Obama Shelves Smog Rule on Concerns About Regulatory Burdens, Uncertainty

President Obama has scuttled the Environmental Protection Agency’s (EPA’s) smog rule, saying that he had underscored the importance of reducing regulatory burdens and uncertainty. The decision has dealt a blow to environmental groups—which are contemplating legal action—and won the Democratic president praise from Republicans and industry groups.

The agency had submitted a draft final rule, "Reconsideration of the 2008 Ozone Primary and Secondary National Ambient Air Quality Standards (NAAQS)," for review to the Office of Information and Regulatory Affairs (OIRA), planning to finalize it this month.

EPA Administrator Lisa Jackson had said that the new ozone standard would be based on the "best science" and meet the obligation established under the Clean Air Act to protect the health of Americans. "In implementing this new standard, EPA will use the long-standing flexibility in the Clean Air Act to consider costs, jobs and the economy."

But in a stunning turnaround, President Obama—who had been under immense pressure from industry groups, including the U.S. Chamber of Commerce and the American Petroleum Institute, to thwart the rule tightening Bush-era ozone standards—returned the draft to the EPA for "reconsideration."

As OIRA Director Cass R. Sunstein wrote in a letter dated Sept. 2 to Jackson, "[The President] has made it clear that he does not support finalizing the rule at this time."

“I have continued to underscore the importance of reducing regulatory burdens and regulatory uncertainty, particularly as our economy continues to recover. With that in mind, and after careful consideration, I have requested that Administrator Jackson withdraw the draft Ozone National Ambient Air Quality Standards at this time,” the president said in a statement. He added that work was already under way to update a 2006 review of the science that would result in the reconsideration of the ozone standard in 2013.

Obama said that he did not support asking state and local governments to begin implementing the new standard. He praised the EPA, under Administrator Jackson, for taking strong actions, including reducing mercury and other pollution from power plants, however, and said the White House would continue to stand with the EPA as it held “polluters accountable and protect our families from harmful pollution.” He added: “My administration will continue to vigorously oppose efforts to weaken EPA’s authority under the Clean Air Act or dismantle the progress we have made.”

Sunstein: Draft Ozone Rule Warranted Reconsideration

OIRA recognized that the Clean Air Act forbade the EPA to consider costs in deciding on the stringency of national ambient air quality standards, both primary and secondary, Sunstein told Jackson. But, he added, the draft rule warranted reconsideration based on three points.

First, under the Clean Air Act, "finalizing a new standard now is not mandatory and could produce needless uncertainty," he wrote, explaining that the EPA was not required to revisit ozone standards until at least 2013. "In this light, issuing a final rule in a late 2011 would be problematic in view of the fact that a new assessment, and potentially new standards, will be developed in the relatively near future."

Second, Sunstein wrote, the EPA’s draft depended on review of scientific literature of 2006, and because work had begun on a new and forthcoming review, the draft could not be based on the "best available science," as was required by Executive Order 13563.

That order was signed by President Obama in January of this year, and it directs federal agencies to minimize the costs and burdens of administrative regulations. Because Executive Order 13563 emphasized that U.S. regulatory systems should "promote predictability and reduce uncertainty," the EPA should reconsider the draft, Sunstein advised.

The EPA had already finalized ozone-reducing measures, including its Cross-State Air Pollution Rule, and proposed national standards for mercury and toxic pollutants, Sunstein added. "Cumulatively, these and other recently proposed and finalized rules count as truly historic achievements in protecting public health by decreasing air pollution levels, including ozone levels, across the nation," he wrote.

A Storm of Reactions

Industry analysts say that the full consequences of the White House’s decision remain unclear. It is particularly uncertain whether the EPA will seek to reinstate the 2008 ozone NAAQS—the implementation of which was suspended while the EPA reconsidered the NAAQS—or will instead continue to implement the less-stringent 1997 ozone NAAQS that is now in effect.

Analysts concur that the ruling will be hit with legal challenges either way. If the 2008 ozone NAAQS is reinstated, legal challenges that were filed against that standard in 2008 by both industry and environmental groups may resume. New challenges could also be filed to compel the EPA to reconsider the rule or implement the 2008 NAAQs.

Meanwhile, the White House’s decision drew a storm of reactions. U.S. Chamber of Commerce President and CEO Thomas Donahue said he was "glad the White House heeded [the chamber's warning] and withdrew these potentially disastrous—and completely voluntary actions from the EPA."

“It is worth noting that the President agreed with just about every one of the Chamber’s arguments against a new ozone standard," he said. "As the President notes, we are now almost three years into the current five-year cycle for another ozone standard, so if EPA were to change the standard, it would have to presumably do it again in two years. This creates tremendous uncertainty for business."

In a letter to House Speaker John Boehner (R-Ohio), Obama listed the ozone rule at the top of the list of seven regulations whose annual costs top $1 billion annually. The rule was estimated to cost between $19 billion and $90 billion annually.

Estimated costs included a $10 billion price tag for the National Emission Standards for Hazardous Air Pollutants for Coal- and Oil-Fired Electric Utility Steam Generating Units rule and $3 billion for the rule governing National Emission Standards for Hazardous Air Pollutants for Major Source Industrial, Commercial & Institutional Boilers and Process Heaters.

Speaker Boehner’s staff called the withdrawal of the rule "a good first step" toward reducing regulatory burdens on businesses, but said there is more to be done, The Hill reported.

Sen. Barbara Boxer (D-Calif.) reportedly said she would stand by environmental groups in any litigation to force the Obama administration to issue a final ozone rule that goes beyond what was enacted by President Bush.

–Sonal Patel is a senior staff writer for COAL POWER

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