the economy. A simplified version of these 

interdependent macroeconomic flows is shown in Figure B-3. The model implicitly assumes 

"general equilibrium," which implies that all sectors in the economy are in balance and all 

economic flows are endogenously accounted for within the model. In this model, households 

supply factors of production, including labor and capital, to firms. Firms provide households 

with payments for the factors of production in return. Firm output is produced from a 

combination of productive factors and intermediate inputs of goods and services supplied by 

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other firms. Individual firm final output can be consumed within the United States or exported. 

The model also accounts for imports into the United States. In addition to consuming goods and 

services, households can accumulate savings, which they provide to firms for investments in new 

capital. Government receives taxes from both households and finns, contributes to the 

production of goods and services, and also purchases goods and services. Although the model 

assumes equilibrium, a region in the model can run deficits or surpluses in current accounts and 

capital accounts. In aggregate, all markets clear, meaning that the sum of regional commodities 

and factors of production must equal their demands, and the income of each household must 

equal its factor endowments plus any net transfers received. 

Figure B-3: Interdependent Economic Flows in N~ERA's Macroeconomic Model 

Imports 

Factors of 

Production 

Goods and 

Services 

Exports 

The model uses the standard CGE framework developed by Arrow and Debreu (1954). Behavior 

of households is represented by a nested Constant Elasticity of Substitution (CES) utility 

function. The model assumes that households seek to maximize their overall welfare, or utility, 

across time periods. Households have utility functions that reflect trade-offs between leisure 

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(which reduces the amount of time available for earning income) and an aggregate consumption 

of goods and services. Households maximize their utility over all time periods subject to an 

intertemporal budget constraint based on their income from supplying labor, capital, and natural 

resource to firms. In each time period, household income is used to consume goods and services 

or to fund investment. Within consumption, households substitute between energy (including 

electricity, coal, natural gas, and petroleum), personal transportation, and goods and services 

based on the relative price ofthese inputs. Figure B - 4 illustrates the utility function of the 

households. 

Figure B - 4: Household Consumption Structure in N ... ERA's Macroeconomic Model 

Personal 

Transportation 

Services (VMT) 

Materials 

Utility 

Leisure 

Non-Transportation 

Energy 

Fossil Fuels Electricity 

Coal Gas 

On the production side, Figure B - 5 shows the production structure of the commercial 

transportation and the trucking sector. Production structure for the rest of the industries is shown 

in Figure B - 6. The model assumes all industries maximize profits subject to technological 

constraints. The inputs to production are energy (including the same four types noted above for 

household consumption), capital, and labor. Production also uses inputs from intermediate 

products provided by other firms. The NewERA model allows producers to change the 

technology and the energy source they use to manufacture goods. If, for example, petroleum 

prices rise, an industry can shift to a cheaper energy source. It can also choose to use more 

capital or labor in place of petroleum, increasing energy efficiency and maximizing profits with 

respect to industry constraints. 

© NERA Economic Consulting 42 
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Figure B - 5: Commercial Transportation and Trucking Sector Production Structure in N.wERA's 

Macroeconomic Model 

Commercial Transportation 

and Trucking Sector 

Materials + Oil Energy + Value Added 

Materials Oil Energy Value Added 

Fossil Fuels Electricity Capital Labor 

Coal Gas 

Figure B - 6: Production Structure for Other Sectors in N ... ERA's Macroeconomic Model 

Materials 

Coal 

© NERA Economic Consulting 

All Other Goods and 

Senrices 

Energy 

Energy + Value Added 

Value Added 

Fossil Fuels Electricity Capital Labor 

Gas Oil 

43 
143 


82183.142

All goods and services, except crude oil, are treated as Annington goods, which assume the 

domestic and foreign goods are differentiated and thus are imperfect substitutes (Armington 

1969). The level of imports depends upon the elasticity of substitution between the imported and 

domestic goods. The Annington elasticity among imported goods is assumed to be twice as 

large as the elasticity between the domestic and imported goods, characterizing the greater 

substitutability among imported goods. 

Business investment decisions are infonned by future policies and outlook. The forward-looking 

characteristic of the model enables businesses and consumers to determine the optimal savings 

and investment levels while anticipating future policies with perfect foresight. 

The benchmark year economic interactions are based on the IMPLAN 2008 database, which 

includes regional detail on economic interactions among 440 different economic sectors. The 

macroeconomic and energy forecasts that are used to project the benchmark year going forward 

are calibrated to EIA's Annual Energy Outlook (AEO) 2012. 

2. Regional Aggregation 

The NewERA macroeconomic model includes II regions: NYNE (New York and New England) 

MAAC (Mid-Atlantic Coast), UPMW (Upper Midwest), SEST (Southeast), FLST (Florida), 

MSVL (Mississippi Valley), MAPP (Mid-America), TXOL (Texas, Oklahoma and Louisiana), 

AZMT (Arizona and Mountain states), CALI (California) and (PNWS) Pacific Northwest. The 

aggregate model regions are built up from economic data for the 50 U.S. states and the District 

of Columbia. The II standard NewERA macroeconomic model regions and the states within 

each NewERA region are shown in Figure B - 7. 

3. Sectoral Aggregation 

The NewERA model includes a standard set of 12 economic sectors: five energy (coal, natural gas, 

crude oil, e:ectricity, an~ refi~edo?etrol.eum products) an~ seven non-e~ergy sect~rs (servi?es, 

manufactunng, energy-mtenslVe- , agrIculture, commercIal transportatIOn excludmg truckmg, 

trucking, and motor vehicles). These sectors are aggregated up from the 440 IMPLAN sectors. 

The model has the flexibility to represent sectors at different levels of aggregation, when 

warranted, to better meet the needs of specific analyses. 

21 The energy-intensive sector in the N,wERA modeling system includes pulp and paper, chemicals, glass. 

cement, primary metals, and aluminum. 

© NERA Economic Consulting 44 
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Figure B - 7: NewERA Macroeconomic Model Regions 

4. Natural Gas and Oil Markets 

There are great uncertainties about how the u.s. natural gas market will evolve, and the NewERA 

modeling system is designed explicitly to address the key factors affecting future natural gas 

supply and prices. One of the major uncertainties is the availability of shale gas in the United 

States. To account for this uncertainty and the subsequent effect it could have on international 

markets, the NewERA modeling system has the ability to represent supply curves for 

conventional natural gas and shale gas for each region of the model. By including each type of 

natural gas, it is possible to incorporate expert judgments and sensitivity analyses on a variety of 

uncertainties, such as the extent of shale gas reserves, the cost of shale gas production, and the 

impacts of environmental regulations. 

The NewERA model represents the domestic and international crude oil and refined petroleum 

markets. The international markets are represented by flat supply curves with exogenously 

specified prices. Because crude oil is treated as a homogeneous good, the international price for 

crude oil sets the U.S. price for crude oil. 

Consumption of electricity as a transportation fuel could also affect the natural gas market. 

Along with alternative transportation fuels (including biofuels), the model also includes different 

vehicle choices that consumers can employ in response to changes in the fuel prices. The model 

includes different types of Electrified Vehicles (xEVs): Plug-in-Hybrid Electric Vehicles 

© NERA Economic Consulting 45 
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(PHEVs) and Battery Electric Vehicles (BEVs). In addition, the model accounts for both 

passenger vehicles and trucks powered by CNG. 

S. Macroeconomic Outputs 

As with other CGE models, the NewERA macroeconomic model outputs include demand and 

supply of all goods and services, prices of all commodities, and terms of trade effects (including 

changes in imports and exports). The model outputs also include gross regional product, 

consumption, investment, cost of living or burden on consumers, and changes in 'job 

equivalents" based on changes in labor wage income. All model outputs are calculated by time, 

sector, and region. 

Impacts on workers are often considered an important output of policy evaluations. Impacts on 

workers are complicated to estimate and to explain because they can include several different 

impacts, including involuntary unemployment, reductions in wage rates for those who continue 

to work, and voluntary reductions in hours worked due to lower wage rates. No model addresses 

all of these potential impacts. The NewERA model is a long-run equilibrium model based upon 

full employment, and thus its results relate to the longer-term effects on labor income and 

voluntary reductions in hours worked rather than involuntary unemployment impacts. It 

addresses long-run employment impacts, all of which are based on estimates of changes in labor 

income, also called the "wage bill" or "payments to labor." Labor income impacts consist oftwo 

effects: (I) changes in real wage per hour worked; and (2) changes in labor market participation 

(hours worked) in response to changed real wage rates. The labor income change can also be 

expressed on a per-household basis, which represents one of the key components of disposal 

income per household. (The other key components of disposable income are returns on 

investments or "payments to capital," and income from ownership of natural resources). The 

labor income change can also be stated in terms of job-equivalents, by dividing the labor income 

change by the annual income from the average job. A loss of one job-equivalent does not 

necessarily mean one less employed person-it may be manifested as a combination offewer 

people working and less income per person who is working. However, this measure allows us to 

express employment-related impacts in terms of an equivalent number of employees earning the 

average prevailing wage. 

D. Integrated NewERA Model 

The NewERA modeling framework fully integrates the macroeconomic model and the electric 

sector model so that the final solution is a consistent equilibrium for both models and thus for the 

entire U.S. economy. 

To analyze any policy scenario, the system first solves for a consistent baseline solution; it then 

iterates between the two models to find the equilibrium solution for the scenario ofinterest. For 

the baseline, the electric sector model is solved first under initial economic assumptions and 

forecasts for electricity demand and energy prices. The equilibrium solution provides the 

baseline electricity prices, demand, and supply by region as well as the consumption of inputscapital, labor, energy, and materials-by the electric sector. These solution values are passed to 

the macroeconomic model. 

© NERA Economic Consulting 46 
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Using these outputs from the electric sector model, the macroeconomic model solves the baseline 

while constraining the electric sector to replicate the solution from the electric sector model and 

imposing the same energy price forecasts as those used to solve the electric sector baseline. In 

addition to the energy price forecasts, the macroeconomic model's non-electric energy sectors 

are calibrated to the desired exogenous forecast (e.g., EIA's latest AEO forecast) for energy 

consumption, energy production, and macroeconomic growth. The macroeconomic model 

solves for equilibrium prices and quantities in all markets subject to meeting these exogenous 

forecasts. 

After solving the baseline, the integrated NewERA modeling system solves for the scenario. First 

the electric sector model reads in the scenario definition. The electric sector model then solves 

for the equilibrium level of electricity demand, electricity supply, and inputs used by the electric 

sector (i.e., capital, labor, energy, emission permits). The electric sector model passes these 

equilibrium solution quantities to the macroeconomic model, which solves for the equilibrium 

prices and quantities in all markets. The macroeconomic model then passes to the electric sector 

model the following (solved for equilibrium prices): 

• Electricity prices by region; 

• Prices of non-coal fuels used by the electric sector (e.g., natural gas, oil, and biofuels); 

and 

• Prices of any permits that are tradable between the non-electric and electric sectors (e.g., 

carbon permits under a nationwide greenhouse gas cap-and-trade program). 

The electric sector model then solves for the new electric sector equilibrium, taking the prices 

from the macroeconomic model as exogenous inputs. The models iterate--prices being sent 

from the macroeconomic model to the electric sector model and quantities being sent from the 

electric sector model to the macroeconomic model-until the prices and quantities in the two 

models differ by less than a fraction of a percent. 

This decomposition algorithm allows the NewERA model to retain the infonnation in the detailed 

electricity model, while at the same time accounting for interactions with the rest ofthe economy. 

The detailed information on the electricity sector enables the model to represent regulatory 

policies that are imposed on the electricity sector in tenns of their impacts at a unit level. 

E. References to the Appendix 

Armington, P. 1969. "A Theory of Demand for Products Distinguished by Place of Production." 

International Monetary Fund StajJPapers, XVI: 159-78. 

Arrow, K.J., and G. Debreu. 1954. "Existence of an Equilibrium for a Competitive Economy." 

Econometrica 22:265-290. 

Burfisher, M.E. 2011. Introduction to Computable General Equilibrium Models. New York: 

Cambridge University Press. 

© NERA Economic Consulting 47 
147 


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NERA 

CHAMBER ot 

~_- - __ c_~~::~ C~~~~ _~_ 

-==----=- ~ =--- -- - ~~~--=-----=---- -- ---=-=- -~~-- --~ --=----=~-

Employment Impacts of Three Air Rules 

Estimated Using a CGE Model 

Addendum to Estimating Employment Impacts of Regulations: A Review of 

EPA's Methods for Its Air Rules 

Prepared for U.S. Chamber of Commerce 

Anne E. Smith, Ph.D., Senior Vice President 

Will Gans, Ph.D., Consultant 

February 2013 
148 


82183.147

~~~~ ~ ~=-==-- ~~ --=: ~~~~ ~= ~ ~~--=- -= - ~~~--~=-- =- -= -~- =--=-

-.--:-~.~ - ----

-~~ ~---= - - - - - ::;:::;:-~~--=--~ -~~---~-:;=--=- =-~~~-=--=--~-=~- - -= =- -

• This report evaluating EPA's employment impact estimation practices 

found that EPA's current use of a cost-to-jobs multiplier based on a 

paper by Morgenstern, Pizer, Shih (MPS) has these flaws: 

- Is a partial analysis that fails to consider employment impacts to the full economy. 

- Always projects positive job impacts, no matter how costly the regulation. 

• The report included a case study showing that a full-economy, CGEbased analysis of the Utility Mercury and Air Toxics Standard (MATS) 

finds negative impacts to worker income across the full economy, in 

contrast to EPA's MPS-based estimate of small positive worker income 

impacts. 

The CGE analysis used engineering costs for MATS comparable to EPA's. 

• Subsequently, the U.S. Chamber asked NERA to develop full-economy, 

CGE-based worker income estimates for several other recent air rules. 

Again, use engineering cost estimates comparable to those in EPA's RIAs. 

- Determine whether the case study finding that MPS-based estimates are inconsistent 

with a full-economy view can be viewed as a general finding. 

Copyright © 2013 by the United States Chamber of Commerce 
149 


82183.148

-=-~ ~~--=-~ ~ ~ :::=:::~==~~ ~---=- -~:=-~ ~- ---=--- - - - --- ~ - ==-- -=- - - - - - -

_rl •• __ ... =._-....... f --=- _ _ ~-~= ____ ~-=-=-=.-=o-_ --=~~~~~=_-_ - _ __ _-~ 

• Cross-State Air Pollution Rule ("CSAPR") of 2011 

- Although CSAPR has been vacated, the RIA's MPS-based employment impact 

estimates can still be compared to those from a full-economy CGE analysis. 

- EPA used MPS multiplier to assess rule's employment impacts. 

• Industrial Boiler MACT for Major and Area Sources ("Boiler Rule") 

• EPA used MPS multiplier to assess rule's employment impacts. 

• A potential 65 ppb NAAQS for ozone 

Use the EPA cost estimates for this potential NAAQS level from 2008 & 2010 RIAs, 

but assess those costs relative to the current 75 ppb NAAQS. 

Prior RIAs did not include any employment impact estimates. 

• All 3 combined -- to explore the cumulative nature of impact estimates 

Copyright © 2013 by the United States Chamber of Commerce 
150 


82183.149

-- -=--~~~~~-=--==~- - -=~=- - - ~- - - ---- - -=- ~ 

__ ._~ __ cc._ .. -=- -~--~ 

- --=---- - - -=--- ~~ -- ~ ;-~~=~-~~~==---=--- ~ - =-- - - =-- ~ -- -=--=~-=- ~ ~--~---

• Same model as used in the MATS case study in the report. 

Detailed description of model is in Appendix B of the report. 

• For the electric sector rules (e.g., MATS, CSAPR), we do not directly 

"input" the RIA's engineering costs to the CGE model. 

Need to let NewERA estimate compliance costs by year given technology and fuel 

choices that can achieve compliance. 

- By using same technology and similar fuel cost assumptions as in EPA RIA, NewERA 

gets to a similar but not exact compliance cost in the electricity sector. 

• Acronyms for NewERA sectors used in this addendum: 

ELE - Electricity 

GAS - Natural gas extraction & transport 

COL - Coal mining and transport 

EIS - Energy-intensive manufacturing 

M_ V - Motor vehicle manufacturing 

MAN -All other manufacturing 

Copyright © 2013 by the United States Chamber of Commerce 

CRU - Crude oil extraction 

OIL - Oil refining 

SRV - Commercial & seNice sectors 

AGR - Agriculture 

TRK Commercial trucking 

TRN - All other commercial transportation 
151 


82183.150

:~~i'J;i1:;ii'~ 

!i;E:~ITt~!;E~r1:~~ 

(*) Analysis reported in the report. (MATS impact analysis was performed relative to baseline 

with CSAPR. The 3 additional policies in this addendum were analyzed relative to a baseline 

with CAIR for comparability to EPA:s RIAs for those 3 rules.) 

Copyright © 2013 by the UnITed States Chamber of Commerce 
152 


82183.151

~ ~ -- -=-=--=~--=:-,::=:=-=_-=.--==:;:o=-=-:;:=:::-=- - -----=- - ---=- - _ - - - ~ ~ _--=-

- - - - - -- - -- - - -

-~~-;~~: ~~ ~- ~ ~ ~ ~ ~=~ ; ~~~~~ 

.. CSAPR requires 28 Eastern states to reduce S02 & NOx 

emissions to help states achieve the NMOS. 

II Emission caps, starting in 2012; Phase 2 in 2014 

- We implemented the specific emissions caps, including limits on 

inter-state allowance trading as constraints in NewERA's electric 

sector. 

NewERA optimizes the generators' choices to retrofit, retire, fuelswitch, buy allowances, &Ior reduce generation in order to 

comply with the emissions caps. 

• Resulting electricity price changes are passed to other sectors and 

households. 

• Resulting up-front compliance investments increase labor and capital demand 

from the rest of the economy. 

Copyright © 2013 by the United Stales Chamber of Commerce 
153 


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3,000 

2,000 

New BuiJds 

'\Retrofits 

2031 2034 2037 " Fuel,O&M 

-2,000 

-3,000 

Copyright © 2013 by the United States Chamber of Commerce 
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82183.153

• EPA employment impact: jobs created by retrofits and 

ongoing compliance. 

• NewERA: employment down because of additional 

electric sector costs passed to rest of economy. 

(Job Equivalents) 

Employment Estimate 

EPA 

based on Morgenstern et 

al. (2002) 

+700 (peryear)* 

* Statistical estimate, CJ. of -1/000 to +3,000 

** Estimatevaries by year 

Copyright © 2013 by the United Slates Chamber of Commerce 

NewERA 

-34,300 (avg, 2013-2037)** 
155 


82183.154

10,000 

2013 

-10,000 

~ ~ 

~ -20,000 

olf 

.., 

~ 

.5 -30,000 

~ 

6 -40,000 

-50,000 

-60,000 

2016 2019 2022 

Copyright © 2013 by the United States Chamber of Commerce 

2025 2028 2031 2034 2037 

I Confidence Interval "' Estimate 
156 


82183.155

~ 

E 

8 

2% 

1% 

.E 0% 

Q 

.c 

~ 

~ j-l% 

u 

~ c: ·2% 

I 

-3% 

-4% 

Gas 

2013~""" '.101'6 ,., ""'2019-" """102'1' ,," '" -202'5"""_-~"m=2(r28- --,,~~~ 2b3r'n~ 

Electricity 

Copyright © 2013 by the United States Chamber of Commerce 

2034 2037 
157 


82183.156

10,000 

2013 2016 2019 2022 

-10,000 

~ 

" 

~ .lr ·20,000 

.D 

~ 

.: -30,000 

" .. 

iii 

'" U -40,000 

-50,000 

-60,000 

Copyright © 2013 by the United States Chamber of Commerce 

2025 

---COL 

~'~MAN 

-,=SRV 

Ai10ther 

10 
158 


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~~ ---~--=-~~-;; ~~---= ~=-=--=~-=-~~-= ---~ --=-- - ~~~ --- -~--=--~ ---=- -

-~~~~~~~~-~~--~----- -~-- • Rule affects 14,000 "major" & 183,000 "area" boilers. 

Major: (> 10 tpy emissions): Emissions Limits (PM, CO, HAP metals, S02' Hg) 

and annual maintenance checkups mandated. 

- Area: « 10 tpy): energy assessment for area boilers (emissions limits only for 

coal units). 

• Applies to most sectors other than electricity sector. 

• EPA based its cost estimates on presumed control technologies by 

type of boiler. 

• EPA's cost estimates are used as direct cost increases to NewERA's 

non-electric sectors. 

We estimated portion of EPA's total cost that is one-time capital expenditure and 

portion that is recurring and input each with different timing. 

Allocated to each NewERA sector based on mapping from EPA's costs by SIC 

codes. 

- New boiler costs allocated by same shares as or existing source costs. 

Copyright © 2013 by the United States Chamber of Commerce 11 
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Total Annualized Boiler Rule costs reported in RIA of $2.4 billion (2008$). 

We need separate recurring and capital costs for the NewERA model. 

The disaggregation of the $2.4 billion costs was obtained from technical 

appendices supporting the RIA. 

{million 2010$) 

Area Rule 

Major Rule 

Totallndust. Boiler 

.............. _.-

Recurring Costs 

$ 94 

$ 165 

$ 259 

Copyright © 2013 by the United states Chamber of Commerce 

Capital Control Costs 

$1,411 

$5,216 

$6,627 

12 
160 


82183.159

$3,000 

'" 

~ $2,000 

" 

~ 

I 

~ ~ $1,000 

{]. 

$0 

Control 

1lU Recurring 

AGR COL CRU ElS ElE 

Copyright © 2013 by the United States Chamber of Commerce 13 
161 


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~~- ~~~ ~~ ~~~--;~~=-==-~::~-~=~-=-~=~~--~~-=-=-~~ ~--~~- ~ --~ ~ 

~_~ __ .-~~-c 

~~~ ==-~_ =~---=-~~_~-==---_-:~-i~;~~~_~;~~:=i-:~~-=-~i~~-=--=- ~-_~~-=-_=-_-

$6,000 

Control 

'" Recurring 

:l 

0 $4,000 N 

c 

~ 

I 

tl 

0 

u 

;; 

~ $2,000 c 

c 

.. 

$0 

2013 2016 2019 2022 2025 2028 2031 2034 2037 

Copyright © 2013 by the United States Chamber of Commerce 14 
162 


82183.161

(Job Equivalents) 

Employment Estimate 

EPA 

from RIA, based on 

Morgenstern et al. (2002) 

+2,200 (peryear)* 

* Statistical estimate, C.L of ~l,OOO to +3,000 

.* Estimate varies by year 

Copyright © 2013 by the United States Chamber of Commerce 

-27,585 (avg, 2013-2037)** 

15 
163 


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~ 

~ 

10,000 

~ -10,000 

.5! 

.E 

ill, 

~ '6 -20,000 

-30,000 

-40,000 

2013 

I Confidence Interval 

2016 2019 2022 2025 

Copyright © 2013 by the United States Chamber of Commerce 

<Jo Estimate 

2028 2031 2034 2037 

16 
164 


82183.163

5,000 

-5,000 

i! 

~ ii -10,000 

.~ 

~ 

.If 

~ ·15,000 

.5 E ~ 

·20,000 

u 

·25,000 

·30,000 

·35,000 

2013 2016 

Copyright © 2013 by the United Slates Chamiler of Commerce 

2025 2028 2031 2034 2037 

"'all other 

17 
165 


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~-~ - -- -=--=- --=--=:=:--==-~-=-~==--=-~-- =-~-~== ~ - - - --- -- --=-

- - - - ~ - =-- -=- -- - - - - - -

--I&i •• l"~~_- - -- -: - -

- ~=-~ ---=--=-___ -_~~~ -=3-=~_-=- -=- -- ~-=-~ - _~_~ _ ___ ~- ---=-

~ Current NAAQS of 75 ppb is under review by EPA and 

likely to be revised to a level between 50 ppb and 70 

ppb . 

.. We analyzed one possible new NAAQS level: 65 ppb 

- Used cost estimates for 65 ppb from the 2008 ozone NAAQS RIA 

(and in the 2010 ozone reconsideration RIA). 

Adjusted those cost estimates to assume starting from full 

attainment of the current 75 ppb standard. 

" No employment impact estimates exist in the RIAs to 

compare our estimates to. 

- Next ozone NAAQS RIA is likely to contain employment impact 

estimates. 

Copyright © 2013 by ltIe United States Chamber of Commerce 18 
166 


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-- -~ -- -- ==-=-=--==-~~~~--;==- --~~~- - -- --- - -~ 

- - - - -

----'!!:;~-~ -~~ • RIA cost estimates for 65 ppb are mostly for unknown types of 

actions/investments: 

"Known" controls: $4.5 billion/year, versus "unknown" controls: 

$39 billion/year (2006$). 

We subtract RIA's cost of getting to 75 ppb from the above. 

We allocate remainder of RIA's costs (converted to 2010$) . 

• to NewERA sectors (and households) 

over time and to regions 

9 Sectoral allocation methods used: 

- For electric sector: Force in SCRs to all coal-fired units in 36 projected nonattainment states, if not already projected to have SCR by compliance date. 

For rest of sectors and households: 

• "Known" control costs for non-EGU point sources allocated to NewERA 

sectors based on their NAICS codes. 

"Unknown" costs apportioned to sectors/households and to regions according 

to their projected NOx emissions. 

Copyright © 2013 by the United States Chamber of Commerce 19 
167 


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.. 

Based on EPA (200B) 

Copyright © 2013 bV the United States Chamber of Commerce 

_ 55 ppb and lower 

1IIII.56-60ppb 

I:I\SI 61 - 65 ppb 

I:I\SI 66 - 70 ppb 

71 - 75 ppb 

II1II 76 ppb and higher 

I:I\SI Installing monitor 

I:I\SI No monitor 

20 
168 


82183.167

~ __ iiia?q_"",.,,-={ UVRC;_~ - -'= ---- - - -~ _- -

_ - _-==-=-;-=-=i~~~-4~~~~:;-__ - ---- ---=- -__ -=-- _- ~ - -=--------=-

• In April 2012, EPA announced that areas would have between 3 and 

20 years to come into attainment with the 2008 standards based on 

their current ozone levels. We assume same number of years until 

attainment time, clock starting in 2017 (consistent with a rulemaking 

in 2014). 

Are-a Classification CurrentOzooe Lewl Attainment Time 

l>1arginal 76-85 ppb 3 years 

l>1oderate 86-99 ppb 6 years 

Serious 100-112 ppb 9 years 

Serious-15 113-llSppb 15 years 

Serious-17 119-174ppb 17 years 

E'\I:reme 175 ppb and higher 20 years 

• Each sector/region cost category is converted to a total present 

value, then 50% is assumed to be capital expenditure made in years 

from 2017 until region's compliance date. Other 50% is assumed to 

be recurring cost, which is applied on annual basis to all years from 

compliance year forward. 

Copyright © 2013 by the United Stales Chamber of Commerce 21 
169 


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$70 

;;; $60 

o E $50 

c 

~ $40 

e 

t! $30 

8 

l! $20 

S 

0$10 

$0 

2019 Compliance: Capital 

J@2022 Compliance: Capital 

2025 Compliance: Capital 

;ij 2039 Compliance: Capital 

Copyright © 2013 by the United States Chamber of Commerce 

2019 Compliance: Ongoing 

2022 Compliance: Ongoing 

2025 Compliance: Ongoing 

2039 Compliance: Ongoing 

22 
170 


82183.169

EPA 

(Job Equivalents) from RIA 

Employment Estimate (no estimate) 

Copyright © 2013 by the United States Chamber of Commerce 

NewERA 

Annual Average, 

2013-2037 

- 609,364 

23 
171 


82183.170

400 

200 

~ 

" (200) 

~ ';; 

.jf 

.Q 

(400) 

.g 

(j (600) ~ 

.., 

~ ~ (800) 0 

.<: 

0-

(1,000) 

(1,200) 

(1,400) 

Copyright © 2013 by the United States Chamber of Commerce 

2028 2031 2034 2037 

-TRK 

~···SRV 

-MAN 

"Ali Other 

24 
172 


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- - -~--=--~ ~ ~-=---~=---=-=----=-- - =- - -- = -= -~=- -=---=----= ~ ---=- - -~ - -

-~~~ .... ~~--:-

9 Combined CSAPR, Boiler, Ozone rules by inputting their individual 

costs in same manner, but all simultaneously. 

• No significant overlap in rules was identified requiring adjustments to 

avoid double-counting. 

eSAPR requires NOx and S02 controls in ELE only, and our Ozone Rule's 

requirements for SeRs are automatically accounted for in the eSAPR compliance 

strategy that NewERA estimates endogenously. 

Ozone Rule requirements for non-electric sectors would affect only NOx and voe 

emissions, while Boiler Rule requirements affect only PM. These require different 

types of technologies, and so are additive not duplicative. 

D Ozone is dominant impact, but all rules contribute to employment 

and other economic impacts. 

Copyright © 2013 by the United States Chamber of Commerce 25 
173 


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~ .. 

~ 

.If " 

.a 

.g 

'S 

-1l 

~ 

:li 

" 0 .., 

I40D 

20D 

-200 

-4DD 

-600 

·800 

-1,000 

-1,200 

-1,400 

Copyright © 2013 by the United States Chamber of Commerce 

-ozone 

csapr 

-Combined 

26 
174 


82183.173
175 

Mr. WHITFIELD. Thank you, Dr. Smith. 

Mr. Segal, you are recognized for 5 minutes. 

STATEMENT OF SCOTT H. SEGAL 

Mr. SEGAL. Thank you, Mr. Chairman, members of the committee. Thanks for the opportunity to testify. My name is Scott 

Segal. I am a partner at the law firm of Bracewell & Giuliani and 

I also direct the Electric Reliability Coordinating Council, which includes some of America’s top power producers that are working to 

ensure that consumers across the United States have access to reliable, affordable, and environmentally responsible power. 

Look, EPA has a tough job of balancing America’s desire for environmental protection with its demand for affordable and reliable 

power. The Agency has issued a number of environmental rules in 

the past 2 years, is working on others that, at times, seem inconsistent with this balance and more of these types of rules are imminent. 

You have heard the names of all of these rules. We don’t have 

time necessarily to get into every one of them. But Dr. Smith 

talked about the MATS Rule, also the State or overturned actually 

Cross-State Rule, the changes to ambient air quality standards, 

water rules, the status of coal ash, Regional Haze rules; the list 

goes on and on. 

You know, if you do work for those that utilize coal, you almost 

get the impression that the Agency doesn’t like coal. It is funny 

how that works since every rule I have named directly deals with 

coal. Worst yet than these rules, is the capacity of the Agency to 

engage in litigation with environmental organizations, settle that 

litigation prematurely on terms that are favorable to expansion of 

the Agency’s power, and also the use of punitive enforcement strategies, and even direct opposition to the findings of state regulators 

who are themselves competent regulators who are in fact closer to 

the problems they seek to regulate. 

Taken together, these power sector rules impact about 780,000 

megawatts of gas, oil, and oil-fired generation. Through the year 

2025, the most recent estimates show that 348 of the 1,300 coalfired electric generator units are likely to close in 38 States, representing about 15 percent of the total coal fleet. The reasons for 

those closures, I think, are clear to all of us. The industry faces a 

combination of low natural gas prices and inflexible regulation. 

Merely losing 56 gigs, a midrange scenario in line with what 

some industry has estimated but also with the FERC—the Federal 

Energy Regulatory Commission—itself estimated, just to give you 

a sense of perspective is the equivalent of wiping out all the power 

generation for the States of Florida and Mississippi. But coal still 

has an important role to play in America’s energy future. As Tom 

Fanning at the Southern Company recently remarked, the U.S. 

still is the Saudi Arabia of coal with 28 percent of coal’s reserves. 

While the shale revolution is arguably the most transformative 

energy event in our time, recent reports have indicated that the 

most obvious projects were switching from coal to natural gas have 

already been undertaken. Many gas plants are running at or near 

capacity. They are running flat out, meaning that additional demand, assuming the economy ever recovers, additional demand 

176 

may have to once again be met by reliable coal production. But as 

these rules increase the regulatory costs, those are passed on directly to consumers in the form of higher prices. Relying on fewer 

instead of more options puts us in danger of paying more for electricity, which affects the economy as a whole. 

You would think that the bill before you today is targeted only 

at the stock prices of energy companies, at least to hear some of 

its critics. That is not what triggers this analysis. It is the cost to 

consumers. And it should come as no surprise that higher electricity prices are destructive to our economy. Consider, residential 

consumers, small businesses, hospitals, schools, farms, industrial 

operations all depend on reliable and affordable electric power. 

Higher prices disproportionately impact vulnerable individuals, including the poor, the elderly, and those on fixed incomes. One-quarter of Americans report having problems paying for several basic 

necessities; 23 percent have difficulty in paying their utilities. That 

is who is damaged when we don’t fully take into account the consumer impact of higher electricity prices. 

By the way, we have heard discussions of higher gasoline prices 

and I would also point out that almost half of our refineries’ operating costs, about 43 percent actually, is for energy and fewer refineries have the capacity to cogenerate appreciable amounts of electricity on their own, meaning higher electricity prices equals higher 

gasoline prices as well. 

Our schools—99 percent of school superintendents found direct 

budget impacts as result of increased energy costs associated with 

maintaining the building spaces. Worse yet, there is no alternative 

for a school superintendent other than to fire teachers to pay for 

more expensive energy. 

Healthcare—EPA’s rules also adversely affect public health in 

three ways: by increasing the cost of medical care and treatment, 

by imposing real threats on human health by suppressing economic 

growth and the improved health that it brings, and by focusing on 

expensive rulemakings with little incremental benefit when those 

resources, if more sensibly deployed, could save many more lives. 

The bottom line, today’s legislation is an important first step in 

the direction of addressing consumer impact and prices. It is not 

a gutting of the Clean Air Act. The power remains with the Environmental Protection Agency, not the DOE. The DOE makes an 

analysis. It is up to the EPA to decide whether to take that analysis seriously and address those energy consumer price end points. 

If they do so, the rule may proceed. So the power remains with the 

EPA to take consumer prices seriously. They should do that, and 

they should adopt this legislation. 

Thank you. 

[The prepared statement of Mr. Segal follows:] 

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Statement of Scott H. Segal 

Policy Resolution Group at Bracewell & Giuliani LLP 

Director, Electric Reliability Coordinating Council 

The "Energy Consumers Relief Act of 2013' 

Hearing Before the Committee on Energy and Commerce 

Subcommittee on Energy and Power 

U.S. House of Representatives 

April 12, 2013 

Mr. Chairman and Members of the Subcommittee. Thank you for giving me the opportunity to 

testifY before you today. My name is Scott Segal. I am testifYing today as a Partner at 

Bracewell & Giuliani and the Director of the Electric Reliability Coordinating Council (ERCC). 

In both capacities, I have worked with some of America's top power producers to ensure that 

consumers across the United States have access to reliable, affordable, and environmentally 

responsible power. 

I appreciate the opportunity to testifY today about the impacts EPA regulations can have on 

energy consumers. 

EPA Regulatory Challenges to the Power Sector 

The U.S. Environmental Protection Agency (EPA) has the tough job of balancing America's 

desire for environmental protection with its demand for affordable and reliable power. EPA has 

issued a number of environmental rules in the past two years that seem inconsistent with this 

balance, and more are imminent. The power sector is under severe pressure from the myriad of 

rules and regulations coming from EPA. Because of the close proximity of their implementation 

and the potential devastating impact they will have, these EPA regulations deserve intensive and 

cumulative scrutiny. Included on the list, among others, are the: 

Finalized Mercury and Air Toxies Standards (MATS) Rule for new and existing sources; 

Finalized National Ambient Air Quality Standards (NAAQS) for Particulate Matter 

(PM); 

Proposed Section 3 I 6(b) rules regarding plant cooling water intake structures and 

effluent guidelines; 
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Proposed New Source Perfonnance Standards (NSPS) for Greenhouse Gas Emissions 

from new power plants; 

Pending New Source Perfonnance Standards for Greenhouse Gas Emissions from 

existing power plants; 

Departure from accepted state implementation procedures, including the regional haze 

program, start-up/shutdown programs, and enforcement-related initiatives; 

Pending reconsideration to the National Ambient Air Quality Standards (NAAQS) for 

S02, N02, and Ozone; and 

Pending Coal Combustion Residuals or By-Products (CCRs) rules. 

Taken together, these regulations will impact roughly 780,000 megawatts of gas, oil, and coalfired generation, which is about 75 percent of the current available capacity in the U.S., and 

makes up nearly 70 percent ofthe U.S. total electricity generation. Currently, compliance with 

several of EPA's new rules would all be required within the same compliance period or shortly 

thereafter. These retrofits are so substantial that, in many cases, they will cost more to build than 

the cost of the original generating unit. This means that the generating units subject to these rules 

would either have to undertake the installation of extensive retrofits on a potentially unrealistic 

timeframe or else shutdown entirely. 

Effect of Regulations on Energy Prices 

Given the regulatory uncertainty related to future EPA regulations on a wide variety of energy 

sources-and not just coal-keeping all options on the table for energy generation, as the 

President has suggested multiple times, is essential to maintaining America's energy supply. 

Last year, there were over 1,300 electric generating units powered by coal at some 589 power 

plants in the United States, with a total generating capacity of some 300,000 megawatts. 

Through the year 2025, the most recent estimates show that 348 of these units are likely to close 

in 38 states representing about 15 percent of the total coal fleet. The reasons for these closures 

should be obvious by now: the industry faces a combination oflow natural gas prices and 

inflexible regulation. Coal represented about half of U.S. power generation in 2008, and is down 

to just under 40 percent last year. 

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As aging coal-fired power plants are forced to shut down due to EPA air pollution regulations 

and additional plants are temporarily idled to install mandated pollution controls, we need to 

ensure a reliable stream of electrical power is available to meet the nation's energy needs. As a 

result ofthe combination of EPA's regulations, the country could experience regional shortfalls 

of electricity, and the reliability of our electricity grid could in tum face risks. The loss of future 

coal-fired generation, investment in current coal-fired generation, and closures of existing coalfired generation capacity that may result from the combination EPA regulatory actions risks a 

variety of reliability problems. 

To place what's at stake in perspective, one report noted, a Federal Energy Regulatory 

Commission (FERC) staff analysis says, the EPA rules endanger "about 8% of all U.S. 

generating capacity. Merely losing 56 gigawatts-a midrange scenario in line with FERC and 

industry estimates-is the equivalent of wiping out all power generation for Florida and 

Mississippi. In practice, this will mean blackouts and rolling brownouts, as well as spiking rates 

for consumers."j 

Coal still has an important role to play in the energy future of the United States and the world. As 

Tom Fanning, the chief executive officer of the Southern Company, observed, "The United 

States is the Saudi Arabia of coal. We control 28 percent ofthe world's coal reserves .... Put 

simply, an American future without coal is outright unsustainable.,,2 This is for good reason: coal 

still has many natural advantages as a fuel source, such as ease oftransportation, reliability as a 

base load energy source, and less complicated infrastructure needs than its alternatives. 

The most confounding market force for coal-powered generation may well be the sustained low 

cost of natural gas. While the shale revolution is arguably the most transforrnative energy event 

of our time, recent reports have indicated the most obvious projects for switching from coal to 

gas have already been undertaken. Many gas plants are running at near capacity, meaning that 

additional demand may have to once again be met by reliable coal generation. Further, the 

regulatory environment for hydraulic fracturing must remain reasonable; environmentalist 

I Wall Street Journal, An EPA Moratorium, Aug. 29, 2011. 

2 Fanning, Tom. Policy Perspectives: American Energy Policy. May 2012. 

http://www.southerncompany.com/news/docs/5-17-12 _ T AF _ AmericanEnergyPolicyPaper.pdf 

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opposition to both coal and gas production is simply irresponsible, particularly added to the 

opposition to transmission lines, nuclear, hydropower, and even some solar and wind projects. 

Additionally, as NARUC Chair David Wright testified last year, coal-fired generation is an 

important aspect of "resource diversity," and EPA needs to "recognize the needs of States and 

regions to deploy a diverse portfolio of cost-effective supply-side and demand-side resources 

based on their own unique circumstances and characteristics." 3 I am is concerned that EPA rules 

establish a future for electricity generation that is narrowly prescribed to a small group of 

technologies, some of which do not even exist commercially at this time, and that EPA's plan for 

the future risks disruption in the reliable supply of electricity. 

Removing coal from our country's energy mix raises additional concerns due to the volatility 

that exists in the other energy markets. Losing the option to generate power from coal, which has 

historically stable costs compared to oil and gas, is a risk we should not be willing to take. As 

Wright also testified: 

[T]he policies being pursued today actually make it harder for our States and regions to 

develop diverse resource portfolios by eliminating the use of coal, which will force us to 

overly rely on natural gas ... but resource diversity is critically important in the electric 

sector. .. Yet no one can predict the future, especially when that future is reliant on a 

historically volatile commodity like natural gas. It is therefore important that we as a 

country maintain the ability to invest in a diverse portfolio of resources so that our 

ratepayers are protected against price increases that one particular fuel may experience.4 

These costs will be passed onto consumers in the form of higher prices. As Tom Wolf from the 

Illinois Chamber of Commerce has testified, "Relying on fewer instead of more options puts us 

in danger of paying more for electricity, which affects the economy as a whole."s 

EPA needs to carefully consider the consequences of polices that may not allow for a flexible 

and reliable supply of electricity, because the impacts of reliability problems can be devastating. 

3 Wright, David. Testimony before the House Energy and Commerce Committee, The American Energy Initiative: 

A Focus on EPA's Greenhouse Gas Regulations. On behalf of National Association of Regulatory Utility 

Commissioners. June 19, 2012. 

http://encrgycommeree.house.gov isites/republicans.energycommerce.house .gov Ifiles/Hearings/EP 120 120619/HHRG 

-112-IF03-WState-WrightD-20120619.pdf 

4Id. 

S Wolf, Tom. Testimony before the House Science, Space, and Technology Committee, EPA's Impact on Jobs and 

Energy Aftordability: Understanding the Real Costs and Benefits of Environmental Regulations. June 6, 2012. 

http://science.house.gov/sites/republieans.science.house.gov/files/documents/hearingsiHHRG-112-%20SY20-

WState-TWolf-20120606.pdf 

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The downside impacts of reduced electric reliability are substantial and must be taken into 

account in any responsible analysis ofthe proposed rule. As ISO New England has stated: 

A reliable supply of electricity is a foundation of our prosperity and quality of life. 

Without it, our world literally grinds to a halt-businesses cannot plan and operate 

productively, hospitals and schools cannot provide their essential services, and residents 

cannot depend on the electricity they need simply to live their daily lives. Without 

reliable electricity, the financial and societal costs would be enormous.6 

The Institute of Electrical and Electronics Engineers of the U.S. (lEE-USA) has further observed 

that even minor occurrences in the electric power grid can sometimes lead to catastrophic 

"cascading" blackouts, and that the loss of a single generator can result in an imbalance between 

load and generation. The resulting blackouts cause incalculable economic damage. For example, 

the direct costs to high-technology manufacturing in the San Francisco Bay Area alone during 

the California blackouts alone ran as high as one million dollars a minute due to lost production, 

and the relatively brief Northeast blackout of2003 cost business about $13 billion in lost 

productivity. 7 These are costs that the our economy and communities cannot afford to bear, and 

EPA needs to carefully consider reliability concerns before moving forward with the proposed 

rule. 

Increases in Electricity Costs Harm the Economy, Public Health, and the Environment 

It should come as no surprise that higher electricity prices are destructive to our economy. 

Affordable, reliable energy is one of the main drivers of economic growth, and increasing the 

cost of energy and thereby forcing U.S. industries oversees is something we cannot risk as our 

country continues down the path of economic recovery. 

Economically Disadvantages Communities 

Residential consumers - small businesses, hospitals, schools, farms, and industrial operations all 

depend on reliable and affordable electric power. Higher prices will disproportionately impact 

vulnerable individuals, including the poor, the elderly, and those on fixed incomes. Those who 

can least afford it will be the ones forced to give up the largest percentage of their monthly 

6 ISO New England. http://www.iso-ne.com/nwsiss/grid_mkts/elec_works/oview _brochure.pdf(Accessed April 10, 

2012) 

7 McClure, O.F. Electric Power Transmission Reliability Not Keeping Pace with Conservation Efforts, Today's 

Engineer. Feb. 2005. http://www.todaysengineer.orgl2005/Feb/rcliability.asp 

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budgets. As the group Empower Consumers testified before this committee, "In a recent study 

on Public Opinion on Poverty, it was reported that one-quarter of Americans report having 

problems paying for several basic necessities. In this study, currently 23% have difficulty in 

paying their utilities-that is, one out of four Americans."s Further, African-American and 

Hispanic families will spend almost twice the amount of after-tax income on energy compared to 

the average and when viewed as a percentage oftotal household income.9 Likewise, elderly 

households use less per capita on energy but still "spend a higher share of their income on 

energy-related expenditures." 10 

Gasoline Prices 

Working families are also burdened by high gasoline prices, which are themselves complicated 

by high electricity prices, in addition to the many regulations faced by refiners themselves. 

Almost half of a refinery'S operating costs (43 percent) is for energy, and few refineries have the 

capacity to co-generate appreciable amounts of electricity on their own. Put another way, the 

U.S. Department of Energy recently calculated, some six kilowatt hours of energy is needed to 

refine each gallon of gasoline. II 

Actual outages - even of limited duration - are particularly hard on refining. Based on 

experience during the California electricity crisis, it became clear that as the risk of outages 

proceeds, so too does the risk of even more prolonged gasoline shortages. The U.S. Energy 

Information Administration found that, "Returning to full production can take up to several days. 

Consequently, the period of reduced production will be longer than the period of the electrical 

outage."l2 EIA also noted that up to 27 percent of California refining capacity could be 

8 Bassett, Darryl. Testimony before the House Energy and Commerce Committee, The American Clean Energy and 

Security Act of2009. April 23, 2009. 

http://democrats.energycommcrcc.house.gov/sites/defaultlfilesidocumentsITestimony-Bassett-FC-ACES-2009-4-

23.pdf 

9 Reuters. New Study Confirms Rising Energy Costs Disproportionately Impacting Minority Households. luI. 25, 

2008, http://wv.w.reuters.com!articlcI2008107/25/idU S 17 80 12+25 -Ju 1-2008+PR."I20080725 

JO Mulvey, Janemarie. Impact of rising energy costs on older Americans, CRS Report for Congress No. RS22826, 

Mar. 4, 2008 at 3. 

JJ How much electricity is used refine a gallon of Gasoline? Letter to Jacob Ward, Program Analyst/PMI' Vehicle 

Technologies Program Office of Energy Efficiency and Renewable Energy U.S. Department of Energy. 

http://gatewayev.orglhow-much-electricity-is-used-refine-a-gallon-of-gasoline 

"US Department of Energy, Energy Information Administration, Electricity Shortage in California: Issues for 

Petroleum and Natural Gas Supply. June 12, 2001. http://www.eia.gov/forecasts/steo/specialipd£lcalifornia.pdf 

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"expected to be forced to shut down completely" even during rotating power shortages.!3 Given 

that the power sector rules can be expected to shorten electricity supply and increase electric 

rates, it is an absolute certainty that its current implementation schedule will increase the cost of 

delivering gasoline to already-strapped American consumers. 

Schools 

Additionally, it is tempting to look at electricity costs as solely affecting large companies and 

ignore the potential impact to social service organizations like school and hospitals. Primary and 

secondary schools spend $12 billion a year on energy.14 School buildings use an average of 10 

kilowatt hours of electricity per square foot annually. With a typical school district paying 

$1.25/square foot annually for energy, a mid-size district with 800,000 square feet of space 

spends over $1 million dollars annually on energy.15 The American Association of School 

administrators reported that 99 percent of school superintendents found direct budget impacts as 

a result of increased energy costs associated with transportation, heating and air conditioning. 

Worse yet, Superintendents have found that higher energy costs directly affect teaching positions 

and the ability of schools to take students off campus for events and competitions. 16 

Health Care 

EPA's rules are also likely to adversely affect public health in three ways: by increasing the cost 

of medical care and treatment; by imposing real threats on human health by suppressing 

economic growth and the improved health it brings; and by focusing on expensive rulemakings 

with little incremental benefits when those resources, if more sensibly deployed, could save 

many times more lives. 

With respect to treatment costs, it is important to note that U.S. hospitals spend $8.5 billion 

annually on energy, often equaling between one and three percent of a hospital's operating 

13 Id 

14 Agron, J., 36th and 37th Annual Maintenance and Operation Cost Study. American School & University. April 

2008. http://asumag.com/Maintenancel2008M&OCostStudy.pdf 

15 Id 

16 UPI. Energy costs spurring school spending cuts. July 29, 2008. 

http://www.upLcomlTop_ News/2008/07129IEnergy -costs-spurring-school-spending-cutsIUPI-9607121734 7 633/. 

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budget. 17 Furthermore, EPA estimates, in the U.S., the health sector is the second most energyintensive commercial sector resulting in more than $600 million per year in direct health costs 

and over $5 billion in indirect costs.! g The average cost of power per square foot for hospitals is 

approximately $2.84. 19 Hospital administrators will have no choice but to pay attention to the 

cost of energy as surging energy costs will squeeze hospital budgets like never before. Without 

adequate power supply, built upon a foundation of stable and cost-effective coal-fired generation, 

the healthcare sector and the American public can expect rapidly increasing costs that consumers 

can ill-afford. 

The economic impacts cited earlier will also directly impact public health. From a commercial 

perspective, higher electricity prices will be largely borne by companies in energy-intensive 

manufacturing, where higher prices will make it more difficult to expand operations and increase 

employment. These productive industries result in millions of direct and indirect jobs. Placing 

unnecessary economic constraints on the U.S. economy, in a time of recession, is unwise and 

detrimental to sound public health policy as, based on decades of research, continuouslyemployed individuals experienced, on average, an additional life expectancy of four to five 

years.20 Comparably, the direct effect of reducing unemployment has been estimated to prevent 

up to 2,500 premature deaths a year.21 In contrast, additional unemployment may significantly 

harm public health. A report to Congress' Joint Economic Committee by Dr. Harvey Brenner 

showed the impacts of unemployment on public health. Brenner found that a one percent 

increase in the unemployment rate was associated with a two percent increase in premature 

deaths.22 In 2004, Brenner used his econometric models to estimate the public health results from 

17 U.S. Department of Energy. United States Department of Energy, Energy Information Administration (EIA), 

Commercial Buildings Energy Consumption Survey (CBECS): Consumption and Expenditures Tables. "Table 

C3A".2006 

18 The World Health Organization. Healthy Hospitals, Healthy Plane~ Healthy People: Addressing Climate Change 

in Healthcare Settings. Washington, DC, 2009. 

"Northwest Energy Efficiency Alliance. Energy in Heathcare [Fact Sheet]. 2010. 

20 Morris JK, DG Cook, and AG Shapero Loss of employment and mortality. BMJ;308:1135-9. 1994 

21 Darling, D. Unemployment and health: Health benefits vary according to the method of reducing unemployment 

BMJ, 338, b829. 2009 

22 Brenner, Harvey. United States. Congo House. Joint Economic Committee, Estimating the Social Costs of 

National Economic Policy: Implications for Mental and Physical Health, and Criminal Aggression, 94th Cong., 2nd 

scss. H. Rept 5th cd. Vol. I., Washington, D.C. 1976 

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reducing coal-generated electricity. For example, with a substantial reduction in coal-fired 

power, Brenner found the result would be between 170,000 and 300,000 premature deaths.23 

Placing EPA regulations in a broader public health perspective, it is clear that EPA regulations 

are not among the wisest of societal investments in addressing premature mortality. President 

Obama himself has recognized the need to keep cost-effectiveness in mind when he issued an 

Executive Order, mandating that EPA to protect public health and the environment "while 

promoting economic gro'h"(h, innovation, competitiveness, and job creation. ,,24 Failure to allocate 

resources based on cost-effectiveness quite literally costs lives. Experts at the Harvard School for 

Public Health have estimated that expensive environmental rules save 100 times fewer lives than 

when the federal government redeployed those assets to address higher risks.25 This tremendous 

differential in health impacts explains why EPA should not be so cavalier in its benefits analysis. 

Finally, the healthy economy that reliable and affordable power makes possible is necessary to 

create the financial basis for future generations of clean technology. In this sense, the healthier 

societies are also those that sustain wealth. As one widely-read, recent report pointed out, 

"recessions serving as a rough time for green energy shouldn't surprise us: a poor economy is not 

a time during which technological advance tends to flourish. Firms are cutting costs, investors 

are pulling back, and consumers aren't spending. The money just isn't available for an expensive 

product to succeed.,,26 If cutting GHG emissions is truly a priority for this administration, the 

first step needs to be focusing on economic recovery now to allow for investment in and 

development of new energy technologies in the future. 

Taken together, the consequences of electricity price increases should lead us to thoroughly 

examine EPA regulations before cementing an energy policy that will be very costly in terms of 

both dollars and health. 

231d. 

24 E.O. 13653,76 Fed. Reg. 3821, published Jan. 21, 2011. 

25 Tengs, T.O., et a!. Five Hundred Life-Saving Interventions and Their Cost Effectiveness, Risk Analysis 15,3, 

369-90.1995 

26 1ndiviglio, Daniel. It's Even Harder Being Green During a Recession, The Atlantic, Sept. 23, 2011. 

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EPA's Suspect Benefits Analysis 

As required by two Executive Orders issued on the regulatory process, EPA has prepared costbenefit analysis to support its regulations. Despite the obvious costs outlined above, EPA has still 

claimed its regulations are net beneficial to society. The reason EPA has drawn such conclusions 

is because time and again they inaccurately calculate the benefits of their rules. 

Looking at the MATS rule in particular, the title of, and rhetoric surrounding, the rule leads the 

public to believe that the vast majority of benefits claimed by EPA to justifY the rule must be the 

result of reductions in mercury emissions. But EPA's cost-benefit analysis tells a very different 

story. According to EPA, the benefits to society of the mercury-reduction requirements are in 

the range of $500,000 to a maximum of $6.2 million in benefits. In other words, in a rule that 

EPA admits will cost about $10 billion annually, the maximum benefit of reducing emissions of 

mercury-the emissions of which serve as the primary basis for the rule-is $6.2 million. 

According to EPA, the rule is justified based on cost-benefit analysis because it will provide 

benefits of up to $90 billion every year. Yet virtually all ofthe benefits come from reducing 

another pollutant known as fine particulate matter, or PM2.5, in areas of the country that already 

meet existing PM standards. 

Regulation of particulate matter is primarily accomplished through National Ambient Air 

Quality Standards (NAAQS), which are required to be set at levels that provide adequate 

protection for the public health or welfare. Yet, in issuing the MATS rule, EPA claimed that tens 

ofthousands of people living in areas of the country that already meet national standards are 

killed every year because of exposure to PM2.5. More than 90 percent ofthe benefits that EPA 

claims under MATS come from areas where PM2.5 concentrations are below 12 ug. 

Regulating PM2.5 is much more flexible and cost-effective under the NAAQS program then the 

MATS rule, and while EPA is mandated to find the most cost-efl'ective solution for each of its 

regulatory priorities, it certainly did not do so in this instance. 

In addition to failing to demonstrate the least burdensome alternative, EPA inaccurately 

attributes to new rules benefits already claimed in favor of previous rules, effectively double 

counting the benefits of existing programs. EPA has already controlled emissions ofPM2.5 

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through NAAQS and set a level of PM2.5 that it has found to be sufficient to public health and 

welfare with an adequate margin of safety. Areas of the country that have already attained this 

level of PM2.5 (i.e., that are in "attainment") are presumably therefore already safe from any 

health risks; other areas that have not yet reached this level (i.e. are in "non-attainment") are 

already required to implement market-wide reductions in PM2.5 to get into attainment. 

In explaining how it developed the baseline for its benefits analysis, EPA's regulatory impact 

analysis states that "EPA did not consider actions states may take in the future to implement the 

existing ozone and PM2.5 NAAQS standards[.J" Of course, as it did for the MATS rule, EPA's 

proposed NAAQS for PM2.5 contained an estimated analysis ofthe benefits of PM2.5 

reductions. By not including these benefits in the baseline of the MATS cost-benefit analysis, 

EPA is essentially claiming these same benefits a second time to justify another regulation. Put a 

different way, the only way EPA can possibly claim more benefits from reductions in PM2.5 is 

to go beyond the controls it has already put in place under the PM2.5 NAAQS. Doing so, 

however, is completely contrary to Congress' intent to regulate PM2.5 under a different section 

of the Clean Air Act and contrary to EPA's own claims that the PM2.5 NAAQS is sufficient to 

protect public health and welfare. 

Susan Dudley, Director of the George Washington University Regulatory Studies Center, 

testified before the Senate that "In principle, a benefit-cost analysis should be 'complete.' It 

should include all the significant consequences of a policy decision: direct and indirect, intended 

and unintended, beneficial and harmful."27 However, when EPA conducts cost-benefit analysis, 

it fails to meet this standard. When looking at benefits, EPA considers any good thing that could 

happen as a result of its rule, no matter how many degrees removed from the direct effects. In 

contrast, when looking at costs, EPA only considers direct compliance costs, but dismisses risks 

associated with electric reliability and energy prices, and how that affects poor and minority 

families or U.S. business competitiveness. In effect, EPA is inflating the benefits of its rules 

while ignoring the costs. 

27 Dudley, Susan. Committee on Environment and Public Works Subcommittee on Clean Air and Nuclear Safety 

United States Senate April 17, 2012 

http://v,ww.epw.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore _id=b269df79-8ef3-4897-8483-

c503fb3ec62 

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So what can be done for our economy to meet its economic and social needs while also 

protecting the environment and appropriately addressing climate change risks? President Obama 

has stated that the "clean energy transformation of our economy" will necessitate "everything 

from wind, solar, and geothermal power to safe nuclear energy and cleaner coal." In order to 

keep coal in the picture, the following strategy makes sense: 

First, focus on new coal technologies. The government and the environmental community 

should welcome the development of integrated gasification combined cycle technology projects 

incorporating beneficial uses for captured carbon. 

Second, allow for efficiency improvements. Too often the EPA approach to enforcement with its 

inflexible concept of New Source Review has created a disincentive for the improvement of 

power plant efficiency that reduces the carbon footprint of each megawatt of electricity 

generated. 

Third, and more to the point of this hearing, regulate in smarter ways. For large energy-related 

rules - those with greater than $1 billion in total economic impact - regulators should have to 

determine adverse economic effects, including energy endpoints such as electricity and 

motorfuel price impacts, and address them before the implementation of the rule. Regulators 

should engage in a robust interagency process that brings together the best and the brightest of 

public and private input based on quality data and realistic benefit and cost assumptions. 

Adoption of the Energy Consumers Relief Act is a step in the right direction. 

I thank the committee for holding this hearing today and inviting me to testifY. Ensuring the cost 

of EPA regulations on consumers is adequately accounted for is a very important issue. I am 

happy to answer any questions you may have. 

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Mr. WHITFIELD. Well, Mr. Segal, thank you. And thank all of you 

for your testimony. 

At this time, we will open it up for questions and I recognize myself for 5 minutes of questions. 

As I had indicated in my opening statement, the Society of Environmental Journalists recently issued a statement saying that EPA 

is one of the most closed, opaque agencies in the Federal Government. And I think all of us are very proud of the fact that the 

Clean Air Act has been unusually effective. EPA has done a good 

job of administering the Clean Air Act and America does not have 

to take a backseat to any country in the world in being focused on 

a clean environment. And we all could recite statistics that reflect 

the success of the Clean Air Act. 

But I also think we have an obligation and responsibility when 

we have an economy that is having great difficulty of when we 

come out with new regulations that cost billions of dollars that we 

also explore fully the impact that it has on the consumers and on 

society in general. All of us have a responsibility and a concern 

about people who suffer breathing problems. And that is why I 

think we can be very proud of the fact that we have made great 

progress. 

I know Dr. Burgess may talk about this a little later, but we are 

part of the Montr AE1eal Protocol because of the Clean Air Act. 

And because of the Montr AE1eal Protocol, Primatene Mist is not 

available over-the-counter anymore to people who have asthma. 

And as a result, their direct costs have increased dramatically because it is simply not available anymore. 

And, Dr. Smith, I was really interested in your statement in 

which you said you did an analysis, and if I understood you, it appears that the more cost associated with an EPA regulation, according to their analysis, automatically there are going to be more 

jobs created. Is that what you said or—— 

Ms. SMITH. Yes, that is the formula EPA is applying right now. 

Mr. WHITFIELD. And would you elaborate on that a little bit? I 

mean, that does not sound exactly correct but—— 

Ms. SMITH. Well, it is illogical and that is why I say this is not 

an appropriate method in the first place. It is based on some earlier studies that looked at spending on worker payments—payments to workers—in industries, in the ’80s who were poor industries, who were reporting off of their environmental spending. And 

the finding was that there was not, across all four of those industries, a significant change in the amount of spending on workers. 

But that did not find increased jobs; it just found that there was 

a change in the spending on workers in those four sectors in the 

’80s. 

Now, EPA is taking that summary statistic that says, well, the 

number was about zero—was about 1.55 on average—and just applying it to every new regulation that comes down the pike, regardless of its relationship to the original study, most of which have no 

relationship to the original study. 

Mr. WHITFIELD. So any regulation that has additional cost, according to the EPA, will create jobs? 

Ms. SMITH. As long as they continue with this method of doing 

their analysis which is, as I said, not really an analysis at all. It 

190 

is just a multiplication that is guaranteed to provide positive jobs 

through more cost. 

Mr. WHITFIELD. Right. 

Mr. Cicio, you had—just a minute here. Well, I am not going to 

ask you a question. I will just make one other comment. 

I have been so upset about the stimulus money being directed to 

so many green energy projects and I can’t help but I just want to 

share that right across the border from my home county in Kentucky in the State of Tennessee, 2 years ago a company called 

Hemlock Corporation announced that they were building a $1.2 billion plant that would employ 1,000 people and about 2,500 construction jobs to make polysilicon chips for the solar industry. In 

the State of Tennessee, there was a big press conference and everyone announced how this was the future for America, green energy, 

which we all support. 

Unfortunately, in January of this year after constructing this plant for 2 years at a cost of $1.2 billion of which there was government money involved also, they announced that they were walking 

away from this plant. They had hired 300 employees to prepare it 

for opening, and the terminated all of those workers. They are 

shuttering the plant and that, in my view, along with Solyndra and 

others, is an indication of how we in the government tried to mandate what was going to happen and the marketplace was not ready 

for it. 

So I see my time is expired, and Mr. Rush, I recognize you for 

5 minutes. 

Mr. RUSH. I want to thank you, Mr. Chairman. And Mr. Chairman, in due respect to the author of the bill, Mr. Cassidy of Louisiana, I must say that this bill defies common sense. Everybody 

in this room has probably, sometime during the course of their 

lives, written out pros and cons listing in order to make important 

decisions. This bill will require the federal decision matrix to consider just half of this list, a pro and con list when evaluating public 

health and environmental rules. The bill requires that the Department of Energy to analyze all of the potential negative effects of 

a proposed rule and determine whether the rule would have a significant adverse effect on the U.S. economy. 

Now, Ms. Steinzor, under this bill would DOE weigh both sides? 

Will they weigh the pros and the cons of a proposed rule? 

Ms. STEINZOR. Congressman, I think that they would focus primarily on the costs that are allegedly imposed by the regulation. 

And their analysis would come on top of an extensive analysis by 

EPA that is supervised by the Office of Information and Regulatory 

Affairs at the White House, that is redrafted, that is hundreds of 

pages long, scrutinized by economists. The Department of Energy 

already has an opportunity to comment on every rule that EPA 

prepares. And again, I would stress all of these rules are statutorily mandated. They don’t come out of the right ear of the EPA 

administrator. They are all required by Congress. 

Mr. RUSH. So this bill requires a skewed analysis that completely 

ignores the benefits of the EPA’s public health rules? 

Ms. STEINZOR. Yes. 

Mr. RUSH. As a matter of fact, have you looked at the bill? Do 

you see the word benefit at all in the bill? 

191 

Ms. STEINZOR. I do not. And bills like this act as if rules were 

sweeping the money into the center of the room and setting it on 

fire. They absolutely ignore the benefits to patients like Dr. Rom’s 

that he explained so well. The incredible economic costs, not just 

in medical expenses, but in days lost from work, staying home with 

a sick child, being unable to be productive is an enormous burden 

on society. And those are the benefits of trying to control pollution 

would be to avoid all of that harm. 

Mr. RUSH. And matter of fact, the types of rules that this bill 

would target have tremendous benefits to public health, the environment, and often consumers. For example, EPA’s greenhouse gas 

standards for vehicles are projected to save families more than $1.7 

trillion in fuel costs and reduce America’s dependence on oil by 

more than two million barrels per year beginning in 2025. 

Ms. Steinzor, that is just one example. How do the benefits of 

some of the EPA’s other recent rules compare to their cost? 

Ms. STEINZOR. Well, as Congressman Waxman explained in his 

opening statement, the ratio between the cost and the benefits, the 

benefits exceed the cost by several orders of magnitude in almost 

all of these rules. That is what makes it so ironic. These rules are 

a great bargain for the American people and that is what makes 

it so ironic, that they have come under this attack. They have been 

years in the making. They were required initiated under the 1990 

Clean Air Act amendments. We are now in 2013. These rules have 

been bounced around to court and back, to the Agency to the White 

House, to Congress, and finally, after all this time, they are beginning to get to the end the runway and be ready to take off and now 

we want further delay, further analysis, further number-crunching, 

further handwringing, and it is just not what you intended. 

If Congress doesn’t like these results, it should take up the Clean 

Air Act, but it doesn’t want to do that because that would be very 

unpopular with the American people. 

Mr. RUSH. Thank you, and I yield back, Mr. Chairman. 

Mr. WHITFIELD. At this time I recognize the gentleman from 

Texas, Mr. Hall, for 5 minutes. 

Mr. HALL. I thank you, Mr. Chairman. And I guess I would like 

to start by not just thanking you, but thanking the folks, as you 

have. And some of the proposals in the past 3 years such as the 

Coal Ash Rule and the Cross-State Air Pollution Rule have been 

very detrimental to energy companies and thrust and jobs and consumers back in my district in northeast Texas. 

I certainly admire Scott Segal. I have known him and know the 

people he associates with, Searcy Bracewell, and paired now with 

the former mayor of New York. They do a good service for us and 

that is why I want to direct my question to you. I am very pro-fossil fuels, I am pro-energy, pro-any source that might keep us from 

having to rely on countries that we really couldn’t rely on if circumstances changed just a little bit. 

But I want to talk about the compliance time on this of the 

EPA—I am talking about anything bad I can think of about EPA 

because I think they are the worst enemy of any nation’s opportunity to get ahead and provide the energy that we have and that 

we need. And we ought to be selling energy rather than buying energy. 

192 

So I guess what I would ask you is what your concern is about 

the compliance timelessness that I talked about for EPA’s energyrelated regulations that they are requiring to happen in just a few 

months, something that would have taken probably 4 or 5 years 

and reconsidering it and then coming back with something just as 

ridiculous. That took us to the courts, and the courts from this 

Texas operation have recognized they are wrong and the lack of 

science that the EPA relied upon. 

And I thank Bill Cassidy for bringing this and I agree with every 

word he said as we opened up here. But what I am concerned 

about is what you think about the timelines and not providing 

enough time for you to delegate, plan, or implement these rules, 

and what effect is that going to have on electric reliability? Just in 

general if you could give that to us. 

Mr. SEGAL. Mr. Hall, thanks for your kind words. I would say on 

the question of timelines, you would do well to be very concerned 

about it. I mentioned briefly in my remarks about this sue-and-settle phenomenon. And unfortunately, timelines are often not dictated or at least not honored from a statutory perspective but come 

to the floor for the EPA from settlements that they reach with environmental organizations where they don’t let other members of 

the regulated community into those settlement discussions. And so 

what ends up happening is a very, very sort of backwards-oriented 

and unrealistic timeframe for implementation of the rules. 

You know, we have heard a lot today about what a good bargain 

all these rules are. I am kind of amused to hear that they are both 

a great bargain for industry and at the same time industry is the 

opponent that keeps us from having more of it. You know, industry 

folks should come to these hearings more often. They would know 

about great investment opportunities in major EPA rulemakings. 

The fact of the matter is, despite the obvious costs outlined with 

respect to these rules, EPA always claims its regulations are net 

beneficial to society. That is like it is not even worthy of discussion. 

In the case of the Mercury and Air Toxics Rule, for example, a rule 

that costs $10 billion, none of the benefits came from mercury. If 

there were truth in advertising on rules, EPA would constantly be 

in front of the Federal Trade Commission explaining why they call 

their rules what they call them and why they put in their analyses 

of benefits what they put in them. 

More than 90 percent of the benefits of this rule are co-benefits 

that come from reducing particulate matter, which as we heard testimony, particulate matter is serious business. However, that 90 

percent reduction comes from reducing particulate matter below 

the level that EPA has already said is highly protective of human 

health and the environment with a substantial margin of safety for 

susceptible subpopulations of the very sort of person that Dr. Rom 

was talking about. 

EPA inaccurately attributes the benefits to current rules, like the 

Cross State Rule Mr. Hall was talking about, benefits that have 

been achieved by previous rules. It is like a poker game with one 

stack of chips and they keep moving the chips from rule to rule to 

rule claiming the same benefit. That is how Enron got into trouble. 

But the—— 

193 

Mr. HALL. In closing, just I know you agree with me that this 

bill is going to provide transparency and protects the consumer and 

protects jobs, and I am very happy that we are looking at it today, 

and I thank you. 

I yield back. Our time is up. 

Mr. WHITFIELD. At this time I recognize the gentleman from 

California, Mr. McNerney, for 5 minutes. 

Mr. MCNERNEY. Thank you, Mr. Chairman, and thank the witnesses for your thoughtful testimony this morning. 

It continually amazes me that our friends on the other side of the 

aisle think of the EPA as the devil because before the EPA came 

along, we had the Love Canal, we had the Cuyahoga River catching 

on fire, and look, China doesn’t have an EPA. Would you rather 

live in Beijing and breathe that air? And so I mean it produces a 

good service for country. 

Now, it is important to have a balance, I understand that. But 

my concern with this bill is that it could indefinitely delay or block 

critical public health and environmental protections for analysis of 

questionable value, in my opinion, by the DOE. 

Now, Mr. Williams, in your testimony this morning you said that 

the bill would inject transparency and scientific rigor back into the 

regulatory process, but I am skeptical of that claim. The bill requires the DOE to draft an inherently biased analysis that presents only the costs of the EPA rule—and that has already been 

brought out this morning—but does not address the benefits. The 

DOE is not really capable of that at this point. It would have to 

develop a new capability. 

Ms. Steinzor, would you consider the analysis required by the bill 

to be transparent and rigorous? 

Ms. STEINZOR. I would not, Congressman. I think the analysis required by the bill would have the economists staring into a crystal 

ball in an effort to run this string of regulatory impact out into— 

it is almost like a butterfly flaps its wings in Rio de Janeiro and 

there might be an effect in Tuscaloosa. That is what is wrong with 

Dr. Smith’s very superficial criticisms of what goes on in EPA analyses. You can’t predict job impacts to the nth degree, and that is 

what people are insisting that the Agency do. It already does extraordinarily rigorous analysis. There are a series of laws—— 

Mr. MCNERNEY. What exactly—so you are going to describe some 

of the analysis that is required by the EPA already? 

Ms. STEINZOR. Yes, very extensive analysis of both costs and benefits. And those analyses, again I need to get a life very clearly, but 

I spend many, many hours reading hundreds of pages filled with 

formulas and we love the magical numbers. We think that they 

make these estimates precise and reliable, and in fact, the extensive analysis that is already done, for instance, on guesstimates. It 

is just one example. Dr. Rom mentioned hospitalization for asthma. 

You know, in one of the cost benefits of the Clean Air Act, the EPA 

awarded $330 for that event. And I am sure that Dr. Rom would 

laugh at the idea that his patients go to the hospital and get the 

kind of treatment he was describing for $330. 

So all of these analysis understate the benefits, overstate the 

costs already. The Agency has spent close to 30 years trying to get 

194 

these rules out and the pending legislation would delay us another 

few decades which would be to the detriment of the public. 

Mr. MCNERNEY. Thank you, thank you. Mr. Segal, do you believe 

that well-crafted regulations protecting air and water quality could 

result in innovation and job creation? 

Mr. SEGAL. Yes, I do. I absolutely do. In fact, the bill does not— 

there is a rumor floating around here that the bill does not account 

for benefits. No, the bill focuses very narrowly on these energy 

endpoints, but the bill also talks about shifts in employment. That 

is what you, Congressman, are talking about, because when we 

have a regulation, we may well take the compliance cost money 

from that regulation, spend it, and then if I make a scrubber for 

example, or I innovate a scrubber, that will create jobs. But the 

question is, the money that I took and spent on the scrubber and 

on the innovation related to the scrubber, if it were deployed in 

more productive mechanisms, what would the job multiplier be in 

that instance? And also—— 

Mr. MCNERNEY. So by more productive you mean—you said it 

would be deployed in more productive measures. 

Mr. SEGAL. Let me give you an example. 

Mr. MCNERNEY. OK. 

Mr. SEGAL. Let’s say I run a power company, all right? I won’t 

stretch credulity too much, but let’s say I run a power company. 

If I don’t spend the money on the scrubber, perhaps I can spend 

it on a way to improve the energy efficiency of my power plant, presumably if the EPA doesn’t sue me under a new source review—— 

Mr. MCNERNEY. But it would have the same out—if you increase 

efficiency—— 

Mr. SEGAL. Yes, and that would not only reduce emissions, but 

it would reduce the cost of power, and then let’s say my community, let’s say, a community in northern California or something 

like that would receive lower cost of electricity, more small businesses, more energy-dependent businesses like florists and grocers 

and things like that could put on the extra job or two, that is real 

job creation and that is the multiplier effect of lower-cost electricity. 

Mr. MCNERNEY. Well, I would like to continue the discussion but 

my time has run out, Mr. Chairman. 

Mr. WHITFIELD. Yes, the gentleman’s time has expired. 

At this time I recognize the gentleman from Nebraska, Mr. 

Terry, for 5 minutes. 

Mr. TERRY. Thank you, Mr. Chairman. 

And this bill seemed rather simple and straightforward until the 

discussions occurred up here and I want to ask the author. Under 

current law right now, the EPA’s only—the only thing they can do 

is look at the health benefits. That is the whole basis of it. 

Mr. CASSIDY. Yes, that is current law. 

Mr. TERRY. And are you striking that provision under this? 

Mr. CASSIDY. No, I am not. 

Mr. TERRY. I am noticing that language. 

Mr. CASSIDY. No, I am not. 

Mr. TERRY. So the benefits under health are already written in 

the law, and so what you are doing is saying that we need the 

195 

other side of the cost-benefit analysis in determining the cost. Is 

that right? 

Mr. CASSIDY. A little transparency so that if someone loses their 

job because of the regulation, they actually understand what 

thought process went into it. 

Mr. TERRY. Yes, so this is establishing a cost benefit. The benefits are already written in there or mandated that that be in there. 

And that has been part of our frustration here. And we mentioned 

the Mercury Rule. Their modeling showed tremendous benefit from 

reduction in mercury poisonings and injuries, but when you would 

subpoena medical records from a 60-mile radius around a coal-fired 

plant, you wouldn’t find any mercury poisonings ever reported to 

the hospitals or physicians. Well, I won’t say every—boy, University of Maryland, I am not too impressed right now. 

But I want to go in and talk about that I think in a cost-benefit 

analysis, you actually have to discuss—and I want to talk to Mr. 

Cicio—because both Republicans and the Democrats are working 

on job creation and particularly in manufacturing. And we have 

what we are calling the Nation of Builders where we are bringing 

in manufacturers in all different industries—big, medium, and 

small, international, local—and it is interesting because all of them 

have said that energy prices are a key component. It is a major 

input cost, and right now in the United States, we have an advantage, particularly with natural gas, to being affordable and reliable. 

So in our manufacturing plan, that is going to be there. 

The Democrats have what they call Make it in America, which 

part of their four-point plan is affordable electricity, affordable energy. And as I understand, an increase of 1 percent in electric costs 

to a manufacturer in total can be $9 billion out of the manufacturing. Could you comment? Is that accurate? 

Mr. CICIO. Yes, Congressman. In fact, I can verify that 1 percent does equal a $9 billion cost on the manufacturing sector for our 

electricity. 

Mr. TERRY. And then, define for us what that means to manufacturing. 

Mr. CICIO. Manufacturing competes globally. As I said earlier my 

testimony, we are the only sector that competes globally. And we 

have tough competition, particularly with the kind of products that 

we produce. Almost all manufacturers around the world can meet 

high-quality standards, and so the only thing that differentiates us 

from our global competitors is cost. And so your point about today, 

at this very moment, we have lower natural gas prices that is giving us a relative competitive advantage. 

But the other point associated with this bill is that policymakers 

and EPA need to be mindful and remember that all of the cost of 

regulations on all our producers of energy, whether it be electricity, 

natural gas, oil, what have you, all of those costs when you are regulating those industries get passed on to us either directly or indirectly. And this weighs on this ability to compete. 

Mr. TERRY. Well, if we were successful in raising electric prices 

to the point where it is not economic to manufacture, will we be 

lowering the CO2 emissions globally? 

Mr. CICIO. No. No, of course not. It is the same way with other 

emissions as well. We simply shift the manufacturing facility offVerDate Nov 24 2008 15:32 Sep 23, 2013 Jkt 037690 PO 00000 Frm 00201 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-30 CHRIS
196 

shore. Someone will produce that and it will be produced offshore 

emitting albeit greenhouse gases—— 

Mr. TERRY. Probably more. 

Mr. CICIO [continuing]. Or any other emission offshore rather 

than here. 

Mr. TERRY. So finding that line is important to actually reducing 

global emissions. 

Mr. CICIO. Well, absolutely. And our point of why we are here 

today is we are not saying don’t regulate; we are not saying we 

don’t want clean air—— 

Mr. TERRY. I agree. 

Mr. CICIO [continuing]. We are saying do it better, do it more 

cost effectively, and that is a win-win. 

Mr. TERRY. I will interrupt just for my closing comment. And, 

you know, we have been accused on the side of the aisle of wanting 

to completely contaminate the entire universe when what we are 

arguing for was a difference between 3- to 5-year implementation 

to make it more palatable and use technologies that don’t even 

exist today. 

I yield back. 

Mr. WHITFIELD. The gentleman’s time has expired. At this time 

I recognize the gentleman from California, Mr. Waxman, for 5 minutes. 

Mr. WAXMAN. Thank you, Mr. Chairman. 

The proponents of this bill argue it will enhance transparency 

and provide rigorous analysis of EPA rules. But I don’t look at it 

that way. Mandating a one-sided analysis that ignores all of the 

benefits of EPA’s public health rules is not going to inform anyone. 

The real effect of this bill is to indefinitely delay and potentially 

block crucial public health rules. 

Ms. Steinzor, this bill empowers the Department of Energy to effectively veto EPA rules, isn’t that right? 

Ms. STEINZOR. Yes, I agree with you. 

Mr. WAXMAN. Does the Department of Energy have the expertise 

to make the economic determinations this bill would require it to 

make? 

Ms. STEINZOR. The Department of Energy does not have that expertise and one of the—— 

Mr. WAXMAN. I agree with you. 

Ms. STEINZOR. Yes. 

Mr. WAXMAN. Now, under this bill, EPA cannot finalize a rule 

until the Department of Energy completes its analysis. Ms. 

Steinzor, does this bill establish a deadline for DOE to act? 

Ms. STEINZOR. No, it does not. 

Mr. WAXMAN. So are there reasons why DOE might not be able 

to complete its analysis in a timely way? 

Ms. STEINZOR. Lack of staff and expertise. 

Mr. WAXMAN. So important public health rules can be indefinitely delayed under this bill, isn’t that right? 

Ms. STEINZOR. Yes. 

Mr. WAXMAN. Dr. Rom, what are the real world impacts of indefinitely delaying EPA air pollution rules? 

Dr. ROM. More hospitalization—— 

Mr. WAXMAN. Put your mike on. 

197 

Dr. ROM. More hospitalizations, more emergency room visits, increased mortality, enhanced morbidity, and this is nationwide and 

it is over time, and it is actually not improving. 

Mr. WAXMAN. Justice delayed is justice denied. 

Dr. ROM. Yes. 

Mr. WAXMAN. Regulations delayed could be help to people denied. 

Dr. Rom, you are a pulmonologist. Over your career, I assume you 

have seen thousands of patients and had to review potential treatment options for a variety of conditions. How do you present treatment options to a patient? Do you review the benefits of a treatment as well as the potential risks? 

Dr. ROM. Yes. When we treat asthma, for example, the standard 

treatment is a bronchodilator. Over time, these bronchodilators 

have become more selective, fewer side effects. Now, we have inhalers that have particles instead of chlorofluorocarbons. We have 

highly selective inhalers so we don’t have to use things like 

Primatene Mist from decades ago, and we present these options to 

the patients. We now have steroid inhalers—— 

Mr. WAXMAN. So you have a lot more advances that—members 

of this committee will remember a debate we had over Primatene 

Mist. And from what I was hearing, the profession didn’t think 

Primatene Mist was the best device to use. In fact, there were some 

downsides to it. 

Dr. ROM. Yes, there are now—— 

Mr. WAXMAN. I just want a yes or no on that—— 

Dr. ROM. Yes. 

Mr. WAXMAN [continuing]. Because it’s just a side issue. Would 

you say to a medical professional who only presented the downsides 

of a potential life-saving treatment is doing an ethical job? This is 

a risk that you would take if you get this treatment for your 

health. 

Dr. ROM. Yes—— 

Mr. WAXMAN. This is the cost you may have to bear to get this 

treatment. 

Dr. ROM. Yes, but we like to prevent asthma exacerbations by 

having patients not only take their treatments, but to have clean 

air. 

Mr. WAXMAN. So it is not ethical for a doctor to make a 

healthcare decision with a patient using the lists of negatives without talking about the positives. Is that fair? 

Dr. ROM. Yes. 

Mr. WAXMAN. When we go to a doctor or consult with our accountant or call our realtor, we want to hear the full story. We 

want to know the pros and cons before we make important decisions. 

This bill sets a different standard for critical public health and 

environmental standards to be determined under law by the Environmental Protection Agency. DOE could veto an EPA rule based 

on skewed analysis of those rules. That doesn’t make sense from 

a public policy perspective, but it seems to me more likely when we 

mandate a skewed analysis of important EPA rules by requiring 

DOE to pretend that the rules provide absolutely no benefits, this 

bill really leads to indefinite delays or blocking of those rules based 

on an absurd analysis. 

198 

This is a bill that we shouldn’t be spending our time talking 

about because it just doesn’t make sense even though we are being 

told it is common sense. This is not the way I learned common 

sense and it is obviously geared to stopping important benefits 

from being provided to the American people. 

I thank you all for being here. I think you have all wasted your 

time just as we did, but you have given us perspectives on it and 

I appreciate it. 

Mr. WHITFIELD. At this time I recognize the gentleman from 

Ohio, Mr. Latta, for 5 minutes. 

Mr. LATTA. Well, thank you very much, Mr. Chairman, and I 

want to thank the panel for being here. I really do think that the 

information we are getting here is very, very valuable for this committee and for this Congress. 

In my district alone, I have about 60,000 manufacturing jobs. 

And I spend all of my time when I get home, on the road talking 

to those manufacturers. And when I am out there, the number one 

issue I hear from them always, the top issue, are regulations coming from Washington and how it is hindering their businesses. And 

these are the folks out there that are the job creators, the entrepreneurs that are out there making sure that their friends and 

neighbors have jobs that can put food on the table for those kids 

that they have and send them to school. 

And when we are talking about the number one regulator out 

there that affects folks in my district, the one group I always hear 

from all the time is the number one agency, it is always the EPA. 

And there is not one group or business that I ever go out to see 

that would ever say that they are not for clean air and clean water. 

And so we want to make sure that we have those jobs in the future because, again, with the 60,000 jobs that I have, the national 

manufacturers gave me a chart not too long ago that shows that 

we have about 1.66 million manufacturing jobs on this committee 

alone. And that is what grows this economy. 

And I would like to ask Dr. Smith, I can start with you, and I 

know we have been having some of these questions going back and 

forth, but you testified that the effects of the EPA’s major regulations can have regulatory impacts that ripple through the full economy. Can you elaborate on that? 

Ms. SMITH. Yes. When a regulation is highly costly and the people in the sectors that have to comply with that regulation end up 

spending more money for the compliance, by and large the cost 

ends up either being passed through to their customers in higher 

prices of the products or there is international competitiveness effects where the affected sectors simply end up leaving the country 

and doing their production overseas. 

Either way, it has built up trickle-down effects to the other sectors and the consumers in the economy. So prices rise, for instance, 

for oil products or for electricity in this economy, there will be effects downstream for the consumers of that electricity. And that is 

where you start to see these economic impacts from regulation 

spreading, inevitably spreading across into other sectors of the 

economy. And that is why the full economy analysis is appropriate 

in situations like this. 

199 

Mr. LATTA. Thank you. And again, looking at my district in Ohio, 

where we have so many manufacturers out there manufacturing 

jobs, we have got to move that product, either bring that product 

going out or we are going to have to have the material coming in. 

The National Association of Manufacturers estimates that the cost 

of just six EPA rules affecting the energy sector could exceed $100 

billion annually and threaten more than two million jobs. 

Mr. Williams, I have got to ask you. How are the refinery and 

petrochemical manufacturing sectors being impacted by those 

rules? 

Mr. WILLIAMS. Sure. We are impacted a number of ways. Obviously, we are impacted in the cost of producing the petroleum products—gasoline jet fuel that runs this country but also as energy 

consumers. So obviously, as Mr. Segal earlier stated, when electricity—for a refinery, other than crude oil costs, the second-largest 

cost is usually utility bills. So when something impacts electricity, 

it impacts us as an energy consumer. And then it impacts us, obviously, in the cost of producing fuels for the general public, fuels 

and petrochemicals for the general public. 

I had an example in my testimony of Tier 3 regulations. We reduced sulfur and gasoline 90 percent from 2004 to 2007, from 300 

parts per million down to 30. Now EPA is looking to move from 30 

down to 10. It is going to be a similar cost and a lot of the stated 

benefit is minimal and even questionable. 

Mr. LATTA. If I could interrupt you, do you have any estimates 

of what that is going to cost the consumer out there with it going 

on from Tier 2 to Tier 3? 

Mr. WILLIAMS. Well, if you just look at the production costs, an 

estimate we have is that it is a $10 billion upfront cost with about 

$2.4 billion annual operating cost. If you are going to break that 

down into cost in cents per gallon, it is somewhere in the .06 to 

.09 per gallon range. 

Mr. LATTA. Because I have seen some estimates, I believe, from 

the EPA that they are saying it is much, much lower. So you dispute that number? 

Mr. WILLIAMS. Yes. There are other studies out there that indicate they are around a penny a gallon. What those studies do is 

they actually look at the Nation as one big refinery and try and 

apply reductions to basically either the Nation as a whole or specific regions when that is not how our industry works. Every single 

refinery is different and complex. The numbers I stated were from 

a model that actually assesses every single individual refinery and 

assesses cost via that methodology, so—— 

Mr. LATTA. Thank you very much. 

And Mr. Chairman, my time has expired and I yield back. 

Mr. WHITFIELD. At this time I recognize the gentleman from New 

York, Mr. Tonko, for 5 minutes. 

Mr. TONKO. Thank you, Mr. Chair. 

Dr. Rom, you make a compelling case that people should limit 

their exposure to particulate matter and to ozone. The legislation 

we are considering doesn’t appear to repeal current standards, but 

it certainly prevents EPA from strengthening them. Are the current standards adequate, or can further benefits be achieved? 

200 

Dr. ROM. That is a very good question. The standards for ozone 

have been lowered by President Bush, Bush’s EPA from 84 to 75. 

And we have recently looked at what would happen if we would net 

the 75 ppm standard. There would be about 2,000 deaths averted 

across the country, heavily in the eastern third of the country. We 

have also looked at the proposed 70 ppm ozone standard, and it 

would avert about 4,000 deaths if we lowered it to 70. So the standard now of 75 that we are not even meeting doesn’t protect health. 

And going to the lower standard would give us a greater benefit. 

For PM2.5, we are at 35 for a daily and we have been at a 15 

microgram per meter cubed annual. That has recently been proposed to go down to 12. 

If you look at the mortality from PM2.5, there are mortality and 

morbidity effects at this proposed standard, and some most studies 

are now showing even effects lower than the standard. Of concern 

is lung cancer. There has recently been a study of over 100,000 

people who were never smokers looking at lung cancer. There are 

1,000 lung cancers in this cohort and the lung cancer increase 

started at 8 and going up. And we are now just trying to reach a 

12 microgram standard. 

So to try to derive health benefits with these standards, we are 

discovering health defects at or even below these proposed standards. So if we are going to protect—and particularly susceptible 

populations—we need to get a protective factor in there. 

Mr. TONKO. And my understanding is that these are pollutants, 

especially ozone and fine particulate matter, can travel significant 

distances from their sources. So is this a problem only for people 

who live in our urban cores or should there be a concern about suburban areas and rural areas that are impacted by the same pollutants? 

Dr. ROM. Yes. There is a considerable transport of particles; however, there are what we would call hotspots. And what we have recently observed is that highways or where there is heavy traffic is 

a hotspot. So living near a road will increase your risk for developing asthma or having a mortality affect. And roads are across 

rural counties as well as urban counties. So air particulates have 

a large distance that they travel, particularly from coal-fired power 

plants so that to control these, such ideas and concepts as the 

Interstate Rule was promulgated. It is difficult to develop these 

rules because they are always challenged in court, but the eastern 

third of the country and particularly the coastal regions of California have both ozone and PM2.5 exposures that don’t meet the 

standards, and it is a challenge to develop public health policies to 

meet the standards. We are getting there. 

Mr. TONKO. Thank you. Thank you, Dr. Rom. 

And Dr. Steinzor, you have a table in your testimony listing a 

number of EPA rules that apply to the energy sector. They all appear to be rules that would be issued under the Clean Air Act. As 

you point out in your testimony, energy touches many factors in 

our society. The oil and gas industry already has exemptions from 

a number of our environmental laws including the Safe Drinking 

Water Act, the Clean Water Act, the Clean Air Act for gas production with hydrofracking, for example. Are there rules issued under 

other statues that would also be subject to this law? 

201 

Ms. STEINZOR. Rules issued under the Safe Drinking Water Act, 

the Clean Water Act, yes. 

Mr. TONKO. And other statutes, though, that would be affected 

by this law? 

Ms. STEINZOR. Yes. Potentially because the legislation says any regulation that costs $1 billion, but it doesn’t give it time period 

for that. So if a regulation cost $100 million a year, it would be 

subject—any regulation under any law that could remotely affect 

energy producers would be covered by this legislation even if the 

cost were substantially less than a billion because we continue to 

multiply into the future. 

Mr. TONKO. Thank you. My time has expired. So with that, Mr. 

Chair, I will yield back. 

Mr. WHITFIELD. The gentleman’s time has expired. 

At this time I recognize the gentleman from Louisiana, Mr. 

Cassidy, for 5 minutes. 

Mr. CASSIDY. OK, thank you. 

Dr. Rom, I am also a doctor, I am also an academic, and so I 

kind of know the field from which you come. Here is the National 

Academy of Sciences discussion of something that EPA put out. In 

roughly a 1,000 page draft reviewed by the present committee, little beyond a brief introductory chapter could be found on the methods for conduct the assessment. The draft was not prepared in a 

consistent fashion. It lacks clear links to an underlying conceptual 

framework, and it does not contain sufficient documentation on 

methods and criteria for identifying evidence. I could go on. Would 

that get published in a peer-reviewed journal for which you were 

the editor? Yes or no? 

Dr. ROM. Probably not. 

Mr. CASSIDY. Yes, probably not. 

Dr. ROM. The National Academy of Sciences has looked at a 

number of—— 

Mr. CASSIDY. If I may, I have limited time. Probably not. And 

yet, this was a draft that was going to incredibly impact the economics of certain industries. 

Next, you mentioned how there is an impact of PM2.5. By the 

way, this bill is not about that. It is about transparency so that 

there could be an economic effect. I think I know, although you are 

a pulmonologist and I am a gastroenterologist, so I go here a little 

bit a fearing. Don’t we know that socioeconomic status actually affects the incidence of lung cancer as well? 

Dr. ROM. Yes. 

Mr. CASSIDY. So if we are able to say that there is this transparent process that there is going to be a cost of blue-collar jobs, 

folks are going to lose their jobs, their families will be less welloff, et cetera, wouldn’t it be fair to say that that could potentially 

also have an impact upon the future prevalence of lung cancer 

among that population? 

Dr. ROM. Well, the effects of tobacco and—— 

Mr. CASSIDY. Yes or no. I mean, just because we know that economics has an impact, and we know that people—— 

Dr. ROM. But much larger than SES or socioeconomic status. 

Mr. CASSIDY. But it is still a factor. So when Mr. Waxman spoke 

about how we want to speak about not just the cost but also the 

202 

benefits, but if you are an oncologist, you not only want talk about 

the potential upside but also the potential downside. I can say that 

confidently. We all should do that ethically. So if we have a law 

which purports to give all this great health benefit but we don’t go 

into the fact that it could cost a blue-collar worker her job, we are 

not really talking about the downside, are we? 

Mr. Cicio, I am struck that in our current economic environment 

our major challenges creating jobs for blue-collar workers who have 

traditionally been employed in manufacturing, construction, and 

mining. You speak about energy-intensive enterprises moving back 

to the United States recreating blue-collar prosperity, which we 

seem to have almost ceded to other countries. Is it fair to say that 

when natural gas went to $13 per Mcf, there was a negative impact 

upon blue-collar prosperity? 

Mr. CICIO. When prices of natural gas rose starting from about 

2000 to 2008 to the point that you mentioned, in that time period, 

we lost about 5 million manufacturing jobs. We shut down almost 

45,000 manufacturing facilities. So the impact of energy directly 

impacted and contributed to job losses. 

Mr. CASSIDY. So the point of principle that this bill is about creating transparency for the economic effect of EPA regulations and 

not about doing away with their ability to promote health benefits, 

it is fair to say as a principle, if you increase the cost of energy, 

there is a direct economic affect upon blue-collar manufacturing 

jobs, which by the way we have also learned increases their prevalence of ill health. Fair statement? 

Mr. CICIO. I would agree. 

Mr. CASSIDY. Mr. Segal, do you agree with Dr. Smith? It seems 

almost fantastical to me that the more something costs the economy, the more jobs that are created, in which case we should just 

regulate ourselves to prosperity, right? Now, Mr. Waxman said 

there is no common sense there. I don’t see the common sense in 

the greater the regulatory burden, the more prosperity we have. 

Heck, we should regulate our conversation right now. Throw away 

the First Amendment. 

Mr. SEGAL. Well, I quite agree. It is kind of a through-the-looking-glass kind of world. The more expensive something is the 

cheaper it is for the economy. 

Mr. CASSIDY. Now, you also make a point that there is—if you 

are creating jobs, oftentimes there is job shift. I think of the vulnerability of these blue-collar workers. You may be losing that 

blue-collar job while you are creating the job for an EPA bureaucrat. Is that a fair statement? 

Mr. SEGAL. It may be an EPA bureaucrat or it may even be 

somebody in another country. 

Mr. CASSIDY. Isn’t that something? That somebody in another 

country, because as Mr. Cicio says, it is going to be manufactured 

someplace, the question is where. All we are about is letting that 

blue-collar worker who doesn’t have a lobbyist, who doesn’t have 

somebody up here with tassels on their shoes and to be able to understand the impact of rules and regulations upon them. 

I yield back. Thank you. 

Mr. WHITFIELD. The gentleman yields back. 

203 

At this time I recognize the gentleman from Texas, Mr. Green, 

for 5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman, and thank you for calling 

the hearing on the Energy Consumers Act of 2013. Many of the 

rules that this bill aims to stop are rules that directly affect both 

my constituents and companies that employ my constituents. They 

are rules that I, too, seriously have wondered how they got developed. I would love to support the bill that would require the Department of Energy to have an official consulting role similar to 

OMB on the drafting of EPA rules where appropriate. 

For example, I was frustrated to hear that DOE’s concerns about 

grid reliability were not heeded by the EPA or considered during 

the Utility MACT rulemaking. With that said, I am also shocked 

that this has set precedent that where one department has veto 

power over another department, particularly an appointee in an 

agency that is part of Cabinet. 

I would like to ask some questions. And frankly, my colleague 

from Louisiana, we lost chemical jobs over the years simply because our price of natural gas went up to $12.50, $13 and North 

Sea gas is much cheaper. Thank goodness our economy has 

changed that so every plant in my district, I think, is expanding 

jobs because of our success, at least in Texas, of the low cost of natural gas. 

But now to my questions. Do any of you know whether there is 

precedent for this type of policy where there is another agency actually gets to check their work or say yes or no? I want somebody 

telling us what it is going to cost and DOE is that agency. But I 

have never known where one agency could just say, no, you can’t 

do this. Is there any precedent for that? Scott, or anyone else? I 

know we have dealt with these issues for a couple of decades. 

Mr. SEGAL. Well, I will take a crack at it. I mean, the relationship—and I know, I think Professor Steinzor also has some stuff 

in her testimony on this—but the relationship between the Office 

of Information and Regulatory Affairs and OMB, as kind of a regulatory traffic cop, is a similar relationship. 

Mr. GREEN. But even they only check what, for example, in this 

case EPA or some other agency does. 

Mr. SEGAL. Right. 

Mr. GREEN. You know, and theirs is fairly limited. I would be 

more interested in forcing agency cooperation, looking at the cost 

and the benefits, and have somebody check their work. 

Mr. SEGAL. Let me say two things on that. The first is the DOE 

really doesn’t veto the bill. I mean, Mr. Waxman is saying that 

DOE would sit around stroking its mustache and eliminating rules. 

That is not how this bill works in my understanding. The DOE performs an analysis. Now, the Agency—the EPA that is—could take 

that analysis and say, OK, we are going to address those energy 

endpoints. We are going to address those. But the power to address 

those remains with the EPA. I mean, the DOE just performs the 

analysis. 

But I do get the point that you are making, and I guess I would 

say maybe there is—I have heard a couple of things in discussion 

back and forth today, which sounds like there could be areas of 

common ground on legislation like this if there were some alterVerDate Nov 24 2008 15:32 Sep 23, 2013 Jkt 037690 PO 00000 Frm 00209 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-30 CHRIS
204 

ations made or some additional thinking put into it. So, I mean, 

what I am hearing is this is a significant issue; these energy 

endpoints are significant issues. The bill is a great step in the direction of addressing those issues. And so I hope you guys do something. 

Ms. STEINZOR. The bill says notwithstanding any other provision 

of law, the administrator of EPA may not promulgate as final an 

energy-related rule that is estimated to cost more than 1 billion if 

the Secretary of Energy determines significant adverse effects to 

the economy. So that language says you may not put the rule out 

provided that the Department of Energy has told you not to. And 

I don’t know of any precedent that puts one agency in this kind of 

charge. 

Mr. GREEN. Yes, and Mr. Segal is right that we work a lot with 

OMB but they really don’t do their own, and I would like to have 

somebody in the place of doing an economic analysis. 

And frankly, the EPA, that is not their job. Our laws have said 

that EPA looks at the environmental impact and how they can— 

but I also want somebody to say, OK, let’s see how we can afford 

it other than going to the courthouse where it ends up being very 

expensive for both the government and the litigants. 

Dr. Smith, in your testimony you testified EPA should employ a 

cumulative impact study when preparing these rules. Do other 

agencies and departments utilize this type of study in their rulemaking? And if they do, how often does it compare to EPA? 

Ms. SMITH. Well, there aren’t too many other agencies that have 

done analyses that compared to EPA’s. But EPA itself has done 

these kinds of comprehensive analyses. They have done them in 

the past. They have tools that are ready to go, and the only question is why they haven’t been using them. My feeling is that because there is no requirement to consider the costs whatsoever 

under the Clean Air Act, that defies common sense, too, that we 

are imposing our entire Clean Air Act without any consideration of 

costs. And that has led to the kind of inappropriate, non-credible 

‘‘economic estimates’’ that are coming out of the Agency at this 

time, when they fully well could do a full economy analysis of their 

own. 

Mr. WHITFIELD. The gentleman’s time has expired. 

Mr. GREEN. Five minutes goes by so fast, Mr. Chairman. 

Mr. WHITFIELD. At this time, I recognize the gentleman from 

West Virginia, Mr. McKinley, for 5 minutes. 

Mr. MCKINLEY. Thank you, Mr. Chairman. 

I have got a series of questions for several of you that, if I could, 

start with Ms. Steinzor. You open your remarks with some pretty 

scathing challenges against some of the oil producers, energy producers, by going over their profit margin, their profits that they 

make. I think you had talked about, according to your testimony, 

$119 billion in profits. Is that correct? 

Ms. STEINZOR. Yes. 

Mr. MCKINLEY. OK. What level would be appropriate? 

Ms. STEINZOR. What level of profits? 

Mr. MCKINLEY. Yes. If they are making around 15 percent profit, 

you are coming at this with a pretty strong view. Should they only 

be making 5 percent? 

205 

Ms. STEINZOR. Well, if I were in charge, they would be giving a 

much larger share of those profits to the same blue-collar workers 

that people have expressed so much concern about. 

Mr. MCKINLEY. In other words, OK, so it has nothing to do with 

energy or for health. It is just that you say they shouldn’t have this 

money. So am I correct? 

Ms. STEINZOR. No. I—— 

Mr. MCKINLEY. I don’t want to dwell on it a lot because I know 

that this money goes into pension funds and retirement accounts 

for people, so there is some value to having a corporation make 

some money. I am just curious why—— 

Ms. STEINZOR. And I am not saying corporations should not make 

money. I am saying that these are some of the most enriched companies in the country that are up here—— 

Mr. MCKINLEY. And ConocoPhillips is a—they make 15 percent 

profit. I don’t know that that is exorbitant given such a diversity 

that they earn from chemical manufacturing to oil production and 

energy production. I am just curious. You seem to be willing to attack the profit margins of these companies and—OK, that is fine. 

I have run into people like you every once in a while. 

But let’s go to Dr. Rom. You know, you made a very poignant 

issue earlier when you talked about the individual that was standing there, next to a—for 5 minutes. Was he your patient or something like that? 

Dr. ROM. I didn’t see him in the emergency room but I saw 

him—— 

Mr. MCKINLEY. So he wasn’t your patient? 

Dr. ROM. Yes, for a period of time. 

Mr. MCKINLEY. I don’t want to make a big deal of it, but did you 

ever have any children that ever went outside without a coat on 

and they were sick? They got sick from being outside or—I am just 

curious. Did this person have a level of personal accountability? If 

he had a pulmonary problem and stood there in front of an exhaust 

pipe for 5 minutes that you referred to, didn’t he have a—just to 

step back? Did you ever tell him that or did you say let’s blame 

the government or let’s blame that bus for running there? 

Dr. ROM. Well, he was intubated at that point—— 

Mr. MCKINLEY. OK. 

Dr. ROM [continuing]. So I couldn’t ask him those types of questions. 

Mr. MCKINLEY. I think it was a very—— 

Dr. ROM. But I think the rate of exposure is the important thing. 

Mr. MCKINLEY. And I think it is important, and I am with you 

on that. I think you made a good point but I also think there is 

a question about—I want to go into more on what you were talking 

about—— 

Dr. ROM. I agree with you on personal responsibility. We give 

people medicine—— 

Mr. MCKINLEY. OK. You and others have testified time and time 

again here before us about asthma and other health-related issues, 

but can you help me, Doctor? How do you differentiate someone 

getting asthma or some kind of airborne disease from being outdoors from when they are indoors? If they spend 90 percent of the 

time indoors, why do we always keep attacking our outdoor air 

206 

quality when it only represents about 10 percent of the time of the 

air we are exposed to? Do you think we should be looking at indoor 

air quality? 

Dr. ROM. Oh, absolutely. 

Mr. MCKINLEY. OK, but that isn’t where—the EPA doesn’t have 

any authority to do that, and I am not sure that I want to get them 

in my house. When someone comes down with an asthma attack, 

can you differentiate, you can tell me, they get that because they 

were riding in their car outdoors or when they were inside their 

house on a couch that was giving off formaldehyde? 

Dr. ROM. Those are very good points, Congressman. Indoor air 

pollution is a real problem. The WHO this week said there are 3.5 

million deaths from indoor air pollution and 3.3 million from outdoor air pollution, so they are almost equal across the globe. In this 

country—— 

Mr. MCKINLEY. But the EPA says the indoor air quality might 

be as bad as 100 times worse in indoor, and on any given day, five 

times worse. 

Dr. ROM. Indoors—— 

Mr. MCKINLEY. How do you differentiate it? 

Dr. ROM. Yes. Indoors—— 

Mr. MCKINLEY. Why are you attacking one group and not the 

other? 

Dr. ROM. Indoors with a room like this where we have central 

air conditioning, the ozone is virtually zero. So we tell our patients 

to stay indoors on bad ozone days. But the PM and the sulfur oxides and NOx get indoors as well as outdoors. So we have problems 

with the other pollutants. 

Mr. MCKINLEY. OK. I think we have run out of time. If you could 

give me some other information about how you differentiate, it 

would be very helpful. Thank you. 

Mr. WHITFIELD. The gentleman’s time has expired. 

At this time I recognize the gentleman from Kansas, Mr. 

Pompeo, for 5 minutes. 

Mr. POMPEO. Thank you, Mr. Chairman. You know, I am puzzled 

how this discussion evolves. We have a piece of legislation here 

proposed by Dr. Cassidy that is about information, it is about disclosure, it is about policymakers having knowledge about what a 

particular federal action, whether that be a statute in this case, 

regulatory—what costs it would impose. And I want to go down the 

entire panel, and this is just a simple yes-or-no question in the fine 

tradition of Mr. Dingell. Yes or no, do you think federal policymakers, regulators ought to know and communicate—to your constituents, Mr. Cisco; your patients, Mr. Rom—the cost of a regulation? 

Mr. CICIO. Yes. 

Mr. WILLIAMS. Yes. 

Dr. ROM. Yes. 

Ms. STEINZOR. Yes. 

Ms. SMITH. Yes. 

Mr. SEGAL. Yes. 

Mr. POMPEO. Great, we have consensus. Mark the time. That is 

what this legislation is about. This is about identifying costs. I assume everyone would also think that on the benefits of a regulation 

207 

as well. Everyone is nodding their head so we have consensus there 

as well. I mean, we start here and we have a member talking about 

climate change and the fact that last year’s temperatures are proof 

of climate change. I made that is just—you can’t let these facts 

go—I mean these intensely unscientific statements go unchallenged. 

Mr. Segal, we end up talking about this health benefits. You had 

mentioned this and if you could just give me 30 more seconds, 

blackouts, brownouts, electric reliability risk, and its relation to the 

thoracic health of Dr. Rom’s patients. 

Mr. SEGAL. Well, sure. There are several different ways in which 

it is related. But directly the cost of electricity is a major cost factor 

for hospitals. So if you increase electricity cost, you increase the 

cost of providing medical care at the hospital. And, in fact, what 

we call electronic medicine these days is heavily dependent on affordable and reliable power. But then, in an indirect sense, I think 

we have all established, or at least many of us have agreed, on the 

notion that high electricity prices make industry less competitive, 

make gasoline more expensive, and as a result, have a negative impact on employment. 

And employment is—great research done by Dr. Harvey Brenner 

at Johns Hopkins estimates the amount of a percentage increase 

in unemployment of the amount of actual increase in mortality and 

morbidity. And that is not taking into account, frankly, in EPA’s 

benefits analysis. See, that is an indirect cost so they don’t take 

that into account. So they will cook the books in the other direction 

but they won’t take into account these macroeconomic impacts on 

health. 

Mr. POMPEO. Yes. I am certainly worried about cooked books. I 

am even more worried that there is no analysis—— 

Mr. SEGAL. Yes. 

Mr. POMPEO [continuing]. Being done. They are simply not even 

opening the books or attempting to prepare the books or even considering cost. 

One last point of cleanup. Dr. Rom, you made a statement about 

ozone—that 75 parts per million, you said it saved certain lives if 

we want to 70, is that right? Do I have that right? 

Dr. ROM. That 75, it is between 1,500 and 2,000 lives that you 

will save if you are meeting that standard. We are currently above 

the standard. 

Mr. POMPEO. Got it. More lives if we want to 70? 

Dr. ROM. Four thousand at 70. And that was—— 

Mr. POMPEO. How about at 60? More lives at 60? 

Dr. ROM. Double. 

Mr. POMPEO. Awesome. How about zero? More lives still? 

Dr. ROM. Background is probably in the 30 to 40 range—— 

Mr. POMPEO. There we go. We get perfection. Background 35. 

More lives still saved if we get from enforcing 75 to 70 and then 

we ultimately get to 35, more lives saved, I assume? 

Dr. ROM. When you are at background, you are at background, 

so I can’t really say—— 

Mr. POMPEO. But it is better than 70. You would rather be a 

background than at 70? 

Dr. ROM. Yes. 

208 

Mr. POMPEO. Yes. When I hear folks say—sometimes folks who 

think this kind of legislation makes sense exaggerate to—I think 

it is silly to make statements about perfection and background. I 

think they are not even worth talking about. I mean, it is silly. So 

I think we all have an obligation to be straightforward about what 

is possible and the real cost associated with those things without 

saying hey, we are going to kill people if we don’t go do this. I 

think it is disingenuous. I think it doesn’t serve the public interest 

very well and I just hope we will all refrain from that. I yield back. 

Mr. WHITFIELD. The gentleman yields back. At this time I recognize the gentleman from Illinois, Mr. Shimkus, for 5 minutes. 

Mr. SHIMKUS. Thank you, Mr. Chairman. And I am going to be 

quick because I know the bells have rung and there are probably 

a couple of more members that want to also ask questions. I do appreciate the panel. 

Listen, we are legislators. The way a bill becomes a law is there 

is an idea—Mr. Cassidy has one—and we debate it, we move it, 

and it becomes law. And it changes the dynamics that will help 

both sides and the disparaged colleagues who are bringing legislation in good faith is just unfortunate because it just frustrates me 

that we don’t have to stoop to that. 

And Dr. Rom, I applaud the profession. I love people in the 

healthcare sector. They are servants. They do great work. But I 

also am concerned about a mayor who can try to ban the Big Gulp 

doesn’t have clean air emission buses like natural gas or biodiesel 

transport systems that would help alleviate some of that issue. 

That would not be an issue if it was a natural gas bus. So I am 

sure there are some there but—I would just add on this, this is the 

question. New source review is a public policy by this country that 

says that if we are going to retrofit manufacturing facilities or 

power plants with new generators more efficient, maybe it doubles 

the efficiency, then the power plant has to go through a whole new 

permitting aspect on their environmental regs. 

So I just ask this question. If we know that these generators can 

double the efficiency and the power plant is meeting current air 

standards—and so you are going to get more electricity output almost lowering the price in half—does it make sense—if it is meeting the current environmental standards, does it make sense to 

force the industry to reapply for all the air permits? And we will 

just go left to right and then I will be done and then we can move 

time to—— 

Mr. CICIO. No, it doesn’t and that is why this legislation is needed to identify what the costs are so that if the costs are high, then 

hopefully, it will give the EPA an option to go back and look at alternative, less costly options. 

And along with this question you asked I would like to address 

Congressman Green’s point. If there isn’t a precedence, there needs 

to be a precedence because the EPA is not an agency with expertise 

in the energy area. The rules that the EPA is dealing with are so 

energy-intensive-related that they need help from the Department 

of Energy to make sure that they get it right. 

Mr. WILLIAMS. I would agree with Mr. Cicio and your statement 

and it really points to the fact that, oftentimes, EPA in particular 

looks at these things in silos and gets to some of the regulatory 

209 

complex I talked about in my written testimony, an example, I 

mentioned Tier 3 earlier. We have a regulation that requires us to 

take more sulfur out of gasoline even though we reduced it 90 percent. That is going to increase GHG emissions 1 to 2 percent. And 

then we also have EPA’s GHG regulations under the PSD provisions and facing NSPS GHG relations. At sometime in the future 

EPA has announced that. So it highlights your point exactly. 

Dr. ROM. Yes. I would point out that for transparency EPA generally is willing to listen to a power plant company or manager to 

discuss multi-pollutant controls in NSR—— 

Mr. SHIMKUS. And not to cut you off, this is current rules and 

current laws that we apply by now that they are not. Obviously, 

they force people then, to go through the old permitting process if 

they are going to bring a new generator online. It is just the current law and it is crazy. It makes no sense. But that is current. 

Ma’am, no comment? 

Ms. STEINZOR. I think it makes perfect sense. 

Mr. SHIMKUS. OK, that is fine. Dr. Smith? 

Ms. SMITH. It serves as a hindrance towards efficiency improvements. 

Mr. SEGAL. For once, my law degree maybe trumps an M.D. This 

is a legal program and it gets the incentives exactly backwards, 

Mr. Shimkus. It prevents efficiency improvements and even prevents pollution prevention, even though that is supposed to be an 

explicit exception. 

Mr. SHIMKUS. Exactly, thank you. I yield back. 

Mr. WHITFIELD. At this time I recognize the gentleman from Virginia, Mr. Griffith, for 5 minutes. 

Mr. GRIFFITH. Thank you, Mr. Chairman. 

The time is limited so I will have to be brief. I agree. The whole 

idea of this bill is so that the EPA can take a look at it and say, 

OK, maybe we need to find a less costly way of doing this if it is 

a good thing to do. But more importantly, I think we ought to be 

looking at those estimates, knowing that the EPA can consistently—in just the short time that I have been here the last 2 1⁄4

years, I haven’t seen a thing yet, I think, the EPA has gotten the 

numbers right on. We may disagree on policy but I at least would 

like to have the numbers be close to reality. They are not there, 

which is why I think it is part of the reason that we have this bill, 

have somebody besides the EPA taking a look at these issues. I for 

one believe that that responsibility rests here in Congress. 

When it comes to the arguments and people say there is no precedence for this or there is no precedence for the Act under which 

we are talking. There was no precedence for the Clean Air Act in 

the first place. So under that argument, we should never have had 

this bill in the first place. And I would have to direct that to my 

friend, the law professor because, as you know, this country is 

about starting things and doing things a different way than the 

rest of the world. Otherwise, we wouldn’t have a democratic republic form of government because we were the first ones in the world 

to have that with the nature—recognizing the city state of Athens 

and some other minor experiments in that. 

But from a nation of this size, we were the first to have a democratic republican form of government. I think it is a great way to 

210 

go and I think we should go there. But I will tell you one of the 

problems that I see from this testimony today and from the questions that I hear is that we actually had a member here say today 

something about this would hinder everyday decisions. A billion 

dollars in Washington is considered an everyday decision. Well, before I was here, I came from the Virginia legislature and the last 

year I was in the Virginia legislature, our entire budget was less 

than $40 billion. To me, a billion-dollar decision is not an everyday 

decision and that is the reason we need this bill. 

I don’t understand these folks who don’t want to have Congress 

getting more information and have us taking more responsibility. 

You know, the people elected us to be responsible for these things. 

And coming up with a new bill, a new idea to put checks and balances into the system, not to say we don’t do something that is 

good, but to put checks and balances there at that billion-dollar 

level. When that is unreasonable, it is clear we have a problem in 

Washington and I think this bill will help fix that. 

Mr. WHITFIELD. The gentleman yields back. 

At this time I recognize Mr. Olson for 5 minutes. We have 6 minutes left on the floor for a vote. 

Mr. OLSON. I thank the chair and welcome to the witnesses. I 

know we are running short on time but Texans can always find 

time to brag about the Lone Star State. So I would like to remind 

my colleagues that my State was the fastest-growing State in the 

union the last 10 years. People from all over the country were 

flocking to Texas for four reasons: our income tax, zero; commonsense regulations; right-to-work state; and cheap, reliable energy. 

One of the biggest challenges my State faces in the future is reliable energy. ERCOT, who controls power generation for about 90 

percent of my State, has said we need five more power plants, large 

ones, coming online by 2014 or we risk having another power crisis. 

If we have a summer heat wave like in August of 2011, we will 

have rolling brownouts and blackouts again. 

EPA’s war on coal has stopped two new power plants from being 

built: Las Brisas and White Stallion along the Gulf Coast there by 

Corpus Christi and Bay City. 

My question is for you, Mr. Segal. Can you talk about the reliability issues you see coming? Are my home State’s challenges the 

exception or the rule? 

Mr. SEGAL. No, sir. They are not the exception, although Texas 

faces a particularly onerous situation, particularly with the amount 

of manufacturing assets we have in refining and in chemicals, et 

cetera, that the entire rest of the country relies upon for their manufacturing. Look, prior to those rules being laid down by the EPA, 

our friends over on the Senate side spent 7 months trying to figure 

out if EPA had even talked to FERC about the electric reliability 

impact. I would like to read their conclusion. ‘‘Instead of taking the 

questions and concerns seriously, the EPA largely ignored requests 

for the Agency to work closely with FERC and reliability experts 

to identify potential reliability risks and then amend the rules to 

lessen those risks,’’ very similar to what your bill would do. 

Indeed, in recently released internal emails, FERC employees expressed frustration with trying to work with EPA noting, ‘‘I don’t 

think there is any value in continuing to engage EPA on these 

211 

issues.’’ They had no interest in trying to adjust reliability on a 

priori basis. 

Mr. OLSON. And that makes my State’s crisis acute. 

Mr. Williams, Mr. Cicio, would you like to add anything to Mr. 

Segal’s comments? 

Mr. CICIO. I am glad you brought this up. I have worked in the 

manufacturing sector for 42 years, my entire life, and I can confidently say that there is greater concern about electric reliability 

by manufacturers than ever before, and it is because of the EPA 

rules on the power sector. And it is a prime example of the EPA 

not having the expertise to deal with the entire direct and indirect 

implications of their actions. 

Mr. WILLIAMS. I would agree with Mr. Cicio and note that, as I 

mentioned earlier, refiners other than crude oil costs, electricity is 

their second-largest cost. The same applies for petrochemical manufacturers. And if there are reliability issues, they are going to significantly impact our sector and our ability to make the products 

and make this country run. 

Mr. OLSON. One question, Mr. Williams. How would this bill 

have helped if it had been law when EPA got in and destroyed our 

flexible permitting system? Remember they came in, rolled in, 17 

years of precedence over on the Clinton Administration, the Bush 

Administration, the first years of the Obama Administration, threw 

it out and the court, the 5th Circuit finally had to overrule them. 

But how would this bill have helped that situation, and what is the 

damage that has been done? Have we recovered yet? 

Mr. WILLIAMS. Well, the flex permit issue is a great issue because EPA officials had told people in our industry, yes, it worked 

you just didn’t do it the way we wanted you to do it, which required folks to go back to the drawing board and de-flex a lot of 

their facilities. 

And it goes back to the point I made about how this bill would 

help. This bill actually, as many members have highlighted today, 

add more transparency to the process. It would allow the Department of Energy to take an energy impact economy-wide look at 

how all these different regulations fit together and how the benefits 

and the costs are assessed, and in some cases, how the costs aren’t 

assessed. 

I mentioned the conflicting regulations with Tier 3 and greenhouse gas. As before, there has been a lot of talk about PM. The 

Tier 3 rule also talks about addressing PM. EPA, as was earlier 

mentioned, just finalized a PM standard that they say was protective of the public health and environment. The PM analysis and 

Tier 3 did not look at that. It looks at in silos. So how do we know 

where the PM benefit is actually coming from? 

So these are just examples of oftentimes the fact that these regulations happen in a silo and there are implications that aren’t considered when EPA is going through their analysis. This bill would 

help because the Department of Energy would certainly prevent 

against the fox-guarding-the-hen-house scenario for lack of a better 

analysis. 

Mr. OLSON. My time is going up instead of going down so I yield 

back. 

Mr. WHITFIELD. The gentleman’s time has expired. 

212 

Mr. RUSH. Mr. Chairman? 

Mr. WHITFIELD. Yes? 

Mr. RUSH. Mr. Chairman, I ask for unanimous consent to submit 

the letter for the record from the Natural Resource Defense Council 

addressing this concern with getting the Consumers Relief Act. 

Mr. WHITFIELD. Without objection, so ordered. 

[The information appears at the conclusion of the hearing.] 

Mr. WHITFIELD. I would also like to enter into the record this 

press release from the Society of Environmental Journalists. 

[The information appears at the conclusion of the hearing.] 

Mr. WHITFIELD. Also, I made a statement that the U.S. was the 

number one oil producer in the world. Actually, we are the number 

one natural gas producer in the world. We are third in oil and they 

anticipate we may be number one in 2018. So I want to correct 

that. 

Also, I just want to clear up briefly, as result of our last hearing, 

Mr. Rush, it was your understanding that I had agreed to a hearing on climate change, which if I led you to believe that I think I 

was mistaken. However, having said that, I personally have talked 

to our staff. While we have different priorities, many on your side 

view climate change as the most important issue. We believe jobs, 

the economy, and some other things are more important. But our 

staffs will be working together to try to develop a format to move 

forward to address some of your concerns on this issue. 

Mr. RUSH. Thank you, Mr. Chairman. I guess I kind of don’t 

know where we are at because I was assured—I thought that we 

had a hearing scheduled, a definite hearing scheduled. But as long 

as we are proceeding in that direction, I guess we have to go along 

with it. 

But Mr. Chairman, I don’t think that we have to decide between 

climate change and jobs. I think that is not the issue here. The 

issue is whether or not we are going to have scientists and climatologists before this committee to offer expert opinion. Thank 

you. 

Mr. WHITFIELD. Thank you. The record will remain open for 10 

days, and I want to thank you for your time. We appreciate your 

testimony and expertise. And with that, this hearing is adjourned. 

Mr. RUSH. Thank you, Mr. Chairman. 

Mr. WHITFIELD. Thank you. 

[Whereupon, at 11:52 a.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

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82183.079

NATURAL RESOURCES DEFENSE COUNCIL 

Aprilll,2013 

Honorable Ed Whitfield, Chairman 

Subcommittee on Energy and Power 

Committee on Energy and Commerce 

2368 Rayburn House Office Building 

Washington, DC 20515 

Honorable Bobby Rush, Ranking Member 

Subcommittee on Energy and Power 

Committee on Energy and Commerce 

2268 Rayburn House Office Building 

Washington, DC 20515 

Dear Chairman Whitfield and Ranking Member Rush: 

On behalf ofthe Natural Resources Defense Council, I am writing to provide 

information that I hope will inform the Energy & Power Subcommittee's hearing on the 

discussion draft of the "Energy Consumers Relief Act of 2013." 

This extraordinary and unprecedented bill would, in one fell swoop, effectively 

rewrite fundamental environmental statutes, grant the Department of Energy sweeping 

new powers, and eliminate federal responsibility to consider the public's health and 

safety. The one thing that would provide "relief' for the public would be for the 

Subcommittee to bury this bill quickly and permanently. In its first seven lines alone, the 

draft bill reverses virtually every presumption and practice of environmental law - law 

that for more than four decades has proven to improve health and safety while allowing 

for economic growth. The law transfers authority for environmental decision-making 

from environmental experts at the Environmental Protection Agency (EPA) to an agency 

with an entirely different mission, the Department of Energy (DOE); removes 

discretionary authority from both agencies; and overrides the law's focus on health and 

environment by allowing only estimates of costs to be taken into account when 

determining whether a safeguard should be promulgated. It is altogether fitting that the 

first substantive phrase of this bill is "Notwithstanding any other provision oflaw" 

because the bill runs roughshod over countless statutes and the people they were enacted 

to protect. 

www.nrdc.org 

1152 15'h Street, N.W. Suite 300 

Washington, D.C. 20005 

TEL 202 289-6868 

FAX 202289-1060 

NEW YORK' SA.'1 FRfu'lCISCO • LOS A.'1GELES • CHICAGO' BEIJING 
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82183.080

And the bill would apply to a far wider swath of EPA activities than may at first 

be apparent. Under the bill, for the Secretary of Energy to have veto power over an EPA 

standard, the standard must 1) "cost more than $1 billion" and 2) be "energy-related." 

First, as to the cost requirement, the $1 billion trigger described in section 2 of the 

bill is calculated by counting "direct" and "indirect" costs for the duration of the 

standard. Section 4(1) defines "'direct costs' and 'indirect costs' as having the meanings 

given such terms in chapter 8 of the Environmental Protection Agency's 'Guidelines for 

Preparing Economic Analyses' dated December 17,2010." That document defines 

"direct costs" and "indirect costs" as follows: 

Direct costs are those costs that fall directly on regulated entities as the result of 

the imposition of a regulation. These entities may include firms, households, and 

government agencies. Indirect costs are the costs incurred in related markets or 

experienced by consumers or government agencies not under the direct scope of 

the regulation. These indirect costs are usually transmitted through changes in the 

prices of the goods or services produced in the regulated sector. Changes in these 

prices then ripple through the rest of the economy, causing prices in other sectors 

to rise or fall and ultimately affecting the incomes of consumers. Government 

entities can also incur indirect costs. For example, if the tax base changes due to 

the exit of firms from an industry, revenues from taxes or fees may decline. In 

some cases, the indirect costs of a regulation may be considerably greater than the 

direct costs. 1 

It is not hard to tally up a $1 billion cost using that definition, especially when costs are 

calculated over many years. 

The bill's use of the term "energy-related" is at least as expansive. The term is 

defined in Section 4 (2)(a) in a way that would cover almost all standards issued by 

EPA's Office of Air and Radiation because virtually any fuel combustion activity "uses" 

or "produces" energy, and virtually all fuel combustion produces air pollution. Many 

clean water regulations relating to the power sector would also come under the bill. 

The appendix accompanying the majority's background memorandum2 seeks to 

minimize the bill's reach by focusing on what in common parlance are thought of as 

energy industries, but the bill actually would apply to any part of the economy that 

combusts fuel and produces pollution. 

But this bill would be pernicious even with a narrower scope. Congress has 

repeatedly vested EPA with authority over pollution for good reason, and it has garnered 

public support. EPA has the expertise, experience and focus to deal with pollution, health 

and the environment. It is hard to think of any other example of Congress taking the 

I U.S. EPA, Guidelinesfor Preparing Economic Analyses. Dec. 2010, §8.2.1.2 available at 

http://yosemite.epa.gov/ee/epaieenn.nsf/vw ANIEE-0568-50.pdf/$file/EE-0568-50.pdf (last visited April 

11,20\3). 

2 See http://docs.house.gov/meetingsIlF/IF03/20\30412/1 00633/HHRG-113-IF03-20 130412-SD003.pdf. 

2 
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approach of this bill- giving an agency a veto over another agency's most basic duties. 

This is simply subterfuge - a way to repeal key aspects of environmental law and to 

dismantle EPA - while appearing to merely be extending authority to another agency. 

It should be noted, though, that in one sense the bill removes discretionary 

authority from EPA without vesting any in DOE. Under the bill, the Secretary of Energy 

has no authority to thoughtfully consider environmental protection. Rather the bill 

mandates that proposed safeguards be discarded - no matter what - if they would have an 

impact on energy or the economy. 

This is the most shocking and radical aspect of the bill. The bill would simply do 

away entirely with any and all health and other considerations. Costs would be all that 

mattered, no matter what the benefits. It would be hard to imagine a step more counter to 

the public interest, not to mention actual experience. 

Studies have shown repeatedly that Clean Air Act standards have health and 

economic benefits that far outweigh their costs.3 The Clean Air Act has brought 

tremendous benefits to both the health of our citizens and to the economy. A recent report 

estimates that in 2020 alone, the Clean Air Act will prevent over 230,000 early deaths.4 

The same report found that the benefits of the Act exceed the costs by a ratio of on 

average thirty to one, with a high-end estimate of benefits exceeding costs by a factor of 

ninety to one. 5 The draft bill entirely ignores the overwhelming benefit to cost ratio of 

almost all Clean Air Act standards, evaluating costs in a vacuum blind to the benefits 

these standards have brought to our economy. 

Yet this draft bill would eliminate all decisional criteria other than costs as the 

determinative factor in whether environmental statutes administered by EPA are allowed 

to be enforced. This would effectively repeal the 40-year-old Clean Air Act requirement 

to base national air quality standards on what is "requisite to protect the public health" 

"with an adequate margin of safety." Clean Air Act § 109(b)(1). 

It is ironic that the sponsors' latest gambit to eviscerate the Clean Air Act uses 

DOE as a stalking horse. For decades, Republicans from Ronald Reagan to Newt 

Gingrich to candidates in the most recent presidential elections have called for the 

3 See. e.g., EPA's recently finalized National Ambient Air Quality Standards (NAAQS) for fine particle 

pollution. EPA estimates that these standards would provide the American public with up to $171 dollars in 

public health benefits for every $1 spent on pollution controls. U.S. EPA, Fact Sheet: Overview of EPA's 

Revisions to the Air Quality Standards for Particle Pollution (Particulate Matter), available at 

http://www.epa.gov/pm/2012/decfsoverview.pdf; Similarly, EPA's Final Toxic Air Pollution Standards for 

Industrial Boilers have a benefit to cost ratio of at least 29 to I. U.S. EPA, Fact Sheet: Final Adjustments to 

the Air Toxics Standards for Industrial, Commercial, and Institutional Boilers and Process Heaters at Major 

Source Facilities, available at 

http://www.epa.gov lairquality/combustionldocs/20 121221_ boiler _ majof_recon _ fs.pdf. 

4 U.S. EPA, Second Prospective Study, 1990-2020, available at 

http://www.epa.gov/cleanairactbenefits/prospective2.html (last visited April 11, 2013). 

5 ld. (The report estimated benefits of $2 trillion, with costs over the same period of only $65 billion) 

3 
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outright elimination of DOE. But apparently the department has value as a cover for 

rewriting environmental laws. 

If the sponsors were actually interested in merely ensuring DOE review of EPA 

rulemakings no legislative action would be needed. There already is an extensive 

interagency review process that EPA undertakes, soliciting comments from fellow 

agencies, including DOE, about standards EPA is developing. This review process is 

consultative and collaborative, but does not task DOE with the authority to usurp health 

protections entrusted by Congress and prior presidents to environmental laws enforced by 

EPA. The Regulatory Impact Analyses accompanying EPA standards consider impacts 

on the industrial sector at issue, job losses, increases in energy prices and other factors, 

consistent with executive orders dating to the Reagan administration. One of many 

examples of this collaboration is the recently finalized toxic air pollution standards for 

industrial boilers. When finalizing these standards, EPA in its technical fact sheet noted 

that DOE was, among other things, collaborating with EPA to "provide site-specific 

technical and cost information" to regulated entities subject to the standards.6 

In sum, this draft bill is simply the latest - and perhaps the most far-reaching 

effort by this Subcommittee to tear down the system of environmental protection that has 

cleaned our air, and saved lives and money for decades. The novelty of this latest 

approach should not be allowed to mask the destructive impact the bill would have. 

Sincerely, 

John Walke 

Clean Air Director 

Natural Resources Defense Council 

6 U.S. EPA, Factsheet: EPA's Air Toxics Standards Major and Area Source Boilers and Certain 

Incinerators Technical Overview Adjustments from March 2011 Final Standards available at 

http://www.epa.gov/airquality/combustionldocs/20 12122I_tech _overview_boiler _ ciswi_ fs.pdf (last visited 

April II, 2013). 

4 
217 


82183.083

Hearing Thursday; Will New EPA Head Open Agency to News Media? I SEJ Page I of 1 

Hearing Thursday: Will New EPA Head Open Agency to News Media? 

April 10.1013: In =t years tho 0b0mlI administration baa taken 

somcy 10 • now level by failing 10 """"nd to even 111811)' ", .. in. inquiries 

by tho newa media abo .. what this imponllD1lgOllCY i. doing in ~gard 10 

human health and protoeti"tl tho environment. With Gina McCarthy'. 

nomination 10 hood th. EPA facing confinnstion, it. time f ... tho S ...... to 

ask some hard qncstiona. 

Below is III SEl _ on the need Cor 8J'8I01' EPA openness with the 

media. A shortened version of this ._ w ...... t ID members ofth. 

s ...... Environment IIId Public Worb Committo •. 

Pmidart Obom. baa an opportunity 10 fix badly broken media poIioi •• 

that keep Ameri .... in th. dad< abo .. their enviromnent Gina McCarthy'. 

nomination as tho bew hood of the U.S. EnviromnenIeI Protection Agency 

affotds him an opportunity to live up 10 hi. promise to ~at.1II 

"~Ied level ofopcnneu in government" 

The 0b0mlI admini.wlion baa been anytbil1$ ... transpai<i!U in lIS deallngs 

with ~ ~eking lnfocmation.illlervi_.and eiarlliellli<>"cn a lm$t ofonviromn"l1al, health and public lands ,.us. ,The EPA i~,¢lIlIQrdle moot c1osed,Qpoque agen<.lios 10 tho """"', Membm<>ftb. Society <>f&viIomnental 

Joumalist;.c .proup 01' I~Sll jouJnalislswoo specialize in <mvirorunemal_era,ge ' f&ce sulmamial hurdles pttill8 

tbeir<lU""1IOil. _mil about air pol!1IIion. water qUality, oU and gas eperstiona and other issues. 

But tho problem is pervasive. SEl momben report similar obsutcI .. obtaining public inIbnnati<m Jrom the Interior, 

Energy and AgricuItuR departments, the Food and Drus Administrotion, tho Centers for Di ..... Control and other 

fcdmllgCllcies. 

R.eporterS who have covered the EPA for sevoral decades say the agency was far more modis-friendly and open prior 

10 2000. But_dis poIioi .. ~ subllantially eroded durins the adminialration of George W. Buell, and they've only 

gotten wane under President Obama. 

Today,the Senate holds ito bearill8lO consider McCarthy's nomination. A new EPA adminiswtor is. chance fur a 

tRsh start. but we are tJoubied by her past statemen1» dcfendill8 the agency's tight grip on communications between 

joumalillS and _ scientists and poIicymakers. "It is the job ofthelgeDCY to moke ~!hal pcnonaIiti •• don' 

got in the wIlY ofreally eIi.cuasing the scien .. ina way that maintains the Igoncy's credibUil)'," she said at. Union of 

Concerned Scientists aymposium I.t year. "The balance that we tty 10 bring ... jalO just make ~ w. are ",ally 

providing faclUlll information, not a IlIYer of ...... m.nt !hal is based on """eon.', penonaI mtemt or edvocacy.· 

But the belan .. is badly out ofwback. The policies she endorsed bottleneck the m. flow of information to the 

public. Information and interview tequesttl are routed to !he IgORcy'. Washington headquarters- wbare they olton 

languish and elie. 

R.eport.". ""' reguIaJIy,..,quirod to ... bmitwr"' .... ,!....nonl!. even \>n the SImplest <laily stori ••. InterView reque.t. tit1> 

.....ty gnml!.l.pelSYS are routine. Replies, wbeu they do come, ""' Iiom JlRIS officers, not scientilllll or poIicyl'l\wrs. ~ totoqUeS!S I'lIIl!Ie ""ocr the free""", o{ infiJnn4tiunAot also Ole l'QlJtinely dOIayed. 

Tho policy i. COUItteIpI'OdacvelO l<:aI1'ate reportill8 and inirnicalto the AmeriCatl public's right 10 know about 

important health and environmonlll1 issues. 

SEl calls OIl the administration to streamline the bandling of information and interview noquests. and 10 allow more 

opeD and cIiroct access 10 administreton, policymakers and the scienlillS whose researth suides government 

decisions. W. also urse EPA, Interior and EnersY department administraton 10 hold regular news conferences. both 

in person and vi. conference call, to ansWCl' reporters' qncstions QD all topica 

As journalists, we are worki"tl QD behalf of our rwIen, view .... and Ii_ to produu timely, II<CIII8te and 

complete roporting on important environmental and heaIIh issues. Tho administration wori<s for them. too. Shouldn't 

it hav. the same 8OaIs? 

It'. a qncstion that the Sonato, in it. booring today, should .. k the EPA nominee. 

- Bello A. Patie, Exeoulive Dire<:tor, Society ofEovironmenlll1 Journolists (www sej.onil; contllOl 

bparke It sej arg. 

-JosephA. Davl .• , Director, SEl F~ oflnfonnation WatchDog PIosrom;_I8CI~ 

sej.gm. 

The Sociil!;~ of Envu'OIlrnefllll Jouma:l.lSti; 

po. B"" 2492 Jm1:.intown .. PA 19046 

Telephone (21l) 1lI4·6174. I'AX (21l1884-8m 

Enw!~ 
218 


82183.084

EPA: 

Agency comes under fire for 'closed, opaque' press policy 

Emily Yehle, E&E reporter 

Published: Thursday, April 11, 2013 

This story was updated Manday, April 15, at 10:56 a.m. 

Decades ago, when Bill Ruckelshaus returned for his second stint as U.S. EPA administrator, employees 

wheeled a giant cardboard box into his office. Inside: Hugh Kaufman, an employee known for his 

tendency to disparage the agency's decisions in the press. 

"He popped out of the box as the going-away gift for the administrator, and it was a big laugh because 

he was well-known by all of us as sometimes giving us a hot foot," remembered Chuck Elkins, a former 

EPA senior official. 

He recalled the episode as an example of how EPA handled the press in the 1980s and early '90s. 

Managers may not have liked what their employees told reporters, but it was allowed -- and sometimes 

joked about. 

Elkins, now retired, emphasized that he was unaware of the current situation. But the Society of 

Environmental Journalists made its opinion clear in a statement today: EPA, it declared, is "one of the 

most closed, opaque agencies to the press." 

"Reporters are regularly required to submit written questions, even on the simplest daily stories," the 

group wrote. "Interview requests are rarely granted. Delays are routine. Replies, when they do come, 

are from press officers, not scientists or policymakers. Answers to requests made under the Freedom of 

Information Act also are routinely delayed." 

In an interview today, Joseph Davis, director of the SEJ Freedom of Information WatchDog Program, 

hypothesized that the problem stems from a shift of priorities in the press office. 

Press secretaries at EPA tend to have gotten their experience from the campaign trail, he said. While 20 

years ago the agency used the press to talk to the public about environmental issues that affected them, 

today it mainly tries to avoid pOlitical controversy. 

"The tactics are different now, and they say as little as possible," he said. "The main job of the press 

office -- as the press office seems to see it -- is to protect the White House from political attacks ... 

rather than inform the press and public." 

Indeed, EPA has found itself at the center of political attacks in recent years. Republicans, many of 

whom accuse the agency of overreach, pounce not only on what an administrator says, but also on 

comments from employees. 
219 


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Former Region 6 Administrator AI Armendariz faced criticism after a video surfaced of him comparing his 

enforcement strategy to that of the ancient Romans who used crucifixions to frighten their enemies. 

Most recently, Sen. David Vitter (R-La.) criticized Armendariz for an email that referred to "Gina's new 

air rules" -- referring to EPA air chief Gina McCarthy, now nominated as EPA administrator - as "icing on 

the cake" in the agency's work to limit pollution from oil and gas drilling. 

Vitter, the top Republican on the Environment and Public Works Committee, characterized Armendariz's 

words as indicative of an agency that seeks to "punish energy producers" (E&ENews PM, March 12). 

Vitter has kept up that line of attack and, perhaps ironically, criticized EPA today for its lack of 

transparency in responding to his requests for information on the agency's internal communication (~ 

related story). 

McCarthy appeared to address such bad press at a symposium that the Union of Concerned Scientists 

held in September on public access to government scientific information. At that event, McCarthy said 

EPA is operating in a political environment in which the agency's "credibility as a scientific entity was 

being questioned." 

She seemed to indicate that message control was preferable to the criticism that comes from employees 

freely speaking their opinions to reporters (Greenwire. Sept. 26, 2012). 

"It is the job of the agency to make sure that personalities don't get in the way of really discussing the 

science in a way that maintains the agency's credibility," McCarthy said at the time. "And that's the 

balance that we try to bring to it, is to just make sure we are really providing factual information, not a 

layer of assessment that is based on someone's personal interest or advocacy." 

But back when Elkins worked at the agency, employees sometimes complained to reporters about any 

agency decisions they didn't like. Managers were held to a different standard, according to Elkins; they 

were expected to speak for the agency, and thus had to be somewhat careful. 

Elkins held various positions during his 25 years at the agency, including acting assistant administrator of 

Air and Radiation. The rule of thumb he followed was to "write things and speak as if you're going to be 

on the front page of The Washington Post." He also quickly figured out that reporters who popped into 

his office could read backward. 

Of course, that was long ago, under a different political atmosphere, when EPA was not disparaged as it 

is today. Bill Ruckelshaus, who was the agency's founding administrator, also began his second term at 

the agency -- in 1983 -- with the "fishbowl memo," directing employees to be as open as possible with 

the public. 

In contrast, former EPA Administrator Lisa Jackson took over an agency that has generally shielded 

employees from speaking with the press. Jackson also rarely spoke to reporters beyond prepared 

statements and speeches. 

SEJ's Davis expressed hope that McCarthy, known for her outspokenness, would reverse that course. 
220 

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82183.086

But until then, an EPA spokeswoman declined to return a request for comment. 

An earlier version of this story did not include the name of the employee in the cardboard box or the EPA 

administrator at the time.