LONDON The knives are out for the Environmental Protection Agency (EPA) following the resignation of the agency's senior official in Texas and four other south-central states, which is symptomatic of the mounting pushback in Congress and the courts.
Unless the EPA can find a way to build bridges with some of its critics, and enforce environmental laws more sensitively, its wings will be clipped by legislators and judges angry about the sweeping impact of its rules and concerned that it puts environmental considerations above jobs, growth and competitiveness.
AN INCONVENIENT TRUTH
EPA Regional Administrator Al Armendariz resigned on April 29 after a You Tube video showed him likening enforcement of environmental laws to Roman invaders crucifying local inhabitants to send a clear message to the rest [ID:nL1E8FU9NT].
"It was kind of like how the Romans used to conquer little villages in the Mediterranean ... they'd find the first five guys they saw, and they would crucify them. And then you know that town was really easy to manage for the next few years," Armendariz said.
He went on to say the same approach can encourage companies to obey environmental laws: "You make examples out of people who are not complying with the law," according to a report in the Washington Post ("EPA official who compared enforcement to crucifixion resigns" May 1).
In a technical sense, Armendariz was right. Regulators as well as prosecutors routinely use selective prosecution, and ask courts to impose exemplary fines, to deter anyone else tempted to break the law.
But the analogy was offensive. More importantly, it was also unwise. It appeared to confirm what many critics have said: that EPA is an over-reaching agency with a messianic sense of its own mission, bent on enforcing its will on states and industries whatever the cost, and unwilling to listen to anyone else.
MOST POWERFUL REGULATOR
EPA is arguably the most powerful regulator in Washington. Its regulations have a far-reaching impact on the economy, as well as energy policy, land use, mining and offshore areas.
In the 10 years between October 2001 and September 2011, EPA enacted more major rules (32) than any other agency, accounting for almost one-third of the total (106), according to the White House Office of Information and Regulatory Affairs (OIRA).
The costs of complying with EPA regulations ($23-29 billion) accounted for half of all compliance costs incurred from federal rules ($43-67 billion), while the benefits ($84-565 billion), accounted for the vast majority of the quantified benefits over the period ($141-701 billion), according to OIRA ("Annual Report to Congress on the Benefits and Costs of Federal Regulations" March 2012).
It is this broad reach that makes EPA controversial. The agency has also become sucked into the heart of debates over global warming and energy policy.
In 2007, the U.S. Supreme Court ruled EPA had authority under the Clean Air Act to regulate emissions of greenhouse gases. In 2009, the Obama administration warned Congress that if it did not pass comprehensive legislation on climate change, including cap and trade, the agency could accomplish most of the same objectives through the regulatory process.
EPA is now making good on that threat. Earlier this year, for example, it proposed new rules prohibiting construction of new coal-fired power stations without carbon capture and storage (CCS), entrenching a preference for natural gas, which will reshape the electricity industry for decades to come.
CUTTING EPA DOWN TO SIZE
EPA's reach has brought it into conflict with a lengthening list of industrial and political interests, including coal miners, refiners, gas fracking firms, steelmakers, and some power generators, as well as coal and industrial-state Democrats, the U.S. Chamber of Commerce, and almost the entire congressional Republican Party.
As a result, its authority and approach to rulemaking are now being challenged on multiple fronts in Congress and the courts.
Dozens of business groups including the U.S. Chamber of Commerce, National Mining Association, American Iron and Steel Institute, Portland Cement Association, and American Farm Bureau, as well as individual firms like Peabody, the country's largest coal producer, and members of Congress, have sued EPA in the U.S. Court of Appeals for the District of Columbia Circuit.
In an unusual two-day court hearing in February, they challenged both EPA's finding that greenhouse gas emissions endanger health and welfare, and the way it has implemented the resulting rules. The strategy is to destroy the evidentiary basis for energy regulation and failing that to delay or weaken regulations by challenging them on cost-benefit and other grounds ("Coalition for Responsible Regulation versus EPA" February 28-29, 2012).
Separately, the agency's findings that hydraulic fracturing may have contributed to the contamination of drinking water supplies in certain instances are being fiercely resisted by fracking firms questioning the quality of the agency's science.
In a high profile defeat, EPA this month backed off claims that Range Resources Corp polluted drinking water in Texas while drilling for natural gas. It is also retesting fracked wells in Wyoming, which the agency claimed last year had been contaminated by shallow gas drilling by Encana Corp.
KEYSTONE SHOWS EPA'S ISOLATION
EPA is not directly involved in the battle between congressional Republicans and the White House over the Keystone XL pipeline. The State Department is advising the president on whether to grant a permit for the pipeline to cross the U.S.-Canada border. But EPA's "environment-first" approach to regulation is very much in the sights of congressional critics.
Congress is inching towards assembling veto-proof majorities to approve the pipeline despite objections from the White House and its environmental advisers.
On March 8, the Senate voted 56-42 in favor of an amendment authorizing the pipeline to proceed, with 11 Democrats joining all the Republicans present to approve the line, which only failed for technical reasons and after strong lobbying the president himself [ID:nL5E8EC7IR].
On April 18, the House of Representatives approved a temporary highway funding bill (HR 4348) by a veto-proof margin of 293-127 (including 69 Democrats) which contained language transferring the authority for approving the pipeline to the Federal Energy Regulatory Commission (FERC).
EPA has picked fights with the entire congressional Republican Party, plus coal-state Democrats (over emissions rules) and oil/gas state Democrats (over Keystone and fracking). So far, the agency and the White House have been able to assemble ad hoc coalitions to block any attempt to strip the agency of some of its powers. But if these three groups ever act together, they have enough votes to over-ride the president's veto.
ATTEMPTS AT CONCILIATION
White House officials and leaders at EPA are aware of the dangers. In the last six months, EPA has postponed implementation of a host of rules, and the president has begun to talk up an "all of the above" energy policy which endorses the role of natural gas.
On April 13, the president signed an executive order "Supporting Safe and Responsible Development of Unconventional Domestic Natural Gas Resources". Crucially it makes the administration's policy on fracking subject to an inter-agency working group.
EPA is represented but alongside eight other departments and four White House offices, including everything from the Defense Department, the Office of Management and Budget and the National Economic Council. It was a clear signal the president wants policy to take account of economic and national security concerns as well as environmental worries.
Like any other specialist department, EPA tends to be staffed by individuals who believe passionately in its core mission. Armendariz's comments show how deeply many within the agency feel about their mission.
The question is whether they can transcend that narrow viewpoint to take a broader view of both the benefits and the costs of rules the agency proposes and enforces.
The stakes are high. EPA's current role as both an environmental agency and an economic/energy regulator is unsustainable.
If it cannot find a better way of balancing those competing roles, and appeasing at least some of its critics, Congress and the courts will almost certainly take some of those powers away.
(John Kemp is a Reuters market analyst. The views expressed are his own)
(Editing by William Hardy)