The Reality of Regulatory Costs

October 26, 2016

In a Facebook interview last week, EPA Administrator Gina McCarthy acknowledged the obvious: her support for the environmental left’s “keep it in the ground” policy (“I think we share the same goal”), that coal state economies are suffering (they’re “in trouble” she allowed) and EPA’s regulations likely contributed (they may “steepen the curve” of coal’s fall).
Then, like a formula one driver veering from a collision, she quickly dodged responsibility for this “trouble” by blaming market competition. “Frankly, the coal industry has been going downhill since the 1980s,” she told Mashable.

Frankly, this is nonsense. Coal production rose steadily since 1980 until 2009.  Production in 1980 was 830 million tons and in 2008 it was 1.2 billion tons.  Coal employment rose steadily from 2000 through 2011, reaching a level that had not been seen since 1994.  Before the administration decided to destroy it, coal’s share of the nation’s power generation market hit 51 percent – higher by far than competing fuels. It broke records for coal exports and fueled more high-wage employment, supporting hundreds of thousands of jobs paying an average of $84,000 per year with great benefits.

But beginning with the MATS rule in 2011, coal lost half of its entire coal fleet, sparking a gradual decline in market share that accelerated thanks to a regulatory barrage capped by the Clean Power Plan, which EIA estimates will shut down another 56 coal plants. A recent study by the King University business school showed that natural gas had only a modest effect on coal production compared to EPA’s regulations that destroyed five times as much coal demand. Earlier, a Duke University study found less than 10 percent of the coal fleet was threatened by natural gas before EPA’s regulations kicked in.

In exchange for leaving the nation with a less diverse energy supply and global CO2 levels virtually unchanged, EPA’s climate regulations leave coal communities with the loss of 68,000 jobs with many more to come. The resulting “trouble” is serious enough that her own administration proposed a $30 billion aid package to repair the damage.

In short, coal’s distress is not the result of market competition. The MATS rule, the Clean Power Plan, renewable fuel standards, New Source Performance Standards, the retroactive vetoes of mining permits and hefty federal subsidies for competing fuels are not market conditions. They are government decisions.
Coincidentally, the same week the administrator was denying the cost of her regulations, a federal judge sought to clarify them.  In a summary judgement against EPA last week, Judge John Preston Bailey berated EPA for ignoring its legal obligation to weigh regulatory costs. “EPA cannot redefine statutes to avoid complying with them,” he said. “Nor can EPA render them superfluous or contrary to their original purpose by simply defining them to be.”

The administrator has claimed she can’t find “one single bit of evidence” of job losses stemming from her climate change regulations. Maybe she hasn’t bothered to look.

Point is, if we’re going to agree on enduring environmental solutions, we need an honest discussion about the costs as well as the science.