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New study shows EPA greenhouse gas regulation would raise electricity prices, impose massive new costs on manufacturers

This week, NERA Economic Consulting released an economic study on the impact of the Environmental Protection Agency’s (EPA) proposed new greenhouse gas regulation for existing power plants. The study was supported by groups from most sectors of the U.S. economy, including the American Farm Bureau Federation, American Fuel & Petrochemical Manufacturers, American Coalition for Clean Coal Electricity, National Mining Association, Association of American Railroads, Electric Reliability Coordinating Council and Consumer Energy Alliance.

NERA’s report confirms many of our fears about this new regulation: 43 states will experience double-digit increases in the price of electricity, and overall compliance costs exceed $360 billion. Some states could see price increases that exceed 20 percent. In addition, NERA found that all consumers will have to make major new upfront investments in order to reduce overall electricity demand from their power plants. For manufacturers, that is money that could often be better spent on product development.

Manufacturers are committed to addressing global climate change and have taken strong steps to reduce our emissions, promote energy efficiency and new technologies, and become more sustainable. Those steps are working. But we must also remember that many manufacturers are trade exposed and can rarely stomach major new costs (like higher energy prices) that make us less competitive against our international competitors who don’t play by the same environmental rules. Manufacturers urge EPA to revise its greenhouse gas rule for existing power plants to avoid the higher energy prices and other consequences predicted in NERA’s report.

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Recent approvals signal “new normal” for LNG exports

Last week, the Federal Energy Regulatory Commission (FERC) quietly issued a final environmental impact statement for Cheniere Energy’s Corpus Christi liquefied natural gas (LNG) export facility in Texas. It required Cheniere to agree to 104 special conditions to ensure that the environment is protected, and it allowed the project to move forward. Ten days prior, FERC issued a similar approval for Dominion’s Cove Point LNG export facility in Maryland. Like the Cheniere approval, FERC required Dominion to adhere to 79 special conditions to protect the environment. It will do that, and the project is moving forward.

No drama. No congressional hearings or presidential proclamations. It was all so…normal.

Kind of nice, isn’t it?

A couple things happened to get us to this point. The meritless arguments from “not in my back yard” opponents and law firms masquerading as environmental groups didn’t hold water with FERC. The protests petered out.  (Which, for what it’s worth is what happens when you protest FERC on a Sunday, when it is closed.) The Department of Energy finally figured how to get itself out of the way and stop causing unnecessary delays. Freed from these regulatory constraints, the environmental permitting process was allowed to work properly. And so it did.

So with an election just a few weeks away, and with it the hope that the 114th Congress can actually work together on energy policy, it’s reassuring to see that on LNG exports at least we have reached a “new normal” whereby companies wanting to take on these projects actually get a yes or no answer in a reasonable amount of time.  However, it’s worth reminding everyone that Keystone XL has been waiting on a final permit decision for six years, coal exports in the Pacific Northwest are fighting uphill to just get their permits heard, and countless other projects are caught in permit limbo. Getting infrastructure projects moving and getting shovels in the ground is a bipartisan priority. Let’s use this “new normal” on LNG as a stepping stone to even better things.

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Eastman Chemical, Merck, Janssen R&D LLC win EPA Energy Star CHP Award

NAM board members Eastman Chemical Company and Merck & Co., along with Pennsylvania manufacturer Janssen R&D LLC, won the Environmental Protection Agency’s ENERGY STAR Combined Heat and Power (CHP) Award for their highly efficient CHP systems, which greatly exceed the operating efficiency of similar conventional systems. CHP provides both electric power and thermal energy (heat) from a single fuel source, as opposed to conventional systems that expel the steam as waste heat. A CHP system captures the energy that would normally be waste heat and uses it to provide heating and cooling.

The NAM supports policies that encourage CHP systems, which promote energy efficiency while also reducing emissions. CHP and similar technologies have allowed manufacturers to reduce our environmental footprint while increasing our productivity. Congratulations to Eastman, Merck and Janssen on today’s award.

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Cove Point LNG terminal takes giant step forward

Yesterday, the Federal Energy Regulatory Commission (FERC) formally approved the siting and construction of Dominion’s Cove Point liquefied natural gas (LNG) export terminal in Maryland, a major milestone that puts the project in position to start construction. Cove Point is an existing LNG import facility that has been in operation for nearly 40 years; Dominion is now seeking to use the facility for LNG exports, a project that will cost $3.4 to $3.8 billion and create thousands of jobs. In May, FERC completed a two-year environmental assessment and concluded that the project could be built safely with no significant environmental impact. Yesterday’s FERC order includes 79 special conditions to ensure that the environmental impact will be mitigated.

The clock is now ticking on the Department of Energy (DOE) to issue a final license to export to non-FTA countries; the agency issued a conditional license in September 2013. DOE issued a final license to Sempra’s Cameron LNG terminal on September 10, 83 days after FERC had issued that project’s combined operating license.

Manufacturers are pleased to see the permitting process for Cove Point moving closer to its conclusion, and urge DOE to move quickly on a decision for a final license.

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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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