September 1, 2012

InEffective Protection Agency

A powerful regulator in disarray

NOTHING THAT THE U.S. ENVIRONMENTAL Protection Agency (EPA) has proposed since President Obama took office is more ambitious than its program to identify, and then control, industrial sources of greenhouse gases (GHGs). A year ago, the federal agency instituted reporting requirements for more than 10,000 American manufacturers, covering about 85% of the pollutants that contribute to global warming, EPA officials said. “The American public, and industry itself, will finally gain critically important knowledge and with this information we can determine how best to reduce those emissions,” said EPA Administrator Lisa Jackson in a September 2009 statement announcing the new reporting requirements.

The nation's smokestack industries responded grudgingly. The new reporting requirements were a prelude to a permitting system for new or expanded plants that emit 75,000 tons of carbon dioxide each year. That includes coal-fueled power plants (which generate a third of the nation's electricity), oil refineries and virtually every American steel and aluminum plant. At current rates, American steel plants emit 1 ton of CO2 for every ton of steel they produce; aluminum plants throw off about 9.7 tons of CO2 per finished ton of aluminum.

For steel, the new rules could mandate new technologies to capture and dispose of carbon emissions, set limits on the amount of GHGs that a manufacturing facility can emit and even shut down noncomplying plants. It's a “job-killing” juggernaut, says Thomas J. Gibson, CEO of the American Iron and Steel Institute, which represents most of the industry in the United States and Canada.

As with many EPA initiatives, however, actual implementation is a goal wrapped in uncertainty. There has been intense industry lobbying for reporting exemptions and modifications. And the White House, in an election season, has apparently discovered that listening a bit harder to the business community might pay off as campaign and fundraising fodder. The new EPA rules, in any case, are an entire year overdue, and there's no signal as to when they will materialize.

Conflict and Confusion

These days, even without the GHG program, EPA has more than enough conflict, confusion, waffling, White House meddling and mounting criticism from the left and right, to keep it under fire for the foreseeable future. The overtaxed federal regulatory agency, whose mission since 1970 has been to protect public health by shielding American air, water and soil from pollution, seems to have brought a lot of this on itself.

But because it stands starkly in the middle of so many issues crucial to public health and economic growth, it is a powerful magnet for criticism and confrontation. Certainly no other federal agency stands as exposed to political attack in this particularly contentious presidential season.

And no other federal agency has appeared to be in such disarray, with backtracking on controversial administrative decisions, ineptly drawn rules, intense confrontations with lawmakers on Capitol Hill, the resignation of one high-level EPA official because of intemperate language, one crushing defeat by the U.S. Supreme Court and conspicuous delay on overdue regulatory actions.

Republicans, including federal lawmakers and the Romney campaign, have crafted a narrative portraying EPA as a prime offender in the alleged “jobkilling,” anti-business crusade of President Obama. According to this account, the administration has used the spurious threat of global warming (U.S. Sen. James Inhofe of Oklahoma calls it “the greatest hoax,” which is the title of his recently published book) to unleash an “abusive” regulatory agency on struggling American businesses.

“It seems today that the three most feared letters to American job creators, which used to be IRS, today those letters are EPA,” U.S. Rep. Candice Miller, a Michigan Republican, asserted last year in supporting a bill to nullify new EPA rules that impose stricter pollution controls on industrial boilers. Added Romney in an interview late last year with Fox News: EPA “is a tool in the hands of the president to crush the private enterprise system.”

Under Fire from the Left As Well

At the same time, though, EPA is catching flak from environmental activists, who see the agency as too often ineffectual. They would like to see the agency act more decisively and summarily in dealing with an array of pollutants and polluters. The Center for Progressive Reform (CPR), a Washington, D.C.-based environmental think tank, has compiled a list of a dozen regulatory actions, nine of them involving EPA, on which the Obama administration has failed to meet its previously established target dates.

“It's political delay,” says CPR President Rena Steinzor. “The president has decided that the easiest way to appeal to independent voters is to bend over backwards not to look anti-business.” Certainly, politics was behind the Obama administration decision last September to move slowly on measures to reduce atmospheric ozone.

The EPA was on the verge of tightening the “ozone standard” beyond the limits set by the George W. Bush administration, when the White House intervened. President Obama said that the new rule would have placed too heavy a burden on industry and local governments during tough economic times. (Ozone is the “smog gas” that health experts say contributes to heart and lung ailments.) More stringent ozone standards would have required new, expensive emissions controls in many industries, particularly in the industrial Midwest where presidential battleground states like Iowa, Ohio and Wisconsin are located.

The president's decision angered even some of his most loyal allies, and it reportedly dismayed EPA Administrator Lisa Jackson, who, environmentalists contend, felt she had been undercut by her superiors.


Fracking and the Economy

Equally volatile and also affected by political pressure is the controversy that now surrounds hydraulic fracturing, or “fracking,” a technique for releasing natural gas trapped in rock shale deposits by injecting water and chemicals into drilling sites. As the country's energy future pivots more toward natural gas, this particular method used for its extraction has provoked screaming from both sides of the aisle, and from powerful business and environmental lobbies. At stake: This relatively inexpensive, but hardly risk-free technology could be an important engine driving America's economy and its march toward energy independence.

EPA jumped on the issue in 2010 because of claims that drillers were tainting water supplies and spewing methane into the air. The water complaints came from citizens in at least three states, who said their drinking water tasted of chemicals and that it was discolored after drillers extracted natural gas. Television footage of residents with flames and brown water erupting from their taps fed the controversy. The Obama administration is clearly sensitive to charges that its proposed fracking regulations could impede the bonanza of natural gas that has been discovered in underground shale formations. Both EPA and the Department of the Interior this year released new fracking rules that were criticized by environmentalists for being too lenient and by industry for being too harsh. EPA has now given producers until 2015, well after this election, to come up with effective methods for capturing escaping methane. In the meantime, drillers will be allowed to flare escaping gases.

But it fell to the Department of the Interior, with the White House whispering in its ear, to address the alleged groundwater contamination. Interior, with EPA backing, at first wanted gas producers to publicly list the chemicals they use before drilling begins. The producers claimed the content of their mixtures is proprietary. The federal department relented somewhat, requiring disclosure only after wells have been drilled, a move that will, at least temporarily, lower the cost of additional paperwork and speed up the drilling process.



But congressional proponents of unfettered fracking have accused the Obama administration of trying to bring it to a halt, using what they call “faulty science” to identify pollutants in water sources close to drilling sites. “There has never been a link established between water pollution and hydraulic fracturing,” says Matt Dempsey, Sen. Inhofe's press secretary.

The critics aren't so sure. They cite Pavillion, Wyoming, where groundwater has been found to contain traces of benzene and other chemicals from gas drillers. This, however, may be a special case involving either a faulty drill casing, or an unusual geological formation, with gas deposits unusually close to aquifers.

Too Much Loose Talk

In any case, the EPA seems to be doing everything it can to convince the public that it doesn't know what it's doing on fracking. It has issued at least three “stop drilling” orders based on groundwater analyses that it subsequently had to retract after the analyses proved faulty.

In the past two years, EPA has issued stop orders against gas drillers in Parker County, Texas, and Dimock, Pennsylvania, as well as Pavillion, and then rescinded the orders when further study showed either that alleged contaminants were not present in drinking water—at least, in sufficient quantities to be a health hazard—or the affected groundwater was probably contaminated before drillers started work. (While residents of the areas continue to complain about their water, EPA has initiated further studies.)

An even lower point for the agency came with the release, by Sen. Inhofe, of a videotaped statement by then-EPA Regional Administrator Al Armendariz, whose jurisdiction included major oil- and gas-producing states like Louisiana, Oklahoma and Texas.

In those 2010 remarks about enforcement techniques, Armendariz brashly compared the mission of regulators to methods of conquest by ancient Romans, who found “the first five guys they saw and they'd crucify them.” Someone taped the remarks, addressed to a community group in Texas, and posted them on YouTube. Inhofe, the ranking minority member of the Senate Environment and Public Works Committee, and an avowed EPA crucifier himself, cited Armendariz's words as proof that the Obama administration was pursuing an anti-business, anti-energy-industry campaign.

Armendariz, from whom Jackson and the White House quickly distanced themselves, resigned within days of the tape's release.

But that was followed by a video of another EPA regional administrator, Curt Spalding, talking about coal pollution rules. Comments that were, to put it mildly, inopportune. In March, in a speech at a Yale University forum, Spalding spoke approvingly of new EPA rules mandating coal-fired power plants to employ carbon capture technology to reduce GHG emissions.

“Just two days ago, [there was] the decision on greenhouse gas performance standards, and saying basically gas plants are the performance standard, which means if you want to build a coal plant you got a big problem,” Spalding told the audience.

“You can't imagine how tough that was,” he added. “Because you've got to remember that if you go to West Virginia, Pennsylvania, and all those places, you have coal communities who depend on coal. And to say that we just think those communities should just go away, we can't do that. But [Jackson] had to do what the law and policy suggested. And it's painful. It's painful every step of the way.”

Inhofe, to say the least, did not feel EPA's pain. He quickly seized on both Spalding's and Armendariz's statements to characterize the Obama administration as being callous toward up-against-it businesses and having a “crucifixion philosophy.”

Meanwhile, EPA critics got significant support from the U.S. Supreme Court earlier this year in a decision that may have blunted one of the agency's more heavyhanded enforcement tactics. It ruled in March that an Idaho couple had the right to judicial review of an EPA compliance order that stopped work on their lakeside home in 2007, on the grounds that they were building on wetlands. The agency was threatening the couple with fines of up to $75,000 a day while they appealed the order. EPA argued that judicial review would undermine its ability to promptly address water pollution issues. But the court ruled that Mike and Chantell Sackett had a right to challenge the agency order in court without risking those fines.

A few months after the decision, a group of 16 Republican senators demanded that EPA stop using its enforcement authority “to intimidate citizens into compliance.” EPA issues more than 1,000 administrative compliance orders a year and has played a part in making “abusive” one of the Republicans' main buzz words this political season.

An Agency Immersed in Politics

How did EPA, created by President Richard Nixon 42 years ago, get so immersed in politics? The new agency was born at the beginning of the modern environmental movement, when Earth Day was in its infancy and it was just starting to dawn on a new generation that the country faced serious, health-damaging environmental problems.

After more than four decades of monitoring and enforcing, though, EPA has grown into an imposing federal bureaucracy, with about 18,000 full-time employees and an annual budget of about $10 billion. That's up from a start-up budget in 1970 of about $1 billion and 4,000 staffers. From its inception, the agency was charged with the complicated task of setting standards for clean air and water, as well as punishing those who pollute.

It's here that the agency bumps up against American industry. There are usually significant costs to making the kinds of environmentally friendly production changes that EPA demands. When EPA issued a final rule last December on limiting mercury and other airborne pollutants from power-plant emissions, coal and utility industry critics said that the new rule would result in the loss of 1.4 million jobs—mostly related to the shutdown of coal-fired power plants and the resulting loss of demand for coal. (Supporters contend the rule would actually create 1.4 million green energy jobs, retrofitting plants and converting to renewable energy sources.)

When and if the new regulations on ozone—mostly the result of automobile emissions reacting with ultraviolet rays from the sun—go into effect, it could be at a cost to American industry and local governments of more than $19 billion, according to EPA's own estimates.

Costs like that are too much for businesses to bear during recessionary times, critics say. But absent from this side of the cost discussion is the notion that the price of industry's air and water contamination is now paid for by the public in increased medical bills, loss of work hours and lower productivity. Economists call these “externalities,” and they do not show up on corporate balance sheets.

But a Soft Record on Enforcement

EPA, under Lisa Jackson's direction, has become more aggressive on some fronts than it was during the Bush administration, which honed a reputation largely for indifference to environmental issues. Bush's EPA promulgated ozone and particulate matter standards were so weak that federal courts found they violated the Clean Air Act.

Jackson's EPA, on the other hand, has issued a number of rules and regulations that quickly offended their target industries. It has taken steps to finalize long-overdue regulations with regard to pollutants from industrial boilers and power plants, for example. It has also, in cooperation with the National Highway Traffic Safety Administration, set in place rules for reducing emissions from heavy-duty trucks (at an estimated savings for model years 2014 to 2018 of about 530 billion barrels of fuel and avoidance of some 270 million metric tons of GHGs). Under pressure from health advocates, EPA recently proposed strict limits on soot pollution from fossil fuels.

As an enforcer, though, EPA falls short of its reputation from Republican lawmakers as an “eco-Nazi” agency. The National Journal said in a May 24 article that it found under President George W. Bush the agency had a better enforcement record than under President Obama, collecting $216 million in fines and injunctive relief in 2007 from criminal cases brought by EPA, compared to only $37 million last year.

The Bush administration's EPA, in fact, extracted the highest civil penalties ever, a total of $2.3 billion against an Ohio and Virginia utility, for its air pollution violations. The Obama administration's biggest penalty to date: $15 million, against a BP refinery in Texas. (As Forward went to press, the main settlement against BP for the Deepwater Horizon blowout was still pending with the Justice Department. The company looks to be liable for between $4.5 billion and as much as $17.6 billion if there is a finding of negligence.)

But claims that the current administration is targeting oil and gas producers is also challenged by an Associated Press analysis in May of comparative enforcement data. In fact, AP found that enforcement actions have dropped 61% over the past decade. That corresponds with a reduction from 224 enforcement actions in 2002 to 87 last year, even though the number of producing wells increased during that period and the amount of “fracking” extractions snowballed.

Nova Southeastern University law professor Joel A. Mintz has done his own analysis of comparative enforcement between the Bush and Obama administrations and concluded: “The charges about EPA thugs coming in the middle of the night I would characterize, as kindly as I can, as political theater.”

Mintz testified at a House subcommittee in June, saying, “Rather than being uniquely overzealous or draconian, EPA enforcement in the Obama years has followed longstanding patterns, established at EPA well before 2009.” The “pattern,” he explained, is that the choices of companies (or industries) to be investi gated or charged by EPA are done at the “career staff level,” with political operatives having little or no effect on the process.

The President Steps In

In fact, some activists see a problem of inaction on environmental issues stemming mainly from the White House, not EPA. “The administration—the president, really—apparently either lacks the stomach to fight for the [environmental] safeguards or has made the political calculation that the fight is not worthwhile,” contends the Center for Progressive Reform's Steinzor and James Goodwin, a CPR policy analyst, in a whitepaper titled “Opportunity Wasted.”

They cite instances in which the president undercut EPA—the decision to delay the ozone regulations, for example, and an informal agreement, negotiated by White House staff, with the automobile industry on emissions standards—as ways that Obama “has repeatedly surrendered rhetorical ground to antiregulatory advocates.”

Obama's environmental critics say the White Housenegotiated agreement on vehicle emissions subverted the regulatory process, substituting “raw political wrangling” for “rational policymaking.” (Among other things, they negotiated less stringent requirements for pick-up trucks and a “review” of the new standards in 2018.)

Janice Nolen, assistant vice president of national policy and advocacy for the American Lung Association, also has a somewhat jaundiced view of the White House's environmental record. In May, her group won a court ruling that led to the release of new airborne soot requirements by EPA. Nolen wondered why it had necessitated court action to address a serious public health issue. The American Lung Association estimates that, when implemented, the new rules will prevent 35,700 premature deaths.

“It's true with every standard,” she said. “There is a reluctance to act. We did this with the Bush administration and with the Clinton administration. We always go through this process.”

Lisa Jackson, who declined to be interviewed for this article, has been understandably outspoken in defense of EPA actions.

“The fact is we can't create an economy that is built to last by putting our nation into a race to the bottom, a race for the weakest health protections and the most loopholes in our environmental laws,” she said in a speech in April, criticizing GOP proposals to kill or delay several regulations.

The national election this fall could produce a clearer sense of direction on environmental policy. GOP nominee Mitt Romney is strongly anti-regulatory, and a Republican-controlled Congress would probably seek to roll back many EPA regulations, like those placing restrictions on GHG emissions from petroleum refineries and power plants. And if President Obama is re-elected, he may feel free enough from political obligations to act more forthrightly in supporting EPA.

Either way, a measure of certainty from the powerful but erratic federal regulatory agency should offer corporate planners new clarity in their risk management deliberations and a more predictable business climate. And that, most CEOs will tell you, is a good thing.

Ed Newton is a Washington, D.C.-based writer, formerly of the L.A. Times, Newsday and the New York Post, as well as the former managing editor of New Times-Broward Palm Beach.