The Impact of Climate Change Proposals on Infrastructure

by Bill Kovacs

As a continuation of the on-going discussion regarding the negative impact on the nation if the Obama administration adopts the Gang of 31's proposals, I will now address how adoption of their proposals will operate as a de facto moratorium on major construction and infrastructure projects.  This is the third -- see one and two -- of the four concerns which our nation will encounter should greenhouse gases be regulated simultaneously with both climate change legislation and climate regulations under the Clean Air Act (CAA).

A Decades-Long Moratorium on Major Construction and Infrastructure Projects

Once CO2 becomes "subject to regulation" under the CAA, the regulatory cascade is immediate.  Under the CAA, should CO2 be deemed regulated under the Act—even if the regulation is for vehicles or fuels and is specifically not directed at stationary sources—no new or existing "major" stationary source of CO2 can be built or modified (if the modification increases net emissions) without first obtaining a PSD permit.  "Major sources" are defined as either a source in one of 28 listed categories (mostly industrial manufacturers and energy producers) that emits at least 100 tons per year (tpy) of an air pollutant, or any other source with the potential to emit 250 tpy of an air pollutant.

PSD for greenhouse gases will result in a complete moratorium on construction in the United States.  According to a report released by the U.S. Chamber entitled "A Regulatory Burden:  The Compliance Dimension of Regulating CO2 as a Pollutant," over 1.2 million buildings in the United States will be exposed to PSD for CO2.  Many of these are previously-unregulated establishments, such as:

• 260,000 office buildings;
• 150,000 warehouses;
• 92,000 health care facilities;
• 71,000 hotels and motels;
• 51,000 food service facilities;
• 37,000 churches and other places of worship; and
• 17,000 farms.

As previously mentioned, these 1.2 million newly-regulated establishments will now be forced to devote a significant amount of their resources to navigating the PSD maze before commencing construction projects.  According to documents released by EPA less than one month following issuance of the ANPR, an average PSD permit costs $125,120 and imposes a burden of 866 hours on the applicant.  If only 40,000 of the 1.2 million buildings exposed to PSD for greenhouse gases opt for new construction or modifications in a given year, PSD compliance alone would cost over $5 billion and would require the devotion of 17,320 full-time employees!   Additionally, the PSD application requires a determination of best available control technologies (BACT), performed on a case-by-case basis, with considerable cost and burden placed on the applicant. 

The increased number of PSD permits triggered by regulation of greenhouse gases will also cripple the state agencies forced to issue them. EPA estimates that state or local agencies tasked with processing PSD permit applications will spend 301 hours and $23,280 processing each permit. Overall, state agencies spend $6.5 million to process the 282 PSD permits currently issued.  If this number were to balloon to even 40,000 permits—a completely reasonable number, given that 1.2 million entities will be exposed—the PSD program will cost state and local agencies $931.2 million, and would require 6,020 full-time employees to implement.  In 2008, Congress appropriated less than one-quarter of the projected administrative costs —only $227.5 million—for state, local and tribal assistance grants for air quality management.  In fact, EPA spent only $971.7 million total on clean air and global climate programs in 2008.  Issuance of 40,000 PSD permits for greenhouse gases would, in and of itself, match or exceed EPA's budget for its entire clean air program!  

Note that the entire PSD process takes, on average, six to twelve months.  In some instances, it can take years. Businesses forced to comply with PSD will be barred from construction for potentially long periods of time, immediately placing our economy at risk.  If the PSD burden is too great, many businesses will simply not undertake new construction projects or modifications.

This is just not the type of program we need as we try to rebuild our economy.  Moreover, these regulations will stop the very infrastructure improvements we are trying to undertake to improve our economy.