EPA’s Ozone Regulation: What ‘Non-Attainment’ Really Means

By at 21 August, 2014, 6:05 pm

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By Karen Kerrigan-

When EPA proposes or promulgates new regulations, it often deliberately employs terms, some taken directly from statutes, which obfuscate rather than clarify what the impact of its regulations will have on small businesses and the economy. A case in point is EPA’s soon-to-be released proposal on ozone.

EPA’s pending ozone standard will likely mean hundreds of counties and cities will become “non-attainment areas.” That’s a sophisticated term straight from the Clean Air Act. It’s useful for EPA because few outside the Beltway know what “non-attainment” means. Rarely does EPA provide the public with a detailed explanation.

From an economic point-of-view, non-attainment is bad and it will only get worse for small businesses across America. That’s the conclusion from a new study by NERA Economic Consulting for the National Association of Manufacturers, which examined the costs of EPA’s potential ozone standard. NERA estimates a standard set at 60 parts per billion, a level EPA is actively considering, will amount to $270 billion in lost economic output every year from 2017 to 2040.The study explains why the costs will be so high:

“Unlike regulations that target specific sectors, an ozone standard would directly affect virtually every sector of the economy, because ozone precursors (oxides of nitrogen, or NOX, and many types of volatile organic compounds, or VOCs) are emitted by a wide range of stationary, mobile, and area sources.”

NERA also explains what “non-attainment” means in practical terms.  New businesses must obtain air permits to operate. In order to do so, state officials must find “offsets” for those emissions from other sources, which is extremely difficult, especially as new air quality standards become more stringent. As NERA stated:

“[B]eing in nonattainment of a NAAQS triggers more regulatory burdens than just reducing emissions to achieve attainment. A number of regulatory programs are also imposed on nonattainment areas. Significant among these is a requirement that any economic entity that wishes to obtain a permit to establish a new facility that will emit the pollutant(s) of concern in a nonattainment area must first find an offsetting reduction of those same emissions from another facility that is exiting the area, or has voluntarily reduced its own emissions below its permitted level. Markets for these “offsets” often develop, but offsets can be exceedingly costly or difficult to find if there are few existing emitting facilities in the area to create a supply.”

The study also points out that non-attainment is not merely an urban phenomenon, created by emissions from cars and manufacturing facilities, but one increasingly facing rural areas.  This has potentially grave consequences for America’s oil and gas renaissance, which is largely taking place outside city limits.  As NERA notes, securing offsets in rural communities will be extremely difficult, and doing so could strangle the U.S. energy boom.

A tightened ozone standard has the potential to cause nonattainment areas to expand into relatively rural areas, where there are few or no existing manufacturing facilities to generate a supply of offsets. If nonattainment expands into rural areas that are active in U.S. oil and gas extraction, a shortage of offsets may translate into a significant barrier to obtaining permits for the new wells and pipelines needed to expand (or even maintain) our domestic oil and gas production levels. Our analysis also considers the potential implications of this often-ignored aspect of nonattainment status.”

The American economy simply cannot afford another costly federal rulemaking, especially one that will undermine the energy industry, one of the few bright spots of growth and job creation over the last several years.  EPA must be more transparent about the consequences of the ozone rulemaking, and stop hiding behind legal euphemisms such as “non-attainment”. Communities and small businesses deserve a full explanation of what’s at stake for their future economic livelihoods.

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council (SBE Council).  The Center for Regulatory Solutions is a project of SBE Council.


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