GUEST COLUMN: NO GRANDFATHER YOU'D WANT TO KNOW?

EPA Likely To Increase Mercury Emissions In West

By Joe Kerkvliet, Guest Writer, 3-02-07

In December 2006, the Environmental Protection Agency finalized new rules governing mercury emissions by the nation’s 94 cement producers.  The EPA will now strictly control mercury emissions for new and future plants, but exempts or “grandfathers” currently operating plants from the new rules.

By grandfathering, EPA is essentially granting a license to existing cement plants, including one in Three Forks, Montana upwind from Bozeman and one in Montana City not far from the state capital of Helena to emit mercury forever without paying for the pollution controls required of new plants.

Mercury is a potent neurotoxin linked to many health problems, including defects in newborns, mental disturbances, and autism.  Mercury contaminates many Montana streams and lakes, and the Montana Fish Wildlife and Parks Department has [as has similar agencies in dozens of states] issued state-wide fish consumption guidelines because of high mercury content in some larger sport fish. 

EPA’s grandfathering is bad policy because it tilts the playing field in favor of existing plants.  By doing so, EPA fails to regulate the largest sources of mercury emissions in the cement industry.  Worse, the grandfathering rule will probably result in more mercury emissions than no rule at all. 

There are four reasons to expect this perverse result.  First, EPA estimates that existing plants, with their annual ual mercury emissions of 13, 200 pounds, will have a cost advantage of 1-7.2% over new plants.  To retain this advantage, existing plant owners have incentives to keep their plants open longer than they would otherwise. A similar EPA rule grandfathering electric power plants has kept older, more polluting, power plants operating 10 or more years beyond their normal life span. 

Second, the existing plants’ cost advantage will retard construction of new, less polluting, and more efficient plants.  Why would investors build new plants when they will be saddled with millions of dollars in pollution control costs not borne by existing plants?  Yet if newer plants were built, they would be less polluting because of improved technology and easier installation of pollution control equipment in new construction.  EPA estimates that just five new cement plants, if they replaced existing plants, would together reduce mercury emissions by 1,300 to 3,000 pounds. 

Third, owners of multiple plants, including some subject to the EPA’s new rules, will shift cement production away from new plants toward the relatively low-cost, but more polluting, older plants. 

Finally, EPA’s grandfathering rule will likely discourage plant owners from modernizing their existing plants.  When owners of a grandfathered plant consider investments in maintenance and modernization, they must first negotiate EPA’s reconstruction review.  EPA uses the review to determine whether the investments will push the plant over the line between a grandfathered plant and a new plant subject to stricter pollution controls.  With millions of dollars at stake and the prospect of lengthy review, some investors are discouraged from making new investments. 

When considering a similar EPA review process for other types of pollutants, the 2003 Economic Report to the President suggests that the prospect of review “might lead firms to delay or forgo plans to modernize their facilities in ways that could benefit the environment.” A 2004 published study of New York manufacturing plants finds that the EPA’s review requirements have retarding investments, resulting in more, rather than less, pollution. 

Another unintended, but sadly inevitable, result of grandfathering is to make environmental regulation increasingly litigious.  Reconstruction review is part and parcel of grandfathering because of the need to distinguish between grandfathered and new plants.

With thousands of ways of modernizing plants, this distinction will always contain legal ambiguities and the stage is set for lengthy, rancorous, and expensive legal battles.  Polluters try to fly under the radar and avoid installing pollution control equipment.  Environmentalists insist that nearly all new investments effectively create a new plant.

Numerous court battles ensue.  In one case, currently before the US Supreme Court, an electric utility agues it is doing routine maintenance.  EPA argues it is effectively constructing new plants.  Whatever the merits of these cases, it is clear court battles divert resources and talents that could otherwise be applied to the real goal of reducing pollution. 

Evidence clearly suggests that mercury is destructive of human and ecological health.  Recent evidence suggests that cement plants are a significant source of mercury emissions and EPA is doing the right thing in developing strategies to control emissions.  However, states like Montana can set higher standards and should resist EPA’s grandfathering policies and encourage rules that apply equally to all cement plants.  Otherwise, the new rule may be worse than no rule at all. 
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EDITOR’S NOTE:  Joe Kerkvliet specializes in analyzing environmental, natural resource, and ecological economics for The Wilderness Society.

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