Jean Chemnick

U.S. EPA's fleet of new air and water proposals seeks to wrest power from states and subject an ever-broader swath of the U.S. economy to burdensome regulation, state officials and economists told a House Oversight and Government Reform Committee subpanel yesterday.

The witnesses told the Interior Subcommittee chaired by Rep. Cynthia Lummis (R-Wyo.) that EPA's proposed Clean Power Plan, ozone revision and "Waters of the United States" rules would each have the effect of trampling established state authorities and costing exponentially more than the agency has predicted.

"This overreach will impact families and businesses across the country," Lummis said at the start of the hearing.

The subpanel heard from two state attorneys general currently suing to stop the rules from going into effect and two economists who have led industry-backed studies that assign EPA's rules much higher costs than the agency does in its regulatory impact documents.

The Democratic invitee was Susan Tierney of the Boston-based Analysis Group, a former regulator who has said EPA's rules -- especially its draft for carbon emissions from existing power plants -- will be far easier to implement than many states worry.

The panel's discussion explored everything from EPA's legal basis for its three highest-profile proposals to the science of climate change.

"I love science. By the way, I'm a dentist," said Rep. Paul Gosar (R-Ariz.) before asking Tierney, who holds a doctorate in regional planning, whether CO2 can be considered a pollutant given its role in photosynthesis.

But the bulk of the back and forth with the attorneys general was over their fears that EPA's restrictions would scuttle economic growth in their states and the legal basis for those rules.

Montana Attorney General Tim Fox (R) discussed his state's opposition to the Obama administration's regulatory proposal aimed at clearing up years of confusion over the scope of the Clean Water Act. The proposed "Waters of the United States" rule would increase the number of streams and wetlands that currently receive automatic protection under the Clean Water Act.

The agency said it would not expand the act beyond its statutory boundaries. But Fox countered that Montana farmers and ranchers had become concerned that a field with water in it could come to be classified as "navigable waters" and regulated accordingly.

Arkansas Attorney General Leslie Rutledge (R) called EPA's recent regulatory activities "a perfect storm of federal regulations that will result in economic disaster for Arkansas."

"The cumulative effect cannot be overstated," she said.

Rutledge joined 11 other attorneys general in intervening in a lawsuit brought by Murray Energy Corp. to prevent EPA's Clean Power Plan from going into effect. Her state faces one of the tougher compliance targets in the nation under the rule, which she said would be particularly destructive given Arkansas' status as one of the lowest-income states.

Ted Thomas, a regulator for the Arkansas Public Service Commission, said at last week's winter meeting of the National Association of Regulatory Utility Commissioners that his state was eyeing a very steep curve up to its eventual 44-percent-by-2030 goal under the rule. Half of his service territories would likely see their rates rise by a quarter, he said.

"There's a gulf between what is modeled by EPA in its regulatory impact assessment and what I'm hearing from folks I talk to," he said. "Part of that gulf is in stranded costs."

New investments like Southwestern Electric Power Co.'s John W. Turk Coal Plant might be taken offline years earlier than initially planned -- and while ratepayers are still footing the bill for their construction, he said.

At the hearing, two senior staff members from Washington, D.C.-based NERA Economic Consulting, Anne Smith and David Harrison, explained their research -- backed by prominent fossil fuel trade groups -- showing that EPA's draft rules would levy costs exponentially larger than those found in their regulatory impact analyses.

Harrison testified that EPA's method of conducting cost-benefit assessments is flawed.

EPA released a regulatory impact analysis together with the proposal that estimated it would cost between $5.4 billion and $7.4 billion annually in compliance costs in 2020, and $7.3 billion to $8.8 billion in 2030, with states that opt for a regional approach seeing savings. These costs would bring climate-change-avoidance and health-related benefits far in excess of that price tag -- ranging between $20 billion and $41 billion for 2020 and $34 billion to $66 billion for 2030, according to the agency.

But Harrison said that is misleading. The Clean Power Plan would cost $180 billion or more through 2030, and the U.S. economy would not see benefits catch up with costs for a century or longer, he said.

Smith added that benefit estimates for both the Clean Power Plan and the ozone standard -- which has the potential to be even more expensive -- rest on reductions in particulate matter, not the emissions they target.

EPA routinely relies, she said, on co-benefits to give the illusion that rules pay for their compliance costs. "EPA has a co-benefits habit," she charged.

For carbon, EPA looks at global benefits of avoided warming that will accrue to all countries, which it compares with costs borne by the United States alone, she said.

But Tierney said studies like the NERA analyses ignore the level of flexibility EPA has built into its rules, especially the Clean Power Plan. They also assume that regulators, lawmakers and others responsible for implementation will stand idly by while the U.S. power grid heads for collapse, she said.

"There is no historical basis for that set of assumptions," she said.

Supporters of the "Waters of the United States" rule, meanwhile, are attempting to draw attention to the powerful interests opposing it.

Environment America released a report yesterday that lists the 10 companies reporting the highest toxic discharges into rivers and streams, and the amount of money they spent lobbying last year.

"It's clear that our nation's polluters have deep pockets, but hundreds of thousands of Americans have raised their voices in support of doing more to protect our waterways, from the Chesapeake Bay to Puget Sound," Ally Fields, clean water advocate at Environment America, said in a statement. "It's time for Congress to listen to citizens, not the polluters, and let the EPA finish the job to protect our waterways."