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June 23, 2020
EPA seeks consistent and transparent cost-benefit analysis

The EPA proposed a new rule on June 11, 2020, that would impose specific requirements for the Agency to utilize uniform and transparent “high-quality analysis” in its statutory obligations in the rulemaking process under the Clean Air Act (CAA). Many statutes, including the CAA, include cost consideration language but do not provide exact guidelines or context around potential impacts. This rule change is expected to provide those specific standards.

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There are three components to the proposal. One change would require the EPA to complete a benefit-cost analysis (BCA) for all future substantial proposed and final regulations under the CAA. Second, the EPA proposes that these BCAs will “be developed using the best available scientific information and in accordance with best practices from the economic, engineering, physical, and biological sciences.” The third element would enact “additional procedural requirements to increase transparency in the presentation of the BCA results, while maintaining the standard practices of measuring net benefits consistent with Executive Order (EO) 12866.” This EO was issued by President Bill Clinton in 1993 and requires “significant regulatory actions” to be submitted to both the Office of Management and Budget (OMB) and the Office of Information and Regulatory Affairs (OIRA) for review.

The EPA’s proposal furthers the Trump administration’s efforts to reform environmental regulations with a goal, per President Donald Trump’s EO 13771, of managing “the costs associated with the governmental imposition of private expenditures required to comply with Federal regulations.” To do so, the administration states that “the cost of planned regulations be prudently managed and controlled” using budgeting procedures.

“This is the one of many actions this administration has taken that will improve the transparency and consistency of EPA’s cost-benefit analyses,” EPA Administrator Andrew Wheeler said in a news release.

Many EPA statutes require cost-benefit analysis on the part of the Agency when enacting new rules. However, there are not currently any “regulations that ensure that the public is provided an analysis of the benefits and costs in a consistent manner across offices,” according to the Agency.

“The new proposed rules will provide a more prominent treatment of costs,” said Joe Guida, an environmental attorney and managing shareholder of Dallas-based Guida, Slavich and Flores, P.C.

For some, the changes are long overdue.

“For too long the cost-benefit analysis has been distorted to overstate the benefits of certain rules solely to achieve political rather than environmental ends,” stated Rich Nolan, president and CEO of the National Mining Association, in a press release issued by the organization on June 4, 2020. “In many cases, the EPA touted the co-benefits from pollutants that are already regulated under other rules—a double-counting that should have no place in consistent and transparent rulemakings—while also undervaluing the cost of regulatory compliance. Today’s proposed rule provides a pathway for a more reasonable regulatory process necessary to support the economic recovery that our nation is working towards.”

The move is also supported by Western caucus members, who were represented in a statement released by House Republican Conference Chair Liz Cheney. “This commonsense approach will ultimately protect economic prosperity and critical jobs across the state of Wyoming,” she said.

Background

An Advance Notice of Proposed Rulemaking was issued by the EPA in 2018 seeking public input. Based on comments received, Wheeler directed the Agency “to develop rules for notice and comment that outline how benefit-cost considerations will be applied to future rulemakings in a more consistent and transparent manner.”

In Michigan v. EPA, 135 U.S. 2699, 2707 (2015), the Supreme Court decision stated “[c]onsideration of cost reflects the understanding that reasonable regulation ordinarily requires paying attention to the advantages and the disadvantages of agency decisions.”

The EPA’s published background on this proposed rule states that the CAA includes provisions requiring costs to be considered in creating regulations. It cites this example from Section 112(n)(1)(A) of the CAA where its Administrator is directed to “regulate electric utility steam generating units under [Section 112], if the Administrator finds such regulation is appropriate and necessary.”

The wording “appropriate and necessary” suggests some attention must be paid to costs. However, the current regulations do not provide consistent and transparent processes for achieving this goal.

Previous EOs dating as far back as the Ford administration have been issued directing federal agencies to “conduct regulatory analyses before issuing major rules, including a consideration of their economic consequences …,” according to “Evaluating the Trump Administration’s Regulatory Reform Program,” a publication by the Brookings Institution.

Orders such as this one and subsequent EOs clearly established the requirements of preparing a BCA, and noted economists Arrow et al. (1996a, 1996b) determined that BCAs “can provide an exceptionally useful framework for consistently organizing disparate information, and in this way, it can greatly improve the process and, hence, the outcome of policy analysis. If properly done, BCA can be of great help to agencies participating in the development of environmental regulations …” (as cited by the EPA).

Requested input

The EPA requested information and comments from the public in these specific areas:

  • Concerns related to currently perceived inconsistencies and lack of transparency in the BCA rulemaking process, including specific examples;
  • Precise suggestions as to how to increase consistency and transparency in the BCA rulemaking process while adhering to existing statutory requirements;
  • Comments regarding retrospective analysis and review; and
  • Recommendations for regulations governing the EPA’s methods for rulemaking in the future.

Commenting procedures

The proposed rule was published on June 11, 2020, and comments by the public can be submitted until July 27, 2020.

Due to COVID-19, the EPA closed its Docket and Reading Room to the public on March 31, 2020, and the Agency is not currently accepting U.S. Postal Service mail. The EPA prefers comments be submitted at www.regulations.gov using the Docket ID No. EPA-HQOAR-2020-00044.

The Agency will announce the schedule for one or more virtual (online) public hearings later. In-person public hearings are currently suspended in response to Centers for Disease Control and Prevention (CDC) recommendations due to COVID-19.

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