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Oregon Deals Blow to Exports by Denying Permit for Morrow Export Terminal Expansion

Yesterday, the Oregon Department of State Lands slapped a “closed for business” sign on future export projects along its coast. In what sadly comes as no surprise given Gov. Kitzhaber’s vocal opposition to the project, today the state agency responsible for issuing a state dock “fill” permit denied that permit for Ambre Energy’s Coyote Island coal export Terminal at the Port of Morrow.

For manufacturers, this is a disturbing precedent. Our goods are exported, and a great deal of them travel through ports in Oregon. Today, one state’s vendetta against coal may have inadvertently erected new barriers to the export of all manufactured products through the state. Moreover, it might be subjecting the nation to trade liability under WTO agreements, as set forth by a NAM report last December.

Manufacturers are obviously disappointed, and urge Oregon to work through whatever issues it needs to work through so that the Port of Morrow may be constructed.

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Time Will Tell If DOE Has Fixed The Problem

The Department of Energy (DOE), which has faced broad criticism over its slow handling of applications for a license to export liquefied natural gas (LNG), today finalized new procedures that it says will expedite the process. While we are glad that the DOE has responded to these criticisms proactively by taking steps to address the problem, only time will tell whether any of these procedural changes will actually work. We are disappointed that several of NAM’s proposed changes, which we believe would have strengthened the rule, were not accepted.

The bottom line for manufacturers is that this permitting process for energy exports should operate in a way that permits the market to function. If the DOE’s new procedures get us there, great. If not, then DOE should plan to hear a lot more from us.

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NAM in the Wall Street Journal: The EPA’s Latest Threat to Economic Growth

The clock continues to tick on EPA’s pending revisions to the National Ambient Air Quality Standards for ground-level ozone. The new rule, expected in December, could cost the economy at large $270 billion each year and put millions of jobs at risk, as noted in the analysis we recently released with NERA Economic Consulting. At these costs – which would total more than $2 trillion in lost GDP through 2040 – new ozone standards would be the most expensive rule ever imposed on the American public.

NAM President and CEO Jay Timmons took to the editorial pages of the Wall Street Journal this week to discuss the economic threat posed by new ozone standards in an OpEd titled “The EPA’s Latest Threat to Economic Growth.” In the piece, Mr. Timmons sheds light on the historic scale of this regulatory threat:

According to a new study for the National Association of Manufacturers by NERA Economic Consulting, the new ozone standard could cost Americans $270 billion annually, put millions of jobs at risk, and drastically increase energy prices for consumers and manufacturers. No single regulation has come close to rendering this level of self-inflicted and ultimately unnecessary economic pain. 

The piece goes on to note the troubling reality that – even among regulators at the EPA – it’s not clear how this new standard could even be met without widespread reduction in economic activity:

Remarkably, the EPA has only identified one-third of the controls and technologies that companies and state governments will need to implement to meet the new standard. The other two-thirds are what the agency refers to as “unknown controls.”

However, we do know that the new ozone standard could mean shutting down, scrapping, and modifying power plants, factories, heavy-duty vehicles, farm equipment, off-road vehicles and even passenger cars. Costs would be passed on to consumers, who would have thousands less to spend every year.

The manufacturing renaissance currently underway has helped bring thousands of jobs back to the United States and fuel our economic recovery. A new ozone rule at the levels EPA staff are currently recommending could undo this growth, slamming manufacturers and businesses of all stripes with a mandate so aggressive that even national parks will fail to comply. That’s why we’ll continue our effort throughout this fall to educate lawmakers and the public alike about the threat on the horizon, urging the EPA to allow the significant cuts made by the existing standard to be fully implemented before considering a tighter standard.

Read Mr. Timmons Op-Ed in the Wall Street Journal here, and check out our video describing ground-level ozone policies here.

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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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