New CRS Report Details Job-Destroying Impacts of EPA’s New Ozone Standard on Arizona’s Economy02/25/2016
Phoenix, Arizona (February 25, 2016) – As the U.S. Environmental Protection Agency conducts a workshop on background ozone in Phoenix this week, the Center for Regulatory Solutions (CRS), a project of the Small Business Entrepreneurship Council (SBE Council) is releasing a new report detailing the economic impact of EPA’s new lower federal ozone standard.
The report, “A Natural Disadvantage: Punishing Arizona for Ozone Levels Beyond its Control,” details how EPA’s lowering of the National Ambient Air Quality Standards (NAAQS) from 75 parts per billion (ppb) to 70 ppb could force as many as nine counties in Arizona into violation, or non-attainment, of federal law. Violation of the 70 ppb standard would trigger a process that effectively transfers authority for permitting and planning programs from local and state officials to the EPA. This could allow the EPA to control decisions regarding new manufacturing facilities, expanding existing businesses, and upgrading the state’s road network.
Making matters worse for Arizona is the fact that elevated amounts of background ozone could make complying with the EPA’s stringent new ozone standard nearly impossible. That is because a large share of Arizona’s ozone is generated by factors outside the state’s control, such as pollution originating overseas or outside the state, the region’s high elevation and topography, or natural occurrences like wildfires. In fact, the EPA recently admitted it did not have a clear plan for addressing background ozone in a white paper it released months after its decision to impose the more stringent ozone standard.
The Phoenix workshop has drawn criticism from stakeholders for being partially closed to the public. U.S. Senator Jeff Flake (Ariz.) expressed his concern Wednesday that “some of the most important discussions are set to take place behind closed doors.” Senator Flake’s concerns were shared by Roger McClellan, past chair of EPA’s Clean Air Scientific Advisory Committee, who advocated earlier this week for EPA to open the entire workshop to the public. “These are tough issues concerning background ozone, especially in the west, that must be addressed in an equitable manner to avoid punishing westerners who treasure both the environment and jobs,” McClellan said in his statement.
Given that background ozone complicates Arizona’s ability to lower ozone levels further, a bipartisan group of business leaders, local and statewide politicians, and trade group representatives are speaking out against the EPA’s new federal ozone standard, sounding the alarm about how imposing new regulations could have a devastating impact on an economy still recovering from the Great Recession.
“Arizona has worked hard to reduce ozone levels and meet the 75 parts per billion ozone standard set in 2008. But now EPA has moved the goalpost, imposing stringent new standards that will plunge the majority of the state back into non-attainment status,” said Karen Kerrigan, President of the Small Business and Entrepreneurship Council. “Even more alarming, Arizona businesses will be unfairly punished for air pollution that is beyond their control. Economic growth, job creation and vital infrastructure projects are all at risk in Arizona under this new standard – and there is little that can be done by the state. EPA should not implement the lower standard until they are able to fully account for and address the issues associated with background ozone.”
Excerpts from the Report:
- By lowering the National Ambient Air Quality Standard (NAAQS) from 75 parts per billion (ppb) to 70 ppb, the U.S. Environmental Protection Agency (EPA) could plunge as many as nine Arizona counties into violation, or non-attainment, of federal law. According to the CRS economic analysis, these counties represent: 97 percent of the state’s economy, 95 percent of the state’s jobs, 93 percent of the state’s population.
- Today in Arizona, just two counties – Maricopa and Pinal – are struggling to meet the former ozone standard, set in 2008, of 75 ppb. But they are close enough to the 2008 benchmark to have “marginal non-attainment” status, which means they are “not required to adopt additional local controls for existing sources,” according to the Clean Air Act. EPA’s decision to ratchet down the standard to 70 ppb will change all of that. Maricopa and Pinal counties will face tighter federal controls and seven more counties across the state will also be caught in the same net, giving EPA alarming new influence over permitting and planning decisions for 97 percent of Arizona’s economy.
- EPA ratcheted down the standards without a real plan in place to deal with background ozone levels that Arizona communities cannot control. Until EPA has a handle on how much ozone is locally sourced and how much comes from outside the state or outside the country, it should not move ahead with enforcing the new 70 ppb ozone standard.
Maricopa County Impacts
- Maricopa County, which is dominated by the Phoenix-Mesa metro area, accounts for 70 percent of Arizona’s GDP and 68 percent of the state’s employment.
- The majority of the county’s emissions, 64 percent, come from on-road vehicle traffic. This is not surprising since the well-populated Phoenix-Mesa metropolitan area is ranked 9th in the nation in terms of travel delays. It is therefore predictable that highway users will be prime targets for extracting reductions of ozone-forming emissions.
- Major utilities represent another source of emissions, but it will be difficult to extract further emissions reductions from local power-generating facilities as the majority of the county’s capacity comes from 11 clean-burning natural gas plants, including the Gila River Power Station, Santan Generating Station, Mesquite Generating Station and the Harquahala Generating Project.
- In 2014, Maricopa County finally attained compliance with the ozone level set in 1997 (80 ppb), after 17 years of effort.
Pima County Impacts
- Pima County, dominated by the city of Tucson and its suburbs, is the second-largest economic powerhouse in the state, accounting for 13 percent of the state’s GDP and employing 14 percent of Arizona’s workers.
- Pima’s most recent ozone levels are just above the 70 ppb standard, at 71 ppb. It would be difficult for the county to further reduce NOx emissions due to traffic congestion (61 percent of Pima County’s NOx emissions are caused by traffic congestion), as the City of Tucson was ranked 44th in the nation for travel delays in 2014.118 Additionally, because of its high elevation, Pima County has a history of stratospheric intrusion events, which are unpredictable and tough to plan for.
- Pima County will find it difficult to extract further emissions reductions from local power-generating facilities, since the majority of the county’s capacity comes from five clean-burning natural gas plants. These facilities will now have to incur additional expenses to achieve compliance, with the new rule effectively acting as a tax on the power-generating industry, the cost of which will be passed on to its consumers.
Yuma County Impacts
- The county’s ozone levels have increased slightly from 74 ppb to 77 ppb within the last decade despite its small population and small manufacturing base.
- Yuma’s close proximity to California is the likely reason for its high ozone levels. California has the highest ozone levels in the country, and studies indicate that man-made emissions from California raise ozone levels in downwind states like Arizona, Nevada, and Utah by 2 to 8 ppb in the spring and 5 to 15 ppb in the summer. It’s important to note that EPA’s definition of background ozone does not include interstate transport of emissions, yet there is no doubt that these emissions are not created within Arizona nor can Arizona control for them. Yuma also takes in air pollution from its southern neighbor, Mexico.
- Another challenge for Yuma County is its staggering unemployment rate: 23 percent.
- With an average ozone level of 77 ppb, the county is vulnerable to even greater economic hardship as regulators struggle to find ways to bring the county into compliance with EPA’s ozone standard
Cochise County Impacts
- Cochise’s most recent ozone levels are just above the 70 ppb standard, at 72 ppb. It would be tough for the county to further lower ozone levels, due its high elevation and history of wildfires.
- With an unemployment rate of 8 percent and a poverty rate of 19 percent – significantly higher than the national averages of 4.9 percent and 14.8 percent, respectively — restrictions that would hamper Cochise’s ability to attract new businesses and stimulate investment would be devastating. Being designated a “non-attainment” county would make it even harder for the county to attract jobs and achieve the economic growth it so desperately needs.
Gila County Impacts
- Gila County also has a higher level of ozone largely due to its high elevation, reaching 4,890 feet in some areas, and frequent wildfires.
- Gila’s emissions of ozone precursors are miniscule compared to those in other Arizona counties, making background ozone the likely culprit for Gila’s high ozone levels.137 One source of ozone precursors that can be controlled is on-road vehicle emissions that account for 45 percent of the county’s ozone level. The remaining emissions likely come from the county’s mining sector, which is a significant source of employment for Gila residents.
La Paz County Impacts
- LaPaz County is also a rural county, with the second-lowest emissions of ozone precursors among the nine counties evaluated.
- Due to ozone drifting into Arizona from California, La Paz’s average level of ozone from 2012 to 2014 was still 2 ppb over the current standard, putting it in non-attainment.
Coconino County Impacts
- Some cities in Coconino County, such as Flagstaff, are located at 6,909 feet above sea level, and are therefore as such are vulnerable to stratospheric intrusion events.
- As with other counties, Coconino’s problems with wildfires make it harder for the county to comply with the new national ozone standard.
Report Highlights Bipartisan Voices Speak Out:
Glenn Hamer, President and CEO, Arizona Chamber of Commerce and Industry: “There’s only so much a state can do. There are no fences that keep out ozone blowing over from California, there are factors beyond our control. We’re doing everything as a state right to improve our economy, the problem is that, on the federal side, the actions by the federal government and specifically the EPA are making it more difficult for our economy to reach full speed.”
Congressman Paul Gosar (R) (AZ-4): “In late October, EPA once again moved the goal posts by unilaterally publishing a fundamentally-flawed new regulation that dramatically lowered the ozone standard for communities throughout the nation. This blatant overreach, not based on the best available science, will kill tens of thousands of jobs annually and cause more harm to our economy than any regulation in the history of this great country. Senator Jeff Flake (R-AZ) and I are leading the charge at the national level and have introduced companion legislation that utilizes the Congressional Review Act to reject this overreaching new mandate. We expect this legislation to pass the House and Senate in coming weeks.” (Interview with CRS)
State Representative Mark Cardenas (D) (AZ-19): “I feel that it’s crucial to consider the financial impact of these systems on our communities. Many businesses will struggle and local communities will suffer if resources have to be used to meet new standards so quickly. New businesses may be reluctant to locate here, which could be detrimental to the economy, and particularly, the job market.”
Senator Jeff Flake (R) (AZ): “Unfortunately, EPA’s proposed tightening of the ozone standard will represent an unnecessary and costly burden our economy.”
Arizona Attorney General Mark Brnovich (R): “We all want clean air. However, reducing the ozone standards to 70 parts per billion will be nearly impossible for Arizona to attain. The new Rule completely ignores Congress’ intent that the EPA set ozone levels for the states that are actually attainable. The financial stakes for this state are enormous if we are unable to comply and I am going to do everything within my power as attorney general to protect Arizona.”
Arizona Gov. Douglas A. Ducey (R): “If the proposed ozone standard is adopted, the vast majority of Arizona, including such pristine locations as Grand Canyon National Park, would be designated as ‘nonattainment’ areas. This means more regulation and higher operating costs for businesses and fewer job opportunities for Arizonans. In fact, the proposed standard is so aggressive that even the EPA acknowledges that existing technology can only account for 60% of the ozone reductions that they demand. In the absence of technological advances that facilitate further emissions reductions, businesses will be forced to consider scrapping existing plants and equipment in order to comply.”
State Representative Jonathan A. Larkin (D) (AZ-30): “You are aware that the economy has grown at a very slow pace and many businesses have struggled to meet the 2008 standards. For many it has been an expensive and stifling effort. Some businesses found expansion was out of the question because resources were expended in meeting the ozone standards. Of course, when businesses can’t expand it means jobs are not created. Every business wants to reach attainment, but doing so can be out of reach for some. New businesses may be reluctant to take on even more stringent regulation.”
Eric C. Massey, Director of Air Quality, Arizona Department of Environmental Quality (ADEQ): “The CAA does not require the Administrator to establish the NAAQS at a zero-risk level or at background concentration levels. However, for many jurisdictions, setting a standard at 60 or 65 ppb would be similar to setting a standard at or just above zero, because background and other emissions are uncontrollable by states. ADEQ urges the EPA to set the standards’ ranges at the highest levels supported by the most defensible science that provide either an adequate margin of safety (primary) or protect against anticipated effects (secondary). Any standard lower than that supported by the most recent and reliable scientific evidence must be contemplated in future reviews, as future reviews may yet produce the requisite defensible evidence to support further lowering the standard.”
The Center for Regulatory Solutions is a project of the Small Business and Entrepreneurship Council, a 501c(4) advocacy, research, education and networking organization dedicated to protecting small business and promoting entrepreneurship. For twenty-three years, SBE Council has worked to educate elected officials, policymakers, business leaders and the public about policies that enable business start-up and growth.
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