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Big Costs, Illusory Benefits: Why Congress Should Nix The Utility MACT
Big Costs, Illusory Benefits: Why Congress Should Nix The Utility MACT
June 12, 2012
Originally published in Forbes
The U.S. Senate is expected to vote soon on legislation (S.J.Res.37) sponsored by Sen. James Inhofe (R-Okla.) to overturn one of the most costly regulations ever adopted by the U.S. Environmental Protection Agency (EPA).
Known as the Utility MACT Rule, the regulation establishes first-ever maximum achievable control technology (MACT) standards for hazardous air pollutant (HAP) emissions from power plants.
Mercury is the principal HAP targeted by the Rule. Unlike most air pollutants, mercury poses health risks not via inhalation but after being deposited in water bodies. Microbes can transform some of the mercury into an organic compound, methylmercury, which can accumulate in aquatic food chains. For humans, the “primary route of exposure” is eating fish.
EPA contends that pregnant women in subsistence fishing households consume enough mercury in self-caught fish to impair their children’s cognitive and neurological development. Although that is theoretically possible, in the 22 years since Congress tasked the EPA to study the health risks of mercury, the agency has not identified a single child whose learning or other disabilities can be traced to prenatal mercury exposure.
The EPA’s December 2000 “appropriate and necessary” determination, the trigger for the Utility MACT Rule, depicted power plant mercury emissions as a significant growing public health threat. That was sheer exaggeration.
The EPA projected that power plant mercury emissions would increase from 46 tons per year (TPY) in 1990 to 60 TPY in 2010. In fact, emissions declined to 29 TPY in 2011 – 50% below EPA’s projection.
Citing a 1999-2000 Centers for Disease Control and Prevention (CDC) survey, EPA stated that 7% of childbearing age women in the U.S. (one in every 14) had blood mercury concentrations exceeding the agency’s reference dose (the “safe” exposure level). But the relevant subpopulation is pregnant women, not women of childbearing age (defined as 15 to 44 years). Childbearing age women are older, on average, than the average pregnant woman, and blood mercury levels increase with age. In the CDC’s 2001-2004 surveys, only 0.4% of pregnant women (one in every 250) had blood mercury levels exceeding the reference dose.
More importantly, the EPA’s reference dose is not a valid measure of actual health risk. The reference dose is 1/15th the lowest exposure level – a value known as the “benchmark dose” – associated with mild, subclinical effects in any epidemiological study. The highest exposure measured in any pregnant woman by the CDC during 1999-2004 was 3.7 times the reference dose – about 1/4th the benchmark dose. Serious harm such as neurological disorders requires exposures much higher than the benchmark dose.
In the Utility MACT Rule, the EPA assumes that any increase in prenatal mercury exposure above the reference dose produces a corresponding decrease in the child’s IQ. Here the EPA relies on a single study funded by the agency and led by an EPA scientist. The study purports to be an “integrative assessment” of epidemiological studies conducted in the Faroe Islands, the Seychelles, and New Zealand. However, the Seychelles study – the most reliable of the three – found no association between prenatal mercury exposure and IQ even though exposures were as high as 22 times the reference dose.
The EPA estimates that implementing the Utility MACT Rule will cost $9.6 billion in 2016. The agency also estimates that the required mercury reductions will provide $0.5 to $6 million in health benefits in the same year. The EPA does not even try to estimate the benefits of the Rule’s MACT standards for other HAPs such as chromium, nickel, and acid gases. For the HAP reductions that are the Rule’s statutory purpose, estimated costs exceed estimated benefits by 1,600 to one or even 19,200 to one.
Even those numbers give the MACT Rule too much credit. The EPA’s benefit estimate assumes that mercury emission reductions achieved in 2015 yield proportional reductions in fish tissue concentrations in 2016. Yet the agency admits that fish tissue concentrations may not decrease for “years to decades.”
The benefit estimate further assumes that the hoped-for reduction in fish mercury concentrations will avert the loss of 0.00209 IQ points per child in a guesstimated population of 240,000 subsistence fishing households, and that those “saved” IQ points will boost aggregate lifetime income by $0.5 million to $6 million. This is not verifiable even in principle. IQ cannot accurately be measured out to five decimal places. Consequently, it is also impossible to determine whether any relationship exists between income and IQ for increments as tiny as 0.00209 IQ points. In short, the EPA’s benefit estimate is a statistical figment.
The EPA nonetheless assures us the Rule will pay for itself many times over. This supposedly is due to the “co-benefits” of coincidental reductions in non-HAP emissions, particularly sulfur dioxide, which is a precursor of fine particulate matter (PM2.5). The EPA estimates that in 2016, the Rule’s coincidental PM2.5 reductions will avert 4,200 to 11,000 premature deaths, generating co-benefits of $33 billion to $89 billion, or $3 to $9 in health benefits for every dollar of cost. None of this is credible.
As Anne Smith of NERA Economic Consulting points out, almost all of the projected 11,000 premature deaths averted are in areas already in attainment with the EPA’s National Ambient Air Quality Standard (NAAQS) for PM2.5. By law, NAAQS are set at a level “requisite to protect public health” with an “adequate margin of safety.” Smith also notes that EPA attributes up to 89% of the estimated co-benefits to PM2.5 reductions below the lowest exposure associated with mortality risk in any epidemiological study.
At best, the Rule’s benefits are wildly exaggerated. The costs, however, are real and substantial. For starters, the MACT Rule will reduce the diversity of America’s energy portfolio, increasing the risk of price spikes. The Rule sets the mercury and acid gas emission limits for new facilities below levels that can accurately be monitored. Consequently, pollution control technology manufactures cannot provide guarantees that companies installing their equipment will be in compliance. Without such guarantees, utilities will not invest in new coal generation. So the MACT Rule effectively bans the construction of new coal power plants – a policy Congress has not approved. Utilities will become more dependent on natural gas, a fuel with a history of price volatility and a future clouded by environmentalist opposition to hydraulic fracturing.
Another downside is a greater risk of blackouts. EPA projects that the Utility MACT and other regulations targeting power plants will cause the retirement of about 10,000 megawatts of coal-electric generating capacity (enough to power 7.5 million to 10 million average homes). Already, operators of 26,000 megawatts have announced that their plants will close rather than comply with the EPA regulations. Several investment firms estimate that total retirements will reach 50,000 megawatts, with some projecting retirements as high as 80,000 megawatts.
Tight compliance schedules create additional challenges for grid operators whose job is to keep electric supply and demand in balance. The North American Electric Reliability Corporation’s (NERC) estimates that 234,000 to 258,000 megawatts of generating capacity will have to be retrofitted by 2015. Hundreds of units will have to be taken offline while controls are installed. A bottleneck of outages could develop if the pollution control industry cannot meet the surge in demand for equipment and skilled labor. No wonder NERC calls the EPA regulations “the number one risk” to grid reliability.
Blackouts are bad not just for business but also for public health and safety. Power failures in the midst of heat waves or winter storms can literally be lethal.
Even if the MACT Rule does not turn out the lights, it is likely to do more harm than good. People generally use part of their income to enhance their health and safety. NERA Economic Consulting estimates that the MACT Rule and three other EPA regulations could reduce annual average disposable income by $34 billion from 2012 to 2020. That is money households won’t be able to spend on health care, nutritious food, and other priorities. NERA also estimates that the four EPA regulations could reduce net employment by an average of 183,000 jobs per year. Many people who lose their jobs also lose their health insurance. Numerous studies demonstrate that unemployment increases the risk of sickness and death.
In September 2011, the House of Representatives passed the Transparency in Regulatory Impacts on the Nation (TRAIN) Act (H.R. 2401) by a vote of 249-169. The TRAIN Act would nullify the Utility MACT Rule and direct EPA to adopt less burdensome regulations to control power plant HAP emissions. Clearly, Congress would not enact the MACT Rule were it introduced as a bill and put to a vote. That should be reason enough for the people’s representatives to overturn the Rule and reclaim their constitutional authority to determine the content and direction of national policy.