BRIEF: Environmental and Energy Regulation

Background: In the last few decades, innovative technologies dramatically expanded the amount of available oil reserves in the United States. U.S. natural gas reserves have grown by 78 percent from 2004-2014 leading to an abundant growth of jobs in the energy sector. The energy industry, on its own, saved the country from a deeper and longer economic recession. From 2007-2012, total private sector job growth increased by only 1 percent. During that same period, job growth in the oil and gas industry, alone, grew by 40 percent. Importantly, increased energy supplies have driven down energy prices, saving households and businesses money.

Energy production is the key building block for economic growth and opportunity. But instead of allowing the industry to flourish, the federal government and its agencies, most notably the Environment Protection Agency (EPA), undermine the energy sector by imposing rules and regulations intentionally designed to limit its growth – for little to zero environmental benefit. Particularly telling is the Obama administration’s recent proposal to enact a $10-per-barrel tax on oil that would raise gas prices by 22 cents a gallon.

Major Regulations Impacting Businesses:

  • New Source Performance Standard: Finalized in early 2015 under the Clean Air Act (CAA), the EPA’s new source performance standard rule places an emission threshold of 1,000 pounds of carbon dioxide equivalent per megawatt hour for new coal-fired plants and new gas-fired plants. This rule effectively bans construction of all new coal-fired power plants since the average coal-fired plant emits nearly 1,800 pounds of carbon per megawatt hour.
  • Clean Power Plan: Finalized in the summer of 2015 under the (CAA), the Clean Power Plan (CPP) regulates existing power plants based on the greenhouse-gas-emissions rates of each state’s electricity mix. With a goal of reducing emissions by 30 percent below 2005 levels by 2030, the CPP will reduce economic growth, destroy jobs, and raise electricity prices.
  • Waters of the U.S. Rule: Issued in May of 2015, the EPA and the Army Corps of Engineers proposed a new rule defining “waters of the U.S.” under the Clean Water Act (CWA). Under this new rule, the federal government can regulate nearly every body of water, even man-made ditches. This rule is an egregious attack on property rights and will restrict the ability of businesses to expand and develop their own land.

Cost of Energy Regulation: From 2009-2015, the EPA issued 3,243 regulations, 33 of which are “major regulations” with a combined compliance cost exceeding $100 billion. Not only do excessive EPA regulations raise the cost of doing business, but they also raise energy prices, destroys jobs, and slow economic growth while doing almost nothing to prevent global warming.

If the Obama Administration fully implements its comprehensive set of rules to reduce global warming, we can expect the following impact on the U.S. economy by 2030:

  • An average employment shortfall of nearly 300,000 jobs,
  • A peak employment shortfall of more than 1 million jobs,
  • 500,000 jobs lost in manufacturing,
  • Destruction of more than 45 percent of coal-mining jobs,
  • An aggregate GDP loss of more than $2.5 trillion (inflation-adjusted), and
  • A total income loss of more than $7,000 per person (inflation-adjusted).

Solution: Accountable representatives to the American people, not federal bureaucrats, should determine whether or not major environmental regulations are implemented. Congress should pass the Regulations from the Executive in Need of Scrutiny (REINS) Act of 2015 (H.R. 427). This bill would require every major rule, defined as those with an economic effect of $100 million or more a year, to be approved by Congress before taking effect. Additionally, Congress should overturn the new source performance standard, the clean power plan, and the waters of the U.S. rule, prohibit the EPA and all other federal agencies from regulating greenhouse gas emissions, and establish sunset dates for all major environmental regulations.

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