Energy

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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The Manufacturing & Mining Link

Today, there is no question that manufacturing in the United States is making a comeback.

But one overlooked—and at risk—driver of this resurgence is the availability and stability of domestic mineral resources. Mined mineral resources are raw materials that support nearly every sector within the manufacturing industry, from the automotive to construction to defense and high-technology. Each sector is intrinsically dependent on minerals and by extension, the mining sector.

In a newly released study by the National Mining Association, U.S. Mines to Market, SNL Metals & Mining (SNL) looks at U.S. mined commodities’ domestic supply chains and the contribution of U.S. minerals to the manufacturing sector, identifying the risks faced by high-tech, energy, medical, national defense and automotive industries. Most notably, the study points out that mismatch exists between the domestic mineral supply and demand because of an inefficient permitting system that can delay the development of new mines by a decade or more.

The nature of manufacturing is that we rely on raw materials to create products. Often times the raw materials we need are not produced in this country and these sources can become unreliable. The inability to have access to a reliable source of raw materials is an impediment and a threat to continued and sustained U.S. economic growth. For instance, many manufacturers report being concerned with a dire need for infrastructure investment and spending in the U.S. and believe that an unstable supply chain of raw materials is “impairing reliability and increasing the cost of goods movement.”

As the U.S. manufacturing sector continues to grow, the importance of a secure and reliable domestic raw material supply has never been clearer – and with it, the need for a more efficient permitting process for new mineral mines that supports the country’s manufacturing industries. If we allow U.S. mining to perform to its full potential, our nation can enjoy enormous growth and job-creation opportunities, support the domestic manufacturing revival and attract global investment dollars.

Learn more at MineralsMakeLife.org

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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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Happy Anniversary Keystone: Marking Six years of Missed Opportunity

Today we mark the sixth anniversary of TransCanada’s first application seeking a Presidential permit to build the Keystone XL pipeline from Canada to the United States. For most of the past six years this project has been with the administration awaiting final approval, with five different environmental reviews conducted and thousands of pages of reports and public comments collected.

Much has happened since the initial permit application was filed in 2008: more than 10,000 miles of oil and natural gas pipeline has been built in the U.S.; Fidel Castro stepped down as President of Cuba; two new countries were created Kosovo and South Sudan; four Olympic games have been held (Vancouver, Beijing, London and Sochi); and Apple released the IPhone 3, 4, 5 and now 6.

For further context on how this delay stacks up in the history books, just look at the array of larger and more complex projects built in a shorter time frame. For example, the 800 mile long Trans Alaska pipeline took just over two years to build. The iconic Hoover Dam was erected in just five years, the Empire State Building in just over one year, and San Francisco’s Golden Gate Bridge in less than five years.

The debate over Keystone is not just about ensuring we have a steady source of energy from a reliable trading partner; it’s also about jobs and the economy. The State Department says the project will create 42,000 jobs and add $3.4 billion to the GDP, jobs and economic growth that manufacturers and other workers desperately need.

Although there’s not much to celebrate, the NAM is marking this occasion with the release of a new video highlighting the facts about Keystone:


 

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Ozone Education Campaign Continues With State Ad Campaign

By now, you may be familiar with the NAM’s efforts to bring attention to the severe economic impact that the EPA’s pending revisions to the National Ambient Air Quality Standards (NAAQS) for ground-level ozone would have not only on manufacturers, but on the overall economic health of our country as well.  As part of this effort, this week we launched radio and digital ads in a trio of critical states – Colorado, Kentucky, and North Carolina – to shed additional light on the economic impact these regulations could have and to ensure that policymakers are paying attention.

Our recent analysis of the pending revisions found that the U.S. stands to lose trillions of dollars and potentially millions of jobs at the hands of the new standard, making it potentially the most expensive regulation ever imposed on the American public. NAM President and CEO Jay Timmons put a finer point on the matter last week in the editorial pages of the Wall Street Journal, writing that “no single regulation has come close to rendering this level of self-inflicted and ultimately unnecessary economic pain.”

The national numbers are massive. And in the states, the economic toll is no less staggering – a point that our new advertising campaign hopes to illuminate. In Colorado, for instance, businesses could face $11 billion in compliance costs. North Carolina could see its economic output drop by $150 billion and could shed 150,000 job equivalents every year. And the study projects that Kentuckians could say goodbye to $32 billion in economic activity and more than 30,000 job equivalents.

The outlook is no better in other states, where pending revisions to the ozone standard threaten to similarly sap economic activity and drive away jobs.

Manufacturers are ready to keep providing the economic fuel that has helped to put our economy back on track. But we need a sound regulatory landscape in order to do that. This week’s ads underscore this fact. And the NAM will work throughout the coming months to make sure that policymakers understand what the EPA’s aggressive new ozone standards could mean for the American economy.

To see our new online ads, or to listen to the radio ads, click here. And be sure to keep tabs on our ongoing education campaign at www.NAM.org/ozone.

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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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