Will EPA Chief’s Departure Prompt Better Energy Policy?

An EPA nominee who understands the importance of sensible rather than reckless regulation could mean job creation at home and competitiveness abroad.

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EPA Administrator Lisa Jackson

Last month's announcement from Environmental Protection Agency Administrator Lisa Jackson that she would be leaving her post touched off much speculation over the reasons for her decision. Though the agency itself toed an official line, some say Jackson was picking up stakes ahead of a brewing controversy over whether she used a pseudonym E-mail address to engage in harsh attacks on coal-produced energy. Others say Jackson is eying a run at public office in New Jersey.

Given that the respected Competitive Enterprise Institute had to file suit to gain access to these 12,000, hitherto unknown E-mails, there may yet be some fire to the smoke of scandal that many commentators believe they've sighted. Regardless, the end of Jackson's tenure also provides a convenient pause to assess the Obama-era EPA's role in energy policy—and the look back is not particularly rosy.

[See a collection of political cartoons on energy policy.]

Aside from imposing brutally expensive regulations affecting electricity production, such as the $9.6 billion Utility MACT rule and other punitive measures against coal power, the  EPA was roundly criticized for considering ways to implement, through administrative fiat, failed legislation to impose a cap-and-trade national energy tax

In 2011, my organization published a report from National Economic Research Associates raising serious concerns over the EPA's inflated claims that the Clean Air Act would generate $2 trillion of annual economic benefits by the year 2020. At first blush this figure seems wildly exaggerated, given that the size of the entire U.S. economy is projected to be about $20 trillion by that time. And at second blush, it looked no better. The EPA's number was based on a methodology called "willingness to pay," which reflects individual attitudes about pollution risks. In fact, a more clear-headed EPA analysis, based on macroeconomics, suggested the Clean Air Act's impact would range from a loss of $110 billion to a gain of $5 billion.

Equally troubling was EPA's refusal to suspend corn-ethanol production mandates amid rising food prices late last year, despite pressure from many points on the political spectrum to do so.

[See a collection of political cartoons on the economy.]

Add to these rather dubious reflections on the Jackson years another recent, strange revelation: EPA apparently cast aside traditional permitting procedures to create a negative ecological assessment of a mine in Alaska—one whose proposed construction does not even exist in formal plans yet. As Dr. Bonner Cohen concluded in a National Center for Public Policy Research analysis released just days ago:

What is to keep the agency from using its interpretation of Section 404 (c) of the Clean Water Act to discourage other mining companies and investors from pursuing promising projects? Once the precedent has been set that the EPA can preemptively shut down a mining project without regard to the permitting process, what company and what investor will risk time and capital in a doomed effort to win a regulatory game the EPA has rigged?

[See 2012: The Year in Cartoons.]

Such a warning could apply equally to the many oil and gas projects that have the potential to transform our nation into a net energy exporter by the end of the decade, raising the important issue of where the EPA is headed next. Will it throw up new impediments to construction of the job-creating Keystone XL Pipeline, just as it appears that the White House might recognize the wisdom of moving forward? Will it stand in the way of environmentally responsible oil and natural gas extraction methods (i.e., hydraulic fracturing) which are helping communities in Pennsylvania and other states recover from the recession? This is no idle question, and it has energy experts in full crystal-ball mode.

To be sure, the head of an agency can only do so much to change the institution's political culture. Yet, President Obama's choice to lead the EPA—unannounced at the time of this writing—could send important signals to America's oil and gas industry. Since the campaign season of 2012 began in earnest, President Obama's team has, according to industry leaders, been somewhat less adversarial toward traditional energy development. Nonetheless, more encouraging signs are needed. An EPA nominee who understands the importance of sensible rather than reckless regulation could be one welcome harbinger of a better year ahead for job creation at home, competitiveness abroad, and even the government's own fiscal position.

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