Proposed EPA Rules Would Hurt Manufacturers

Nov 30, 2012

Employees assemble Lunch Blox food containers to packaged on a production line at the Newell Rubbermaid Inc. factory in Mogadore, OH. Photographer: Ty Wright/Bloomberg.

A new report from the National Association of Manufactures (NAM) warns that a number of proposed EPA regulations threaten millions of jobs and would slam American manufacturers with billions of dollars in new costs.

Here are two key findings from this report examining six proposed rules*:

  • The annual compliance costs for all six regulations range from $36 billion to $111.2 billion (by EPA estimates) and from $63.2 billion to $138.2 billion (by industry estimates).
  • The total capital expenditures for all six regulations range from $174.6 billion to $539.3 billion (by EPA estimates) and from $404.5 billion to $884.5 billion (by industry estimates).

For manufacturers, a great deal of these added costs would come from higher electricity costs. The report reads,

As consumers of more than 28 percent of electricity production, manufacturers in the United States would see production costs rise. That would lead to higher prices of manufactured goods and services, resulting in lost sales at home and abroad, which, subsequently, would encourage layoffs and discourage new hiring and investment, render exports less competitive and ultimately suppress U.S. GDP.

The report questions how EPA estimated the benefits of these proposed rules. Take Utility MACT for example. The purpose of the “Blackout Rule” that has forced power plants in a number of states to shut down is to reduce mercury emissions. EPA estimates that the benefits from doing that range from $500,000 to $6 million. However, that's a tiny percentage of the $33 billion to $90 billion in total annual benefits EPA claims will come from the rule. The agency pulls off this interesting counting maneuver by including so-called “co-benefits” from reductions in particulate matter which is already regulated under other rules. EPA took the same co-benefits approach in estimating the benefits from Boiler MACT. 

EPA's questionable use of co-benefits is the centerpiece of a legal brief challenging Utility MACT filed with the U.S. Court of Appeals, Washington, DC Circuit by the U.S. Chamber's National Chamber Litigation Center.

By the way, the report finds that the co-benefits calculated by EPA come from “a single study on adult premature deaths, which are projected out from two medical studies with limited data samples.”

The NAM report notes that  ”manufacturing-heavy states, such as Indiana, Michigan, Missouri, Pennsylvania, Ohio and Wisconsin, will pay disproportionately more in compliance costs and initial capital expenditures than other states as a result of these regulations.” Here are the state-by-state breakdowns of the annual costs from Utility MACT, Boiler MACT and Coal Combustion Residuals rules.

In a statement, NAM President and CEO Jay Timmons said, “It is already 20 percent more expensive to manufacture in the United States compared to our largest trading partners, and more regulations from Washington are only digging the hole deeper.”

As The Daily Caller reports, manufacturers should be ready for a slew of delayed new regulations:

More than 80 percent of “regulatory actions” currently under review by the Obama administration have been held over typical review time and many regulations have been held past their scheduled release dates.

“It is hard to say why this administration has been so slow to publish some rules but not others, though there is plenty to speculate,” Sam Batkins, Director of Regulatory Policy at the American Action Forum and the author of the study, told The Daily Caller News Foundation in an email.

*Utility MACT, Boiler MACT, Coal Combustion Residuals Rule, Cross-State Air Pollution Rule, Cooling Water Intake Structures, and the Ozone Rule.

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