Oil and Gas:

API's Gerard says stricter ozone rules will freeze economic growth

How could new rules to limit ozone emissions from oil refineries and manufacturing facilities affect job growth in the oil and gas sector? During today's OnPoint, Jack Gerard, president of the American Petroleum Institute, discusses the industry's reaction to U.S. EPA's moving forward with new ozone standards. He explains why he believes the rules could have a chilling effect on growth in the manufacturing sector.

Transcript

Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Jack Gerard, president of the American Petroleum Institute. Jack, thanks for coming back on the show.

Jack Gerard: Thank you, Monica.

Monica Trauzzi: Jack, a big debate here in Washington over whether EPA should set stricter rules to regulate ozone emissions from oil refineries and manufacturing facilities. EPA has sent the final rule to OMB, but this was after it delayed its decision three times. What did EPA do with this extra time? Did it consider the concerns of industry?

Jack Gerard: Well, we had numerous meetings. We met with the administrator even last Friday to once again express our concerns with going forward with this rule. This is a discretionary decision on the part of the EPA. The law requires, the Clean Air Act law requires that every five years they review the standards and continue to update them to continue to promote clean air, something that we all support. Unfortunately, they made a decision that right in the middle of the game they were going to move the goalposts again, so we're not yet at the five-year mark and they want to reconsider this ozone standard. And what it's going to do is it potentially could run this down so strict that it would have a chilling effect on the entire economy and put 85 percent of the country in nonattainment, which essentially means if you've got a permit, you want to build the bridge, you want to build a road, you want to build a new manufacturing facility, you wouldn't be able to do it. So our meetings with EPA, we've strongly encouraged them to put this off, put it back in the regular cycle of clean air standards and not overreact particularly at this time where we're trying to create jobs here in America.

Monica Trauzzi: EPA administrator Lisa Jackson has said that the Bush administration standards, which are currently in place, would not hold up in court. Are you aware of the same potential legal challenges that she's talking about? Do you see that happening?

Jack Gerard: Well, that's her view. It's interesting, because these are policy decisions. The law requires them to consider certain things to protect health and the environment. The previous administration made a policy decision and rather than wait until the next turn as the law requires for her to do to look at it and reconsider that decision, she just arbitrarily and with full discretion has stepped in now to review this decision at this point in time. So, again, we're telling them it's not necessary, follow what the current law is, allow us to get to that point of review. Let's bring in the new science and see how much cleaner the air already is. EPA, by their own admission, will tell you the air is cleaner today than it was last year and the year before. So air quality continues to improve and that's why we've told the administration she needs to look closely at the impact of this on jobs and economic recovery.

Monica Trauzzi: Administrator Jackson says she's following the advice of a board of expert scientists. Do you not believe that those recommendations should be followed?

Jack Gerard: Well, the board of expert scientists, or KSEC committee as they call it, are there as advisers. They're there as advisers to suggest, well, we think it ought to be within this range or we think this is what the science of the data shows. Those same advisers gave counsel to the previous administrator and he made a policy decision based on the counsel he received. So, once again, they are divisors to her. They get a lot of different information and a lot of different scientific review. In fact, one of the things we think they should look more closely at is there's evidence or there's scientific analysis out there that suggests the air improvements are coming by regulating other pollutants, that it's not a smog issue, it's not an ozone issue, that really the benefits they're receiving that's improving air quality is coming from their standards on particular matter and others. And we think those should all be considered before they take this discretionary move that could have a very significant chilling effect on economic recovery and job creation.

Monica Trauzzi: So, walk us through some of the facts and figures that you're looking at that lead you to believe that there might be this chilling effect.

Jack Gerard: Well, the Manufacturers Alliance did a study that concluded we would lose 7.3 million jobs if this standard were to go forward. We think that's inconsistent with what the president has said. The president has made two key points of which we strongly support and as an industry, and I know I speak for the broader business community, we're doing everything we can to create jobs in this country and we're strongly encouraging the administration to follow what the president said was his priority and that's to look at all regulations, to streamline those regulations, to make sure they're not unintentionally harming the economic recovery. We think this will be a real test for the White House. This is a discretionary act. They're not under court order to do it, they're not under legal obligation to do it, but it's entirely inconsistent and flies in the face of what the president has said, which is streamline regulation and create jobs. This does neither. This moves the goalposts in the middle of the game and it will essentially put up a sign in America that says we're not open for business. We think it's bad policy and it couldn't come at a worse time as we're trying to get the economy back on track.

Monica Trauzzi: What does this all say then about the relationship between the business community and the Obama administration? If you're saying that you're going into these meetings and saying all of this, presenting this information, are they listening? What's the relationship like?

Jack Gerard: Well, we hope they're listening. The relationship has always been cordial. We have views, they have views and that's part of the public policy development process. However, in this particular case, since it is a purely discretionary act on the part of the administrator, we just think she's got it wrong at this point in time. They need to take a second look at this and we're hopeful that the White House, the OMB and others will look closely at this. By their own admission, the EPA said this could cost as much as $90 billion. That is one of the most expensive regulations that has ever been put forward in the history of our country. To do that as a discretionary act at the very time we're trying to seek economic recovery, we believe is bad policy and this is purely a policy decision.

Monica Trauzzi: Are there ways in which EPA could allow for some compliance flexibility in the rule that would make it more palatable for your industry?

Jack Gerard: Well, when they say flexibility in the rule, we're always concerned about that, because once the rule is in place, the rule is the rule and people sue over the standard. They can tell - they attempt to compel action or compliance with or without the administrator being part of that conversation. So we're very concerned about the standard that's set and, again, in this case, we just don't believe it's necessary at this time.

Monica Trauzzi: Senator Barrasso has said that these regulations could be economically destructive, especially right now as Washington is focusing so much on fiscal responsibility and lowering the debt ceiling. What can Congress do about all of this?

Jack Gerard: Well, there's been over 100 members of Congress that have already written to the administration and to the administrator telling her not to proceed with this draconian rule. I expect that outcry will continue, it's bipartisan opposition. This isn't a partisan issue. You've got Democrats and Republicans that have told the administration or questioned why are you doing this at this time? It's not necessary. It's inconsistent with what you've said about streamlining regulations and creating jobs and so we believe the role of Congress at this time is to have aggressive oversight and, if necessary, to step in and indicate to the administrator this is not the time to do this.

Monica Trauzzi: Have you seen any indication that EPA may reverse its decision to move forward with this and the Obama administration may stop it?

Jack Gerard: Well, we were disappointed in our meeting last week. We had a number of the major business leaders come together and to meet with the administrator. I thought it was a very cordial meeting. We shared our views, we heard hers, but there appeared to be no willingness to reconsider or to look closely at what they're doing. That concerns us greatly and the discussion will now proceed over to the White House and to OMB.

Monica Trauzzi: OK, we'll end it right there. Thanks for coming on the show again.

Jack Gerard: Thank you, Monica.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

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