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Most expensive regulation in history may be coming this December. Merry Christmas, America.

This morning, the National Association of Manufacturers (NAM) released a study by NERA Economic Consulting that examines the economic costs of a stricter new standard for ground-level ozone. The study, an executive summary, and individual results for each of the lower 48 states can be found on our website at http://www.nam.org/ozone.

We asked NERA to model an ozone standard set at 60 parts per billion (ppb), a level EPA is currently considering and the number environmental and health advocates are asking the EPA to arrive at. According to NERA, the costs of a regulation set at this level are very, very high: $270 billion in GDP, 2.9 million lost job-equivalents, and nearly $1,600 less for the average household to spend per year. But as troubling as those numbers are, what is equally if not more troubling is the reason for them: EPA has identified only a third of the controls needed to comply with a 60 ppb standard, and the remaining two-thirds are left to what the agency calls “unknown controls.”

Let me state that again: we don’t know what we would have to do to make two-thirds of the reductions (approximately 2.6 million tons of nitrogen oxides) in order to meet a 60 ppb standard. That’s a problem.

What NERA did was try to estimate what we would really have to do to get those 2.6 million tons out of the environment. They concluded that you’d have to start shutting down, scrapping or substantially modifying everything from power plants and factories to heavy-duty trucks, trains, farm equipment, off-road vehicles and even passenger cars. All of that comes at an extremely high cost.

So for the benefit of our members and the Administration, we asked NERA to produce what we believe is the most intellectually rigorous analysis that’s ever been done in the area of ozone. NERA took into account the unique characteristics of each state and did the analysis from the ground up. They identified which sectors would bear the compliance burdens in each state, and how. And they identified areas where data is lacking and provided guidance on what EPA can do to fill these gaps.

This study, we hope, will help guide EPA and others in the Administration to a reasonable end point. The existing ozone standard – the most stringent ozone standard ever – was just revised in 2008, and is still being implemented. It will drive substantial reductions in ozone levels for the next several years. We all want clean air and clean water, and manufacturers are committed to complying with the 2008 standard and doing our part.

Ozone levels are getting so low that even national parks like Yellowstone and Rocky Mountain would be in violation at the levels EPA is considering. As NERA’s study shows, we may have reached the point at which significant further reductions simply cannot be accomplished in any cost-effective manner.

We believe the current standard of 75 ppb needs to be on the table for EPA’s proposal in December. As this study shows, 60 ppb is simply not achievable and should be off the table.  We sent the report to EPA leadership this morning and offered to provide them an in-depth briefing to understand the study results and methodology. We hope they will take us up on our offer.

This regulation directly impacts every single one of our 12,000 members. We owe it to them to make sure EPA gets this regulation right.

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Manufacturers applaud bipartisan House passage of H.R. 6

This afternoon, the House passed H.R. 6, the Domestic Prosperity and Global Freedom Act, by a vote of 266-150. 46 Democrats joined 220 Republicans in supporting the NAM’s position and voting in favor of the bill.

The NAM supported H.R. 6 because it ensures that market forces, rather than bureaucratic inertia, govern international trade by providing a 30-day deadline for the DOE to approve or deny pending LNG export applications. It doesn’t prejudge outcomes or remove any legal obligations; it merely ensures that projects sink or swim on their merits, not because of regulatory delay at the DOE.

To view NAM’s Key Vote letter, click here. To view the roll call of the vote, click here.

 

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Cove Point LNG Export Terminal Receives Favorable Environmental Review, Clears Next Step on Way to Permit

This afternoon, the Federal Energy Regulatory Commission (FERC) issued its environmental assessment for Dominion’s Cove Point liquefied natural gas (LNG) export terminal, finding that the project can be completed with no significant impact on the environment. This means Cove Point has crossed what is effectively the second major hurdle in its quest for a permit. The Department of Energy (DOE) issued the project a license to export LNG last September.

Manufacturers support the construction of the Cove Point project. Dominion, the project’s sponsor, estimates that construction of the export project will cost between $3.4 billion and $3.8 billion and will create thousands of jobs. These are construction jobs but also jobs across the manufacturing supply chain. For instance, one of our members recently testified that if it is selected to supply natural gas liquefaction equipment for just one average-sized export terminal, it would support hundreds of jobs at its domestic facilities, and hundreds of jobs with its own suppliers in other communities around the U.S.

The Cove Point environmental assessment comes on the heels of this week’s major announcement by President Obama that he will take new steps to improve the federal permitting process in an effort to expedite new infrastructure projects.  The complicated regulatory process for permits and approvals has for years impeded the timely construction of our infrastructure, which as the President noted is “one of the best ways to create new jobs and spur our economy.”

Predictably, several professional “Not In My Back Yard” groups are already issuing statements in opposition to FERC’s review. This is a typical opposition strategy: cry foul about every step in the environmental review process in an effort to delay the project until the developers run out of money and walk away. Let’s hope it doesn’t work here. While delay and red tape is a major cost for any major infrastructure project, delay in the context of an export facility carries with it the risk of violating our international treaty obligations under World Trade Organization (WTO) agreements. In December, former WTO Appellate Body Chairman James Bacchus—the former “judge” of the WTO, who essentially wrote all the controlling case law—concluded in a report for NAM that unnecessary delays in the environmental review process for energy export projects would likely violate WTO trade rules.

Manufacturers welcome today’s news and urge FERC to complete the review process for Cove Point as quickly and efficiently as possible.

Ross Eisenberg is Vice President for Energy and Resources Policy for the National Association of Manufacturers

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Growing Manufacturers’ Opportunities in the Asia Pacific: Rising Asian Energy Demand A Major Opportunity for US Manufacturers

The Asian Development Bank predicts that by 2035, Asia will represent 56 percent of the world’s energy consumption, up from 33 percent in 2010. Asia already accounts for 67 percent of global coal consumption. Our own official energy forecaster, the U.S. Energy Information Administration, predicts that energy use in non-OECD Asia (led by China and India)will rise by 112 percent from 2010 to 2040. That is a massive amount of energy, one that will almost surely have to be met with an “all of the above” approach that includes fossil fuels, nuclear energy, renewables and energy efficiency.

President Obama spent this week in Asia and promoted trade among the U.S. and Asian nations. It certainly would be in the area of energy. He could start by handing out a few permits.

Thanks to an abundance of all types of energy and an advanced manufacturing sector that produces technologies that help produce and use energy cleaner and more efficiently, the U.S. is well-positioned to meet Asia’s growing energy demand. Commodities like coal, natural gas and crude oil are being sought by countries like China to meet population growth needs and Japan to replace power plants that were shut down in the wake of the 2011 nuclear accident at Fukushima Daiichi. In addition, as these countries embrace new energy sources and technologies to improve their efficiency and reduce their emissions, domestic manufacturers want to compete for this business.

But many of these sectors face regulatory hurdles that either add years to the permitting process to be able to export their products or face blanket barriers that prohibit exports altogether.  That seems counterintuitive.  I routinely have visits from Japanese manufacturers, and their request is the same each time: when do you think we will get U.S. coal, and when do you think we will get U.S. liquefied natural gas (LNG)?  It’s a legitimate question to ask one of their largest trading partners at a time when they need fuel to take the place of the power plants the government has shut down.  It’s also one I never have a good answer for, because the permitting process seems to be getting worse instead of better.

It’s a topic we expect came up quite a bit during the President’s recent trip. We hope the Administration does the right thing and protects manufacturers by giving us the opportunities to meet Asia’s growing energy demand.

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We wish we were making this up: Federal Government has no idea how it is managing environmental reviews

A new report on the Obama Administration admits a stunning lack of oversight of our nation’s bedrock environmental law, the National Environmental Policy Act (NEPA). NEPA is the law that requires all major projects — think highways, bridges, pipelines, transmission lines — to submit to a comprehensive review of their potential environmental impacts prior to construction. NEPA is often the largest, costliest, most time-consuming regulatory hurdle developers face before they can build. It also is a common target for abuse, as there are countless ways to throw a wrench in the process and make the review take even longer (see XL, Keystone). The longer the delay, the more likely the developer walks away. Project opponents don’t even need a “win” on NEPA to win; the delay is often enough.

The White House Council on Environmental Quality (CEQ) administers NEPA, and for the past few years has assured us that it is best suited to streamline the environmental review process. Today’s report shows CEQ hasn’t even been watching. Consider what the General Accountability Office (GAO) found:

  • The Administration does not have accurate data on the number or type of environmental reviews conducted each year.
  • The Administration does not know how much it spends on environmental reviews, or how much typical environmental reviews cost.
  • The Administration has no idea how long a typical NEPA review takes. GAO instead cites to a nonprofit group, the National Association of Environmental Professionals (NAEP). NAEP estimates that the average environmental impact statement (EIS) takes 4.6 years, the highest it’s ever been. NAEP also estimates that the time to complete an EIS increased by 34.2 days each year from 2000 through 2012.
  • The Administration thinks the majority of NEPA reviews are the shorter Environmental Assessments (EA) or Categorical Exclusions (CE), but it really doesn’t have any data.
  • No government-wide system exists to track NEPA litigation or its associated costs.
  • Delays sometimes occur because agencies assume they will be sued and spend more time making the review “litigation-proof.” Yet there is no evidence that these efforts actually improve the review document.

The White House opposed efforts to streamline NEPA in a bill passed by the House last month. Yet the President promised again this year that he would cut the red tape plaguing these reviews. How in heavens name is the Administration properly able to cure what ails NEPA when they’ve made no attempt whatsoever to diagnose the problem?

It’s time for Congress to step in here. Please.

 

 

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White House Releases Methane Strategy Document

The benefit to manufacturing from the U.S. energy boom is undeniable. In September, the NAM participated in a study that found the unconventional oil and gas value chain could support 3.9 million jobs by 2025. The study cautioned that with the wrong policies in place, much of this economic potential could be lost.

Today, the White House released a strategy document that contemplates new “policy tools” for the oil and gas sector.

As the suppliers of goods to service this sector and the beneficiaries of the low-cost energy it produces, manufacturers encourage the administration to work with industry to build on the progress that has already been made in lowering emissions as opposed to issuing additional, inflexible regulations.

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LNG exports take center stage in House, Senate

Today, both the House and Senate will hold committee hearings relating to liquefied natural gas (LNG) exports. Both hearings will focus on not only the economic impact but also the increasingly-relevant geopolitical aspects of exporting energy. The House Energy and Commerce Committee hearing will focus on a specific piece of legislation: H.R. 6, the Domestic Prosperity and Global Freedom Act. H.R. 6 would provide expedited processing of all new LNG export applications to the Department of Energy (DOE), and would approve all applications pending in the DOE’s queue as of March 6, 2014.

Like any major infrastructure project, LNG export terminals must run the gauntlet of a long, drawn-out permitting process. One of the earliest steps in the permitting process, a license from DOE, has become a regulatory choke point for LNG exports. Some applicants have been waiting years for a decision, with no end in sight. At DOE’s current pace, some of the applications in the queue could be waiting until 2016 or later before they can move to the next step in the process.  While the national interest determination requirement by DOE isn’t itself a problem–we support a process that is open, transparent and objective–the way it’s been carried out is creating a major barrier to free trade and open markets in the area of LNG exports. It also may be running afoul of our international obligations: a recent report by former World Trade Organization (WTO) Appellate Body Chairman James Bacchus, who is testifying before the House today, concluded that the delay by the DOE to issue licenses to export LNG to foreign countries likely constitutes, in and of itself, a violation of our international obligations under the WTO. (He reached the same conclusion for coal export permitting delays.) As the United States leads the world in enforcing global commitments to prevent export restrictions, such as those that China has placed on raw materials and rare earths to the detriment of U.S. industry and workers, we should not ourselves be in violation of those same commitments.

The NAM was founded over 100 years ago to promote open markets and free trade for American manufacturers. In the context of all exports, including those of energy, the NAM fundamentally supports open markets and promotes exports of all products. We believe the market, if allowed to work, will provide equilibrium.  For the past year, we’ve called on DOE to speed up its licensing process to provide applicants an up-or-down decision as expeditiously as possible. In recent weeks, the editorial boards of the Washington Post, Wall Street Journal, the New York Times and others have called for similar action.

As part of our commitment to exports and free trade, the NAM supports H.R. 6, the Domestic Prosperity and Global Freedom Act. H.R. 6 would put the United States in compliance with its own international obligations under the WTO, and would and help bolster U.S. efforts to eliminate other countries’ export restrictions. H.R. 6 does not impact the economic, environmental or safety studies that the Federal Energy Regulatory Commission (FERC) and other agencies are required to conduct, nor does it remove any other regulatory requirement. It would promote the development of infrastructure to allow the export of a product–a principle that manufacturers support.

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New Report Raises Major Concerns with EPA Scientific Process; Warrants “Time Out” on New Ozone Regulation

This morning, the Senate Environment and Public Works Committee released a report that uncovers a biased, politicized and troubling process for examining scientific evidence at the Environmental Protection Agency. The 67-page report, conducted by committee staff, finds that the key scientific building blocks of almost all recent major EPA regulations were arrived at through a process that routinely shut down scientific debate, ignored the advice of subject matter experts and consistently elevated the concerns of policy staff over those of the Agency’s own scientists. And the consequences of this flawed process could not be more startling: these scientific studies have been the backbone of almost every controversial (and expensive) new regulation issued by EPA in recent years, from Utility MACT to Boiler MACT to PM2.5 National Ambient Air Quality Standards (NAAQS).  These are the regulations that threaten to make manufacturing less competitive, and we’re now learning that EPA’s process for crafting them may have been fatally flawed.

The report comes less than two weeks before a meeting of EPA’s scientific advisory panel, the Clean Air Scientific Advisory Committee (CASAC), where CASAC members are set to debate and ultimately recommend what the level should be for new Ozone NAAQS. CASAC’s last Ozone recommendation resulted in a regulation that by EPA’s own calculations would cost $90 billion per year. That’s billion with a “b”.  And the report indicates that the same flawed scientific conclusions that poisoned the Utility MACT, Boiler MACT and PM2.5 NAAQS will be the drivers of a strict new Ozone standard.

EPA’s new Ozone NAAQS have the potential to be the most expensive regulations ever leveled against manufacturers. Done the wrong way, these regulations would strand massive amounts of capital, bringing U.S. manufacturing growth to a standstill. Manufacturers would become less competitive, and when that happens, we all lose.

With so much at stake, it is critical that the new Ozone regulations be done right. The Obama Administration has committed itself to using the most transparent, scientifically sound process for issuing new regulations. Today’s report makes clear that the system is broken. Manufacturers call on the Administration to pause the Ozone NAAQS review until it can properly evaluate the process by which scientific decisions are made and correct the flaws uncovered by today’s report.

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House to Vote on Bill to Improve EPA Greenhouse Gas Regulations

This week, the House will vote on H.R. 3826, the “Electricity Security and Affordability Act.” The NAM strongly supports this bill, which I testified in support of back in November, and which the Partnership for a Better Energy Future, a coalition of roughly 100 business and labor organizations, recently showed ts support for. H.R. 3826 would would place some reasonable limits on EPA’s new greenhouse gas (GHG) regulations and get us back to an all-of-the-above energy strategy.

Recently, the EPA proposed a GHG regulation for new power plants that would greatly limit the sources of energy available to power U.S. manufacturing. The first of several coming GHG regulations, this rule would effectively ban the construction of new coal-fired power plants in the United States by requiring them to be equipped with carbon capture and sequestration (CCS) systems. While CCS is a very promising technology, it is too expensive and is not in use at a single commercial-scale power plant in the country. To remain competitive in a global economy, manufacturers need an “all-of-the-above” energy strategy to ensure they have access to affordable and reliable energy.

If the EPA continues down this regulatory path, it will lead to even greater uncertainty and costs for U.S. manufacturers as we wait for the next similar regulations. It’s time for the EPA to consider a more reasonable path forward. H.R. 3826 would do that by drawing some clear lines around what EPA can and cannot do as it crafts these regulations.

To help ensure manufacturers have continued access to safe, reliable and low-cost energy, click here to contact your Representative and ask them to support H.R. 3826.

Click here to Take Action Now!

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President Makes Bold Promises on Energy; Must Balance Commitment to All-Of-The-Above Strategy with Reasonable Regulations

The President wisely made energy a focus of tonight’s State of the Union address. As well he should: energy is a bright spot in our economy, and with the right policies our competitive advantage on energy can only grow.

Some of the ideas proposed by the President tonight make a lot of sense. The unconventional oil and gas boom has unlocked millions of jobs–many of these in manufacturing in sectors like iron, steel, fertilizer, cement, chemicals and plastics–and the President appears ready to commit real resources to making sure this renaissance continues. He makes strong commitments to energy efficiency–initiatives like a $1 billion performance contracting initiative that comes on the heels of a very successful $2 billion program from 2011-2013 that created manufacturing jobs and saved energy. Perhaps most importantly, the President seems ready to finally make the kind of changes to the permitting process for infrastructure projects that will speed these projects up, get shovels in the ground, and reduce red tape.

That said, it’s hard to reconcile the broad, sweeping promises in speeches like this one with the aggressive–and often conflicting–regulatory agenda put into place by the Administration. Regulations like the greenhouse gas standards praised by the President, which threaten to phase out many of the fuels driving our energy renaissance. Or Ozone, a regulation that by the Administration’s own estimate would cost as much as $90 billion per year. Or the calcified permitting process that continues to plague the Keystone XL pipeline, energy exports and countless energy and infrastructure projects across the country.

And so much will depend on execution. The President has promised to fix permitting and red tape before, but many of the reforms fell short. He’s repeatedly called for an all-of-the-above policy, but in practice it’s really been some-of-the-above. Coal, nuclear, hydropower and others deserve to be part of the equation, alongside oil, gas, renewables and energy efficiency. Yet many of these words were not uttered in tonight’s speech.

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