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Friday, June 15, 2012

Will the War on Coal Create Jobs?

U.S. Senator Jim Inhofe (R-OK) has made his views clear as to what he thinks of the Obama administration’s ramped up regulation of coal. In early June, he called the Utility MACT rule “the first step to kill coal in the United States.”

On the other side, the Obama EPA, headed up Lisa Jackson, actually asserts that the new regulation will create jobs.  Jackson claims in an interview published on, that coal’s challenges are “entirely economic,” having nothing to do with costly new regulations.

Who is right?

Well, claiming that increased government regulation creates jobs and has no negative impact on the industry being regulated disqualifies Administrator Jackson from serious consideration. More regulation, whether one agrees with the regulation or not, means that businesses face increased costs to comply with those new government mandates, and that any resources spent and jobs linked to dealing with such regulations are the result of shifting resources away from market and ultimately consumer-driven enterprises to costly, government make-work. In the end, the resources used to comply with government regulation are lost resources to the private sector.

On the other hand, Senator Inhofe understands quite well the potential costs of the Utility MACT rule on coal and coal-powered energy. In his early June comments, Inhofe warned, “Utility MACT is the centerpiece of President Obama's effort to kill coal: Utility MACT is specifically designed to close down existing plants, while the Obama-EPA's greenhouse gas regulations are specifically designed to prevent any new coal plants from being built.”

If one doubts what Inhofe says here, keep in mind, this administration’s underlying position on coal. In 2008, arguing for the imposition of a cap-and-trade regulatory scheme, Barack Obama declared, “So if somebody wants to build a coal-powered plant, they can. It's just that it will bankrupt them because they're going to be charged a huge sum for all that greenhouse gas that's being emitted.”

And in March 2012, before a Yale University gathering, EPA Region 1 Administrator Curt Spalding declared, “Lisa Jackson has put forth a very powerful message to the country. Just two days ago, the decision on greenhouse gas performance standard and saying basically gas plants are the performance standard which means if you want to build a coal plant you got a big problem. That was a huge decision. You can't imagine how tough that was. Because you got to remember that if you go to West Virginia, Pennsylvania, and all those places, you have coal communities who depend on coal. And to say that we just think those communities should just go away, we can't do that. But she had to do what the law and policy suggested. And it's painful. It's painful every step of the way.”

Those are very disturbing and cavalier declarations and actions on the part of the current President and his administration.

Senator Inhofe summed up the costs of what the Obama administration as follows: “Front and center, of course, is the Utility MACT rule, a rule with such strict standards, they cannot be met, which means that, along with EPA's other air rules, up to 20% of America's coal fired capacity will be shuttered and around 1.6 million jobs will be lost. Utility MACT's price tag is second only to the Obama EPA's greenhouse gas regulations, which are designed to prevent any new coal plants from being built in this country. Like the Waxman-Markey cap-and-trade bill, these regulations will cost $300 to $400 billion dollars a year and destroy over two million jobs.  It may even cost more if the courts throw out EPA's ‘tailoring rule’ - a rule that EPA is attempting to create to subvert the law in order to avoid the ‘absurd results’ that would ensue if the agency regulates greenhouse gases under the thresholds required by the Clean Air Act.  That means every church, every school, every restaurant and coffee shop, will have to be regulated or put out of business by the EPA.”

In December, Scott Segal, director of the Electric Reliability Coordinating Council, observed, “The bottom line: This rule is the most expensive air rule that EPA has ever proposed in terms of direct costs. It is certainly the most extensive intervention into the power market and job market that EPA has ever attempted to implement.”

Consider that in a June 6 letter to Inhofe, Cecil Roberts, leader of the United Mine Workers of America, noted the new rule “eliminates coal as an option for new electric generation facilities.” Wouldn’t you think that this labor union would be supportive of an Obama administration proposal if it actually did create jobs? But the notion that such heavy-handed government regulation would create jobs is simply absurd.

Last year, the U.S. House of Representatives voted to impose an indefinite delay on the MACT rule, while also mandating a re-write. It’s worth noting that 19 Democrats joined Republicans in approving that legislation.

In the Senate, Inhofe is leading the charge with legislation (S.J. Res. 37), which could be voted on this week, to put an end to the EPA’s Utility MACT rule.

Using the Congressional Review Act, the Inhofe measure would only need 51 votes. Interestingly, all Republicans are onboard, except for Senator Lamar Alexander from Tennessee. Alexander is cosponsoring a measure, with Senator Mark Pryor (D-AR), that would extend compliance with the rule from four years to six years. But that amounts to nothing more than meaningless, political cover, since if it makes no economic sense to face the added costs in four years, it will still make no sense in six.

Will the Senate do the right thing by repealing this costly EPA rule? Or, will it uphold the rule, and thereby vote against the consumers and small businesses that need reliable, affordable energy, and vote for reducing U.S. GDP and competitiveness, and destroying jobs?

As Senator Inhofe noted, “It's time for the Senate to do its job and stop this regulatory nightmare.”


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is “Chuck” vs. the Business World: Business Tips on TV.

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