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EPA Rollback Reflects Classical Welfare Economics

Trump EPA Deals A Blow To Free Market Fundamentalists

EPA Contradicts Trump Executive Order That Repealed “Social Costs of Carbon”

Self described Democratic Socialist Bernie Sanders excepted, these days, it is rare to engage a public discussion of the fundamentals of political-economy, especially for government agencies or the media to expose flaws in capitalism or so called “free markets”.

Rarer still are efforts to justify government regulation based on so called “market failure” (e.g. see: The Case For Government Regulation).

Since the Reagan administration, public policy has embraced the “free market” – pursuing privatization and deregulation in favor of individual market based choices, incentives, and industry voluntary compliance (all carrot and no stick).

That ideological stance has been used to attack and restrict government intervention in markets and to dismantle regulatory mandates, particularly economic and environmental regulation. (But, hypocritically, governmental regulatory interventions that promote corporate interests or restrict public, union, or democratic interests are just fine.)

So, it is incredibly ironic that the Trump administration embraced the critique of “market failure” and laid out the affirmative case for EPA regulatory intervention in markets.

It is tragic and doubly ironic that it has done so in a deregulatory attack on the Obama administration’s EPA Clean Power Plan.

Thus far, while the media has aggressively criticized this Trump rollback, the coverage has been focused (correctly) on the implications for coal power plants, climate, and public health – not the theoretical foundations.

But deep in the technical weeds of the EPA proposal, the astute reader can find an incredibly ironic and significant critique of “free markets” and justification for EPA regulation.

Even more ironic is the fact that EPA has exposed the lie of President Trump’s Executive Order that repealed EPA consideration of the “Social Costs of Carbon” in regulatory policies.

Here’s the relevant text from the EPA proposal (@ page 13-14):

That analysis is straight out of classical welfare economics on “market failure” and “externalities”  and “public goods” – almost verbatim the theory I learned in Economics 101 way back in 1975:

Market Failure

In economics, market failure is a situation in which the allocation of goods and services by a free market is not efficient, often leading to a net social welfare loss. Market failures can be viewed as scenarios where individuals’ pursuit of pure self-interest leads to results that are not efficient – that can be improved upon from the societal point of view.

Externality

In economics, an externality is the cost or benefit that affects a party who did not choose to incur that cost or benefit.^[1] Economists often urge governments to adopt policies that “internalize” an externality, so that costs and benefits will affect mainly parties who choose to incur them.

Public Good

In economics, a public good is a good that is both non-excludable and non-rivalrous in that individuals cannot be effectively excluded from use and where use by one individual does not reduce availability to others.

Who would have thought that the Trump administration would make a classical welfare economics based case for government regulation?

Freidrich Hayek and Milton Friedman and James Buchanan are rolling in their graves.

“Industrial Stakeholders” Hollow Out DEP Air Permit & Enforcement Programs From The Inside

Corruption, right out in the open

[Intro Note: If readers think I exaggerate in my criticism, please check out the rigorous review conducted by US EPA for conflicts of interest, and appearance of conflicts, for membership on an EPA Science Advisory Board Panel.

Then ask yourself in ANY DEP Stakeholder or ISG participant meets the EPA standards – and note that the NJ DEP conducts no such review – none at all.]

I’ve previously written about how a “by invitation only” “Stakeholder” group of major polluting corporations co-wrote NJ DEP guidelines for pipeline reviews, as well as the technical contents of the DEP’s site remediation program, see: The Oil and Gas Industry Wrote NJ DEP Pipeline Review Guidelines

Today, we take a brief look at how similar abuses occur in DEP’s air quality program.

Importantly, that program not only is supposed to protect public health and environment from the emission of traditional and toxic air pollutants, but – because greenhouse gases are defined as air pollutants under NJ state law – it also has responsibility for climate change mitigation, i.e. regulation of emission sources and reducing emissions of greenhouse gases (a regulatory power DEP has failed to implement or enforce).

I) The Origins of Institutionalized Corruption

Initially during the “Open for Business” deregulatory Whitman administration (1994 – 2002), DEP mangers formed what is now called the “Industry Stakeholders Group” (ISG). During the Whitman DEP, Commissioner Bob Shinn euphemistically called this a “re-engineering” initiative, whereby private corporations and their consultants were given carte blanche to literally re-design the air permit and enforcement programs and write the technical content of DEP air programs (this was where later DEP initiatives like “Technical Manuals” and “Permit Efficiency” came from).

(Skeptics can read Whitman’s STARR Report (see p. 46 summary) “Strategy to Advance Regulatory Reform” (Department of State, Office of Business Ombudsman, July 1995) and read Whitman’s first State of The State address for examples of her no holds barred assault on DEP and regulation. Whitman abolished the Office of Environmental Prosecutor via Executive Order #9 and created the anti-regulatory Business Ombudsman’s Office via Executive Order #15) Whitman sought to roll back stricter NJ state standards to federal minimums via Executive Order #27. These are just a few of Whitman’s attacks that have been expanded upon by Gov. Christie and embraced by Gov. Murphy.)

II)  What Is The Industrial Stakeholders Group?

Currently, the DEP air quality permit and enforcement staff regularly meet with the ISG.

The ISG meetings are comprised exclusively of major polluting corporations in NJ and their paid consultants, including:

• Dupont (Chemours)
• Merck
• PSEG
• Corning Glass
• South Jersey Industries (South Jersey Gas)
• NAES Corp.
• Covanta

Although the ISG meetings are technically “open”, there are no public, environmental group, or academic participants on the ISG (the sporadic Rutgers participant is a compliance officer, not an academic expert).

I could find no evidence of agenda items or public attendance at or participation in ISG meetings. I suspect that the ISG meetings are not widely advertised or promoted by DEP and that the media and environmental groups are not even aware of the ISG.

Here’s how DEP describes the mission of the ISG:

WHAT IS THE ISG?

The Industrial Stakeholders Group or ISG focuses on Air Quality Permitting in the State of New Jersey.  The group is composed primarily of DEP air quality permitting staff, DEP air quality enforcement staff and representatives of regulated industries.  Attendance is open to anyone with an interest in Air Quality Permits.  The group meets quarterly to discuss ways of promoting effective and consistent permits that are protective of the environment and consider the concerns of the regulated community.

Note that the co-equal purpose includes to “consider the concerns of the regulated community.”

The DEP staff provide ISG participants briefings on regulatory issues – including interpretation of existing and development of any new regulations. That regulatory briefing affords crucial strategic opportunities for industry to intervene in, kill, and shape the design and technical content of regulations and how they are enforced.

Consider also how the ISG regulatory briefings integrate seamlessly with Gov. Christie’s Executive Order #2, where industry is given “advance notice of rules” explicitly to provide industry an opportunity “to prevent unworkable, overly-proscriptive or ill-advised rules from being adopted.”

Gov. Murphy and his DEP Commissioner McCabe have retained and promoted the same abuses initially advanced by the deregulatory Whitman DEP and the anti-regulatory Christie DEP’s.

The DEP staff also provide technical assistance to ISG members on how to comply with DEP regulations. In essence, public employees effectively work as consultants to corporate polluters. Again, this practice allows industry to manipulate or skirt compliance obligations. (hit this link to see ISG agendas and participants)

I am not aware of any DEP “Stakeholder” group comprised exclusively of public, community, scientific and academic community experts and advocates that work on developing much needed new regulations or enforcement of existing regulations to protect public health and the environment and address climate change (i.e. mitigation, or reduction in greenhouse gas emissions). 

So, I sent the DEP ISG program manager the following question:

Hank – I note from the DEP ISG website you provided a link to that the mission of the ISG is:

“The group meets quarterly to discuss ways of promoting effective and consistent permits that are protective of the environment and consider the concerns of the regulated community.”

Is there a DEP air permit group that meets regularly to consider the concerns of the public, climate science, and public health communities?

Appreciate your timely reply,

III) How Far We’ve Fallen: From Polluters To Customers

When I began as a DEP professional in 1985, there were institutions and Offices (e.g. the Bureau of Community Relations, numerous workgroups and Advisory Committees) and initiatives that were well staffed by DEP and expressly designed to solicit public concerns, inform and listen to the public, and serve the public interest.

In contrast, there was an arms length, and often adversarial, relationship between DEP and industrial polluters.

But since then, public oriented DEP institutions have been dismantled and efforts to advance the public interest have been abandoned.  Worse, what were once considered polluters became called “the regulated community”.

Continuing down that path, “the regulated community” are now called “customers” that are to be provided “customer service” by DEP staff and “Stakeholders” that must be listened to and coddled with “stewardship” and “voluntary compliance”, not subject to “command and control” “red tape” regulation and “Soviet style” “enforcement sanctions”.

The dominance and “regulatory capture” of DEP by polluting corporate industries has gotten so bad that DEP professionals are not even aware of it and don’t try to hide it.

It’s corruption, right out in the open.

[End note: the dismantling of DEP public interest focus and rigorous regulatory regimes parallels the rise of NeoLiberalism, and can be explained by many things, including the Powell memo, the rise of Public Choice theory, The Chicago School, The Federalist Society, the Koch Brothers and failures of the Liberal Class to defend New Deal values and government institutions.]

Corruption Of Environmental Agency Regulation Not Limited To Trump EPA

Dear Chairman Smith and Members of The Senate Environment Committee:

I am writing to convey recommendations for consideration by Senator Smith’s Task Force on developing Natural Resource Damage [NRD] standards.

As you know, I have long worked on various aspects of NRD policy, before the legislature and NJ DEP and other arenas.

My recommendations below seek to assure that the NRD Task Force considers not only methodologies to monetize NRD injuries, but broader aspects of an effective regulatory policy, including media specific DEP regulatory standards for NRD; ecological standards and wildlife criteria; removal of current legislative barriers to DEP’s adoption of such regulatory standards; and scientific integrity and ethical standards to limit undue influence on  and improper access to DEP.

The NY Times has done a series of superb investigative journalistic reports that document the total corruption of the Trump EPA’s entire regulatory apparatus, particularly under former EPA Administrator Scott Pruitt. Pruitt, who was forced to resign in disgrace, was so corrupt that industry virtually took over EPA.

But even after Pruitt’s departure, the corruption continues.

Yesterday, the Times told the story of former oil and gas industry lawyer William Wehrum, who now heads Trump EPA’s air office, see: As Trump Dismantles Clean Air Rules, an Industry Lawyer Delivers for Ex-Clients

WASHINGTON — As a corporate lawyer, William L. Wehrum worked for the better part of a decade to weaken air pollution rules by fighting the Environmental Protection Agency in court on behalf of chemical manufacturers, refineries, oil drillers and coal-burning power plants.

Now, Mr. Wehrum is about to deliver one of the biggest victories yet for his industry clients — this time from inside the Trump administration as the government’s top air pollution official.

But such corruption is not limited to the Trump administration or the US EPA.

I’ve long documented similar corruption of the NJ Department of Environmental Protection’s regulatory policy – under both Democratic and Republican Administrations.

Here’s one particularly timely example, where we produced a smoking gun letter from the Chemical Industry Council to the NJ DEP.

The CIC letter openly thanks Commissioner Campbell and Assistant Commissioner Hahn – two DEP officials with stellar reputations in environmental policy circles – for killing proposed toxic water quality standards, commonly referred to as “wildlife criteria”.

Take a look at the chemical industry’s thank you letter:

Interested readers can get complete background information in this press release and linked documents.

Of particular importance and relevance right now is the industry’s reference to “Natural Resource Damages (NRD) implications”.

The CIC industry lawyers knew that DEP’s adoption of “wildlife criteria” (i.e. water quality standards for toxic chemicals that harm wildlife) would have huge impacts on NRD enforcement, i.e. numeric regulatory standards would quantify and thereby make it far easier for DEP to determine whether NRD injuries had occurred, how widespread those injuries were, and how much the chemical industry would have to pay to restore natural resources and compensate the public for those injuries.

Simply put, a violation of a very low DEP regulatory standard in water, sediments, soil, fish or bird or wildlife tissue would trigger and facilitate enforcement of NRD damages.

Recall the Christie Administration’s controversial $225 million settlement in the Exxon case. The Corzine DEP had sought $8.9 billion in NRD damages.

Widespread criticism of the Christie settlement of the Exxon case prompted Senate Environment Committee Chairman Bob Smith to establish an NRD work group to make recommendations of how to calculate the economic value of NRD injuries.

As NJ Spotlight recently reported:

Another problem with the [NRD] lawsuits is the state lacks any objective standards to monetize damages to New Jersey’s natural resources. Sen. Bob Smith, the chairman of the Senate Environment and Energy Committee, set up a legislative task force of industry experts and environmentalists to try and come up with a framework to establish such standards.

The abandoned “wildlife criteria” and similar other numeric regulatory standards to trigger natural resource injury are a crucial part of the framework under consideration.

Therefore, in light of this history, we urge the “task force of industry experts and environmentalists, in addition to economic methods to “monetize” NRD injuries to:

1) include reconsideration of wildlife criteria previously abandoned by DEP;

2) the scientific methodology  and eco-toxicology DEP relied on to develop those standards;

3) update, expand the scope of, and promulgate current DEP Ecological Screening Criteria as enforceable regulatory standards to trigger NRD injuries;

4) consider necessary legal and regulatory changes required to remove current legal barriers and enable DEP to adopt those kind of ecological standards to hold toxic polluters accountable for NRD; and

5) scientific integrity and ethical standards to restrict undue and/or improper industry influence on DEP.

For additional background on those issues, see:

• Gov. Christie Killed Ecological Cleanup Standards At Heart Of Exxon Deal

• Ecological Standards Ignored For 16 Years – Polluters Dodge Billions In Liability

• Bombshell: Bungling By DEP Led To Exxon Deal

• Natural Resource Injuries Are Not “Like Pain and Suffering” 

• Christie Comptroller’s Office Rejected Request To Investigate DEP Natural Resource Damage Program

• NEW JERSEY FORFEITS HUNDREDS OF MILLIONS IN POLLUTION DAMAGES

McCabe Seeks To Divide and Conquer 

Isolates and Marginalizes DEP’s Dupont Critics

Manipulates Public & Provides Cover For Local Officials At Partisan Sham “Hearing”

That headline is not rhetorical – once again, Murphy DEP Commissioner McCabe has revealed herself as either a totally naive fool or a malign manipulative political bureaucrat.

[A reader just shot me an email – slams me for getting it badly wrong and says: “McCabe a wealthy corporate sell out – check her record and financials”]

The most recent case of gross malpractice occurred in Pompton Lakes regarding the notoriously failed 30 year long Dupont toxic site “cleanup”. Follow the most recent developments:

Recall that, months after Gov. Murphy compared Dupont Pompton Lakes to the Love Canal disaster, McCabe was criticized for rejecting the pleas of local residents to support designation of the Dupont site as a federal Superfund site, see: Like Christie, Murphy’s DEP says no to Superfund for Pompton Lakes cleanup (June 3, 2108):

Gov. Phil Murphy’s administration has no plans to seek Superfund status to speed cleanup of a contaminated plume and former DuPont munitions site in Pompton Lakes, despite pleas for such action from many residents who must live with the cancer-causing pollution.

“I don’t see any advantage in Superfund,” Catherine McCabe, acting commissioner of the state Department of Environmental Protection, said last week in an interview with The Record and NorthJersey.com.

(We noted that in seeing no advantage in Superfund, McCabe contradicted her former boss, US EPA Region 2 Administrator Judith Enck, who, after leaving office, told the Record:

Six years ago, a leading EPA official told McCabe’s predecessor, then-DEP commissioner Bob Martin, how Pompton Lakes would benefit from Superfund.

Judith Enck, a former EPA regional administrator, pushed Martin and the Christie administration in 2012 to put Pompton Lakes into the Superfund program.

States must nominate toxic sites to begin the Superfund process, and Enck said the Christie administration was the biggest obstacle.

“I think the new administration should consider sending a letter to EPA for Superfund designation,” Enck has told The Record, referring to the new Murphy administration.

The Record also reported that McCabe’s claims of “no advantage in Superfund” were flat out contradicted by McCabe’s former agency, US EPA:

Superfund status would provide a more ironclad cleanup plan for Pompton Lakes that could not be as easily challenged by Chemours, according to U.S. Environmental Protection emails obtained by The Record and NorthJersey.com.

It would also give residents more opportunity to have their concerns heard. And it would allow them to hire independent contractors to examine mounds of scientific data.

And of course, based on McCabe’s own prior legislative testimony, I predicted exactly this would happen long before it did, see:  Murphy DEP Admits “Continuity With Christie DEP” On Dupont Toxic Fiasco (May 17, 2018).

After McCabe announced her “no Superfund” decision, local residents were especially enraged because McCabe made that decision without meeting with or even talking to them. That betrayed a promise they had received from McCabe’s Chief of Staff, Eric Wachter and thought they had received personally from Gov. Murphy himself on a WNYC radio call in show. (and we predicted that too – see Played in Pompton Lakes – Again)

To make amends for betraying local residents, McCabe agreed to a meeting with them.

On Thursday August 16, 2018, Commissioner McCabe, Chief of Staff Wachter, DEP’s Communications Director and McCabe’s “special assistants” Brendon Shank, Derek Hardy &  Chris Gough finally met with several local residents and members of local activist groups CCPL and PLREI.

McCabe brought her political team – not one DEP expert or staff familiar with the Dupont cleanup attended that meeting. I was told that McCabe apparently was not even familiar with the terms of the 1988 Administrative Consent Order (ACO) between DEP and Dupont. That ACO governs the DEP’s oversight of the cleanup and is a crucial document.

It is simply incomprehensible that a DEP Commissioner would hold a meeting with informed residents without a DEP expert and without detailed briefings on and knowledge of the regulatory oversight documents (i.e permits, ACO, etc).

But before the meeting with residents went down – a meeting which took DEP months to arrange – word of the meeting got out to local officials and others, who then demanded their own meeting with DEP.

Despite residents’ longstanding disagreements with local officials, whose negligence in protecting residents and consistently supporting Dupont, (see: Is Pompton Lakes The Most Corrupt Local Government In NJ?) DEP and EPA borders on corruption, McCabe immediately accommodated that request, which was held just one day after meeting with residents.

In this second meeting, McCabe met with an invited small group of local officials and Republican State legislators representing the District.

Republican Assemblyman Kevin Rooney falsely called that political meeting an “Environmental Hearing”.

It was not a “hearing”.

It was a divisive dog and pony show, an orchestrated and partisan sham to create the false appearance that local officials and State legislators are aggressively holding DEP and Dupont accountable and looking out for residents.

Here’s a screen shot from Assemblyman Rooney’s Twitter feed:

Here’s how former local official and CCPL leader Lisa Riggiola felt about that “hearing”, calling out Rooney in this comment on Rooney’s Facebook page:

A hearing and many of the residents of the plume that have been fighting for their lives for a decade are not invited to a hearing?   You sure this wasn’t a political event for the Republican Party?  Are these some of the same people that have shunned the plume residents, showing them not an ounce of care or respect let alone do anything positive to fight for the right clean up?  You have a hard time after a decade for them to believe that some of them are changed after all these years?

Right on, Lisa! You got it exactly right.

But, of course local and State politicians are going to play these bullshit games.

A DEP Commissioner is NOT supposed to do so and should have the political chops to understand these games and avoid getting manipulated by them (see:  The Murphy DEP Is Out of Control In Politicizing Dupont Pompton Lakes Permit Review).

By holding 2 meetings – both private, by invitation only, and political – McCabe has sown further mistrust and division among the people of Pompton Lakes, while also undermining trust in DEP.

McCabe is playing the same manipulative game as local officials have in trying to isolate and marginalize the residents who criticize Dupont and DEP. She has shown disrespect to them.

But instead of avoiding these games and manipulation, McCabe – just like she did on that wetlands “tour” with Senate President Sweeney – completely caved in and willingly participated in gross political manipulation.

That’s why there were no DEP scientists or experts in the meeting with residents, just McCabe sycophants and political hacks.

Shame on her – again.

Looks Like Commissioner McCabe Didn’t Get The Memo

We’ve previously ridiculed the “moral imperative” on climate change that purportedly drove NJ Gov. Murphy’s recent nuclear bailout and explained how current NJ DEP regulations fail to address climate change.

Today we – very briefly – highlight another huge contradiction between the Gov.’s purported policy goals and his DEP’s actual performance thus far – a performance that makes it impossible to achieve the Gov.’s legislative goals, absent significant policy changes at DEP.

NJ Spotlight recently reported:

Competitive Power Ventures, the owner of a 725-megawatt power plant in Woodbridge Township, is seeking approval to build another natural-gas plant adjacent to its existing unit in the Keasbey section of the community….

The proposal is the fourth natural-gas plant seeking necessary approvals from local and state permitting authorities. But it also raises questions about whether the sector has absorbed the message from the Murphy administration that it wants to have 100 percent clean energy by 2050.

Despite previously reporting on DEP approvals of proposed new gas plants, Spotlight chose to give DEP a pass and merely question whether “the [gas] sector]” has absorbed Gov. Murphy’s message.

The Spotlight story concluded with this “he said” claim (instead of a fact claim):

Environmentalists say the new natural-gas plants conflict with that [Global Warming Response Act] target.

Aside from the meek “Environmentalist say” characterization, and failure to mention the fact that DEP has begun green lighting the construction of almost 2,000 MW of new gas power plants and renewed and issued new permits for major gas pipelines, Spotlight knows that there is really no question that there is a conflict between the proposed new gas plants and Gov. Murphy’s purported goals.

Here’s what Gov.Murphy’s legislation actually says about gas infrastructure:

(7) In order to meet the goals under the “Global Warming Response Act,” P.L.2007, c.112 (C.26:2C-37 et seq.), to reduce greenhouse gas emissions 80 percent by 2050, it will be necessary to significantly reduce emissions from the electric power generation sector. This will require reducing the State’s heavy reliance on natural gas for electric power generation, the primary source of emissions from the electric power generation sector. ~~~ P.L. 2018, c. 16

Did DEP Commissioner McCabe get the memo?

Or Did Murphy not write one?