Ozone Rules: Are the Costs Too High?

The on-again, off-again new federal ozone rules are on again, as the Obama administration the day before Thanksgiving announced it will revise the air standard for ground-level ozone to a range of 65 parts per billion to 75 ppb (the current standard, set in 2008), with a request for comments on the possibility of a 60 ppb standard. The announcement came in a 626-page proposal, accompanied by a 575-page appendix. Happy reading for the holidays.

The Environmental Protection Agency was under a court order to make a proposal by December 1, after the Obama White House the day before Labor Day 2011 kicked an EPA 70 ppb plan down the electoral road. The White House feared that the rulemaking updating the 2008 National Ambient Air Quality Standard (NAAQS) for ozone would hurt the president’s 2012 reelection campaign. Republicans were savaging the proposed rule. At the time, the administration said it was putting the rules on hold because, the words of the New York Times, “the regulation would impose too severe a burden on industry and local governments at a time of economic distress.” Presumably, that’s no longer the case.

But the costs of the new O3 rules are considerable. The Financial Times noted, “Enforcing the lower limit of 65 ppb would be the most costly environmental regulation proposed in the U.S. for 17 years, according to the EPA’s own estimates.” That figure, by EPA’s calculations, would be $15 billion annually by 2025, while the 70 ppb standard would add $3.9 billion in additional annual costs to the economy.

EPA’s announcement as it released the proposed revision of the new NAAQS said the health benefits of reduced ozone concentrations – in terms of reduced asthma attacks and other respiratory problems – would “significantly outweigh” the costs. That’s an assertion that industry will challenge during the rulemaking and opponents (mostly, but not entirely, Republicans) in Congress.

The schedule set by the federal court in California, which mandated the December 1 date, calls for a final rule by October 1, 2015. EPA probably can’t meet that date, given the mass of data involved. So the proceeding may still be pending when the 2016 presidential campaign is underway. It surely will also land back in the courts.

One interesting wrinkle in the proposed rule is that California, where meeting any new standard will be a real problem, gets a special break, and the administration’s cost estimates do not include the California costs. The Golden (and smog-ridden) State would not have to meet the deadlines in the overall rule. EPA’s cost estimates for California alone are $800 million annually for a 70 ppb standard and $1.6 billion for a 65 ppb standard.

With Republicans in control of both the House and Senate for the remainder of Obama’s term in office, a political fight over the ozone rule is also likely. In a letter to the White House Office of Management and Budget prior to EPA unveiling its proposed rule, Republican Sens. David Vitter of Louisiana and James Inhofe of Oklahoma vowed to challenge the EPA rule. “By any measure,” they wrote, the proposed rule will present one of the costliest rules every issued by EPA and will serve as one of the most devastating regulations in a series of over-reaching regulatory actions taken by this administration that will limit investment and the ability of the U.S. economy to produce higher paying jobs for hard-working Americans.” Vitter is the ranking Republican on the Senate Environment and Public Works Committee and Inhofe is the likely chairman in the 114th Congress. Vitter is running to succeed Louisiana Gov. Bobby Jindall, who is term-limited, in 2015.

The courts could ultimately decide the fate of the ozone rule, and the other Obama administration’s attempts to limit coal-fired power. As the Wall Street Journal noted, the issue of the cost versus benefits of EPA’s spate of new pollution rules for coal-fired plants has already drawn the interest of the U.S. Supreme Court. The high court, just before the administration’s ozone announcement, said it would review EPA’s new mercury emissions rule, which also target coal-fired plants.