Threats

The High Cost of Regulation

American power is woven into American products,
but so are the high costs of government regulations.

The costs of regulations are factored into the products and power we buy everyday. As regulations become more and more burdensome on high tech businesses, manufacturers, and energy producers, the more expensive our lives become. From electronics to grocery store purchases, regulations that lack common sense are passed on to consumers. We have identified key regulations below that will make products more expensive, but we are just getting started. New regulations are being implemented all that time, so check back or LIKE us on Facebook to stay up to date!

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Tier 3 Standards

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TIER3

In addition to the numerous other regulations affecting the transportation and energy industries, the Environmental Protection Agency (EPA) issues regulations governing tailpipe emissions from qualifying vehicles. Because emissions can be more easily contained with reduced sulfur content in gasoline, the so-called Tier 2 regulatory framework—issued in 1999—also imposed restrictions on refiners.

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In addition to the numerous other regulations affecting the transportation and energy industries, the Environmental Protection Agency (EPA) issues regulations governing tailpipe emissions from qualifying vehicles. Because emissions can be more easily contained with reduced sulfur content in gasoline, the so-called Tier 2 regulatory framework—issued in 1999—also imposed restrictions on refiners.

Even though these Tier 2 standards have reduced sulfur content by 90 percent (from 300ppm down to 30ppm) just since 2004, EPA is moving ahead with plans to issue tighter Tier 3 standards. The exact details have not been specified, but Tier 3 would likely force refiners to reduce sulfur content an additional 67 percent, from 30ppm down to 10ppm. The best available study suggests that just a single component of the new Tier 3 proposal would impose upfront compliance costs of almost $10 billion on refiners, and cause a permanent increase in refining costs of 6 to 9 cents per gallon of gasoline.

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BLM’s Hydraulic Fracturing Rule

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FRACTURING

The Bureau of Land Management (BLM) has proposed a new rule to further regulate hydraulic fracturing on federal lands. This expensive regulation will make it even more difficult to produce oil and gas on federal lands.

Hydraulic fracturing on public lands is currently regulated by the states, and the BLM’s proposed rule would usurp that authority. The rule is estimated to cost between $1.49 billion and $1.61 billion per year, and would further hinder the ability to produce oil and gas on federal lands. The public has until September 10 to comment on the rule.

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Background

The Bureau of Land Management (BLM) has recently proposed to subject hydraulic fracturing on public lands to federal regulation for the first time. Hydraulic fracturing is a drilling process that utilizes a highly pressurized mixture of water, sand and chemicals to extract oil and gas from shale rock formations, and has been used since 1947 in over 1.2 million wells without a single confirmed case of groundwater contamination.

Hydraulic fracturing was first pioneered in the United States, and recent advances in its use—like the combination of hydraulic fracturing with horizontal drilling—have contributed to the recent natural gas and oil booms seen in places like Pennsylvania’s Marcellus Shale and North Dakota’s Bakken Formation. The map below illustrates the location of various shale plays where hydraulic fracturing is primarily used:

The important role that hydraulic fracturing has played in revolutionizing the way we produce energy here in the United States cannot be understated. To this point, in 2008—the first year that hydraulic fracturing was widely employed with horizontal drilling—the estimates of recoverable oil in the Bakken Formation jumped from 151 million barrels of oil to over 3 billion barrels of oil. Moreover, the United States is now the world’s largest producer of natural gas in large measure because of hydraulic fracturing.

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Greenhouse Gases

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GHG

The Environmental Protection Agency (EPA) is developing regulations to restrict carbon dioxide emissions under the Clean Air Act. These regulations will have a significant impact, because EPA is working to restrict the use of natural gas, coal, and petroleum—the source of 82 percent of America’s total energy consumption. Amazingly, EPA claims to be implementing these regulations because of global warming, but according to EPA, their regulation won’t affect global warming in any meaningful way. This begs the question—why is EPA implementing regulations that increase the price of energy, harm the economy, and have no benefits?

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The Environmental Protection Agency (EPA) is developing regulations to restrict carbon dioxide emissions under the Clean Air Act. These regulations will have a significant impact, because EPA is working to restrict the use of natural gas, coal, and petroleum—the source of 82 percent of America’s total energy consumption. Amazingly, EPA claims to be implementing these regulations because of global warming, but according to EPA, their regulation won’t affect global warming in any meaningful way. This begs the question—why is EPA implementing regulations that increase the price of energy, harm the economy, and have no benefits?

Since at least the late 1990s, environmental activists have tried to get EPA to regulate greenhouse gases. In 1998, EPA General Counsel, Jonathan Cannon, wrote a legal opinion stating that EPA had the authority to regulate greenhouse gases under the Clean Air Act. During the rest of the Clinton administration and into the Bush administration, EPA declined to regulate greenhouse gases and was subsequently sued by environmental groups and a few states. This lawsuit became Massachusetts v. EPA and eventually reached the Supreme Court. Concerned about the impacts of global warming, such as rising sea levels, the Supreme Court in a 5-4 decision found that EPA had the authority to regulate greenhouse gases under the Clean Air Act.

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Automobile Mandate

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CAFE

The Obama Administration is advancing a small car mandate that will significantly limit consumer choices under the guise of Corporate Average Fuel Economy standards. Instead of letting the Transportation Department set efficiency standards with a primary focus on consumer choice and safety, as has historically been the case, the Obama Administration is letting EPA take over the program to advance its expensive energy agenda. To meet the Administration’s proposed vehicle mandates, automakers will have to make more expensive and less safe cars that many consumers may not want and cannot afford.

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The federal government is mandating dramatically higher fuel economy standards for cars and light-duty trucks (pickup trucks, SUVs and vans) in an effort to reduce oil use. These regulations, called Corporate Average Fuel Economy standards (CAFE) have some serious negative side effects. History shows that to meet fuel economy mandates, automakers make cars lighter and less safe and the additional technology required for greater fuel economy makes automobiles more expensive.

Generally, the auto companies have resisted these mandates, but after bailing out General Motors and Chrysler, the Obama administration twisted the automakers’ arms into supporting ever higher mandates, regardless of cost or safety. In fact, the latest round of fuel economy mandates will force 7 million car buyers out of the market because the regulations add thousands of dollars to the price of a new car.

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Renewable Fuel Mandates

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RFM

The creation of ethanol turns corn, a vital food stock, into motor fuel. This increases the price of a staple food and disproportionately affects the poor around the world.

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The creation of ethanol turns corn, a vital food stock, into motor fuel. This increases the price of a staple food and disproportionately affects the poor around the world.

A few years ago, ethanol was hailed as a way to reduce greenhouse gas emissions and reduce our use of imported oil. These beliefs led to bipartisan support for ethanol mandates and subsidies. In 2005, President Bush signed a renewable fuel mandate in the Energy Policy Act of 2005 and then increased the mandate in 2007 in the Energy Independence and Security Act. The mandate requires the production of 20.5 billion gallons of renewable fuel in 2015 increasing to 36 billion gallons in 2022.

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Air Emissions Regulations

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EMISSIONS

Year after year, air quality in the United States continues to improve. In fact, from 1970 to 2010, air pollution emissions have decreased 71 percent even though automobile use has increased by 170 percent and energy consumption has increased by 44 percent. Despite these improvements, EPA is working to impose even stricter regulations with ever-diminishing benefits.

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Year after year, air quality in the United States continues to improve. In fact, from 1970 to 2010, air pollution emissions have decreased 71 percent, even though automobile use has increased by 170 percent and energy consumption has increased by 44 percent. Despite these improvements, EPA is working to impose even stricter regulations with ever-diminishing benefits.

A few months ago, EPA was working on new draconian ozone regulations. EPA signaled that it wanted to reduce the National Ambient Air Quality Standards program’s currently mandated 75 parts per billion (ppb) ozone standard to a level between 60 ppb and 70 ppb. If EPA goes forward with this plan, the impact on the nation’s economy will be nothing short of devastating.

Every state affected by this new regulation could lose tens of thousands of jobs, according to a bipartisan letter signed by a group of 34 U.S. Senators led by Mary Landrieu (D-La.) and Jeff Sessions (R-Ala.). According to some estimates, the new rule could mean the loss of 7.3 million jobs, or 4.3 percent of the workforce in 2020.

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Maximum Achievable Control Technology Standards (Utility MACT)

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MACT

The Utility Maximum Achievable Control Technology (MACT) rule, most recently called the Mercury and Air Toxics Standards, is a regulation proposed by EPA that will restrict the ways power plants produce electricity across the nation. It was finalized on December 16, 2011, and will place limits on the emissions generated by coal fired electric generating units.

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The Utility Maximum Achievable Control Technology (MACT) rule, most recently called the Mercury and Air Toxics Standards, is a regulation proposed by EPA that will restrict the ways power plants produce electricity across the nation. It was finalized on December 16, 2011, and will place limits on the emissions generated by coal fired electric generating units.

Earlier in the year, the agency also finalized a rule that will require states to reduce power plant emissions further. That rule—called the Cross State Air Pollution Rule (CSAPR)—was finalized in June 2011. These regulations, which are only a handful of many that apply to power plants, will have the combined effect of making it prohibitively expensive to run a coal-fired power plant in the United States. In fact, this very scenario was first forecasted by President Obama, who said in 2008 that under his proposed air quality regulations, “anyone can run a coal plant… it’s just that it will bankrupt them.” The bulk of the costs associated with making electricity generation more expensive, however, are ultimately borne by the consumer.

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