PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

The EPA’s Plan to Kill Coal and More

By at 4 June, 2014, 1:55 pm

Center for Regulatory Studies

by Raymond J. Keating-

On Monday, June 1, President Obama’s Environmental Protection Agency (EPA) announced its regulatory plan for existing power plants mandating a 30 percent reduction in carbon emissions by 2030 from 2005 levels.

The EPA's announced  regulatory plan for existing power plants is far reaching it is impact. Electricity costs will dramatically rise and our nation will lose power generation when scores of power plants are taken offline to comply with the EPA's harsh and unrealistic mandate. Moreover, small businesses in the industry are goners.

The EPA’s regulatory plan for existing power plants will be far reaching it is impact. Electricity costs will dramatically increase, and our nation will lose power generation when scores of power plants are taken offline to comply with the EPA’s harsh and unrealistic mandate. Moreover, small businesses in the coal industry are goners.

In a June 2 article, The New York Times, hardly a bastion of pro-business, pro-free-market bias, reported: “Experts say it could close hundreds of power plants.”

Indeed, the very existence of coal-fired electricity generation is placed in real and serious peril under these proposed regulations. The implications are numerous and grave. Consider the following:

Real costs for the economy. It was noted in a June 3 Wall Street Journal editorial, “In eight short years this Administration will have accomplished the largest transformation of the U.S. power system since the 1930s. As recently as 2007, cheap coal accounted for more than half of U.S. net generation but has now plunged to 37% and is trending down. Some of this is due to the natural gas boom, but the EPA rule will finish the job.”

Indeed, to the extent that this shift in resources for electricity generation came about due to market innovation and efficiencies – for example, the unlocking of natural gas resources in shale rock via advancements in hydraulic fracturing and horizontal drilling – that’s a net gain for the economy. But to the degree that government regulations, mandates and threats force a shift in resource usage, there are real costs for the economy, for consumers, for businesses and for workers.

The EPA is not about “flexibility.” In a June 2 op-ed, U.S. Senators John Barrasso (R-WY) and Heidi Heitkamp (D-ND) pointed out that much talked about “flexibility” in this EPA regulatory is not at all flexible: “The administration repeatedly promised to deliver regulatory certainty and give states ‘flexibility’ if they meet the tough new standards. The fact is that states have to present their plans to the Environmental Protection Agency for final approval. If the EPA doesn’t approve the state plan, the agency could impose its requirements on the state.” In addition, they made clear the negative consequences – that is, the very real costs – of such a regulatory escapade: “Coal-fired power plants will be especially hard hit, disproportionately hurting coal-producing states like Wyoming, North Dakota, Pennsylvania and Montana. When excessive Washington red tape closes a power plant or a coal mine in a small community, those jobs aren’t the only ones to go. The lost revenue base hurts public schools, police and busing services for seniors who can’t drive. Teachers, laborers and doctors move away, looking for a better chance somewhere else. Small businesses don’t have enough customers, so they shut down—the town withers away.”

America will lose power generation capacity. In a USA Today op-ed, Hal Quinn, president and CEO of the National Mining Association, spelled out a variety of costs: “The EPA’s new, overzealous greenhouse gas regulations will force the closure of many of the existing coal-based power plants that currently generate 40% of the nation’s electricity — at the very time that advanced technologies are making America’s fleet of coal-generation plants cleaner and more efficient… States that rely on coal for 50% or more of their electricity generation enjoy 30% lower electricity costs, and thus also tend to be home to the nation’s strongest manufacturing base. These states will be at the losing end of what is essentially a cap-and-trade system that EPA is proposing. The model EPA touts is California, where electricity costs are 45% higher than the national average.”

The coal industry is all about small business and many will suffer. As SBE Council has noted before, this is a direct small business issue. The coal and power industries are largely populated by small and midsize businesses. For example, consider that 60 percent of the employer firms in the coal mining industry had fewer than 20 workers in 2011 (the latest U.S. Census Bureau data), and 94 percent had less than 500 employees. Also, in the electric power generation, transmission and distribution industry, 40 percent of employer firms had fewer than 20 workers, and 93 percent less than 500 employees.

Finally, it is critical to understand that this is not just about coal, but all carbon-based energy. In that June 3 editorial, the Journal observed, “Now the agency is taking a ‘systems-based approach’ that usurps state responsibilities in order to move electricity production away first from coal and later natural gas.” And it was pointed out in another editorial that “the ultimate green goal is to replace all fossil fuels with renewables, no matter the economic cost.”

With this massive regulatory intrusion into energy – on top of previous regulations, such as those covering emissions for new power plants – it is becoming clear that the economy, small businesses, jobs and consumers are an after thought for President Obama. Rather, he is pursuing accolades from a radical green movement, no matter the costs for the rest of us.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s new book published by SBE Council is titled Unleashing Small Business Through IP: Protecting Intellectual Property, Driving Entrepreneurship and available from Amazon.com here.

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