At an energy conference a few weeks ago, some utility executives shared with me the paralyzing sense of uncertainty they now feel amid today's regulatory climate. They are not alone.
Indeed, manufacturers in a host of industries -- steel, chemicals, plastics, petroleum, natural gas, lumber, rubber, wood and paper, to name a few -- now find themselves suspended in what is, effectively, a state of limbo. The short-term reason for this is EPA's confusing actions this year related to finalization of its Maximum Achievable Control Technology (MACT) air-pollution rules, which stand to have far-reaching consequences.
More broadly, though, businesses are growing increasingly concerned that the federal government is shifting to the kind of command-and-control regulatory regime we saw in the 1970s and early '80s.
The EPA released its "final" MACT standards for boilers and incinerators in February but simultaneously notified industry that it would reconsider some of those rules thanks to a massive backlash that occurred during the comment phase last year. (By some estimates, the boiler MACT rule alone would have cost manufacturers more than $14 billion in capital and threatened 224,000 jobs.)
More recently, EPA set October as the deadline for the reconsideration period and announced it will issue final standards by April 2012. These rules will affect more than 200,000 boilers and process heaters operated, not just by large-scale manufacturers, but by small businesses, universities, hospitals, municipalities and others.
Meanwhile, the regulatory limbo created by EPA's inability to establish clear, fair standards carries costs of its own.
"The uncertainty caused by the EPA's excessive regulatory behavior has resulted in construction delays, scaled-back projects and even the termination of some projects throughout the nation," writes Rep. Pete Olson (R-Texas), in a post for The Hill's Congress Blog. "Not only does this reduce manufacturing growth and the supply of energy, but it also destroys jobs."
Under the 1990 amendments to the Clean Air Act, the EPA has a legal responsibility to establish MACT standards for major sources of air pollution. Nobody disputes this. But from the beginning, EPA's rules have been vague, with unclear floors and ceilings and a confusing, workplace-based approach that meant regulations for one vinyl chloride plant in New Jersey could differ significantly from another in Louisiana. This made the rules vulnerable to successful challenges from the likes of The Sierra Club and The National Resources Defense Council.
And yet the regulated industries themselves have been doing a great job on air pollution, which has dropped impressively since 1990. EPA's confusing revisions, by comparison, were no help. In some cases, they led to a kind of Whac-a-Mole game: Manufacturers realized that following the regulations on, say, carbon monoxide, would inevitably lead to illegally high levels of nitrogen. Attacking nitrogen would, in turn, cause sulfur dioxide to skyrocket. And consider what is now happening in the vinyl chloride industry. The stringent MACT standard for this sector likely cannot be met with existing technology even at an exorbitant cost, experts say.
Indeed, some believe it would put every vinyl chloride plant in the United States out of business. Bear in mind, there are only five or six left. One of them is brand new and was better than state-of-the-art under the previous regulations. As companies operate in today's limbo environment, meanwhile, they are at risk of being slapped with penalties or lawsuits from environmentalists and/or the EPA. No doubt some U.S. executives are brushing up on their Mandarin and contemplating moving their factories to China.
The blame here does not solely lie with the EPA. Environmentalists have pushed the limit on the 1990 Clean Air Act amendments, and the lackluster economy continues to create existential challenges for everyone. Amid widespread fears about global warming, moreover, experts now believe Congress will try to clamp down even further by ordering EPA to expand its mandate.
The MACT fiasco illustrates the critical need for legislators to do precisely the opposite: Congress needs to stop leaving the nitty-gritty details of the legislation it passes to unelected regulators. Lawmakers must write laws with clear direction and informed industry guidance rather than try to dodge voters on the environment, healthcare, the economy-you name it-by hiding behind unelected bureaucrats.
In the meantime, all manufacturers can do is make their voices heard on the MACT issue before these ever-shifting rules finally do become the law of the land.
Veteran environmental attorney James A. Kosch is a Newark, NJ-based shareholder in LeClairRyan's Tort Defense Practice, and a director of the New Jersey State Bar Association's environmental law section.
