Economic analysis could undermine Trump rule repeal

By Ariel Wittenberg | 10/30/2019 01:04 PM EDT

When the Trump administration finalized its repeal of the Obama-era Clean Water Rule last month, it also quietly updated an economic analysis of the repeal’s costs and benefits.

A new economic analysis could leave the Trump administration's repeal of the Obama-era WOTUS rule more vulnerable to litigation.

A new economic analysis could leave the Trump administration's repeal of the Obama-era WOTUS rule more vulnerable to litigation. Army Corps of Engineers

When the Trump administration finalized its repeal of the Obama-era Clean Water Rule last month, it also quietly updated an economic analysis of the repeal’s costs and benefits.

The 195-page final analysis is nearly 10 times longer than the one that accompanied the Trump administration’s initial proposal in 2017 to repeal the rule and estimates different costs and benefits of repealing the regulation, which clarified which wetlands and waterways are protected by the Clean Water Act.

The updated analysis — which the public did not have the chance to comment on — could leave the repeal vulnerable to legal challenges, experts say.


"The agencies aren’t required to do an economic analysis, but once they decide to do it, courts typically want them to do it right," Vermont Law School professor Pat Parenteau said. "If there are flaws in the analysis, and if the public hasn’t had a chance to see it, that could fit into the box of arbitrary and capricious."

Already, a coalition of environmental groups have cited the new analysis in their legal challenge to the repeal filed last week.

The lawsuit, filed in the U.S. District Court for the District of South Carolina, argues that the administration already made its mind up to repeal the Clean Water Rule, also known as the Waters of the U.S. rule, or WOTUS, before beginning the rulemaking process. The new economic analysis is one of many factors the groups highlight to support their case, including former EPA Administrator Scott Pruitt’s history of challenging the Clean Water Rule in court and President Trump’s executive order directing EPA and the Army Corps of Engineers to repeal the rule.

"This is more evidence to us that they decided the result first and then did studies that they think purport to support the result," said Southern Environmental Law Center attorney Blan Holman, who is representing the challengers in the case. "I think it adds significantly to the picture."

EPA did not respond to questions about why it did a new economic analysis for the final rule or why it did not allow public comment on the document.

‘Extreme’ differences

The latest economic analysis isn’t only much longer than the 2017 version, it also uses different methodology to examine the impacts of repealing the Clean Water Rule and reaches different conclusions about the costs and benefits of rescinding it.

Back in 2017, the Trump administration calculated that the repeal would result in $162.2 million to $476.2 million in annual avoided costs and $33.6 million to $72.8 million in forgone benefits.

That initial analysis was criticized by environmental groups and policy experts for slashing the benefits of wetlands by claiming several key studies were too old to be included in its calculation, even though the analysis included studies of similar ages about the costs of regulating wetlands (Greenwire, July 7, 2017).

EPA and the Army Corps did not immediately respond to those criticisms. Though the Trump administration issued a supplemental proposed repeal of the Clean Water Rule in 2018 to beef up the legal justifications for rescinding the Obama-era standard, it did not issue a new economic analysis until last month, when it finalized the repeal.

The new analysis finds that the repeal will produce annual avoided costs ranging between $116 million and $174 million and annual forgone benefits of $69 million to $79 million.

The different conclusions between the analyses are likely based on the fact that the administration used different methodologies to reach them.

The 2017 analysis largely borrowed from work the Obama administration had done to calculate the costs and benefits of the Clean Water Rule by predicting how many more wetlands and waterways would be protected nationwide under the standard.

Now, the Trump administration says both the 2017 and Obama-era analyses actually overstated the Clean Water Rule’s costs and benefits by failing to look at how states would respond to changes in federal regulations, among other things.

"The analysis for this final rule responds to the concerns raised by commenters by incorporating a more balanced, robust characterization of possible state responses to a change in jurisdiction," the final repeal rule explains.

That includes calculations that 18 states would be "unlikely" to update their regulations for dredging and filling in wetlands in response to the Clean Water Rule repeal, while 10 would be "unlikely" to update their regulations for point source discharges in response to the repeal.

Those calculations mirror yet another economic analysis the Trump administration conducted earlier this year to support its new definition of Waters of the U.S., which also looked at potential state responses (Greenwire, Jan. 21).

That analysis was also slammed by critics, who say the administration relied on incorrect assumptions about states to predict their behavior.

Betsy Southerland, a former career official in EPA’s Office of Water, says the latest repeal economic analysis is similarly flawed.

She noted that very few states have their own programs regulating water pollution, and those that do generally cover fewer types of waterways and wetlands than the federal government.

"It is overly positive," she said, noting that the analysis predicts 39 states will likely update their regulations for point source discharges when only 25 states have set their own standards more stringently than the federal government’s. "Thirty-nine is quite a bit more than 25."

Bethany Davis Noll, litigation director at New York University School of Law’s Institute for Policy Integrity, agreed.

She also faulted the new analysis for only focusing on how the repeal would affect individual states, instead of looking at how varied levels of state waterway protections could lower water quality in states with strong protections if they are downstream of those that are more lax.

"The Mississippi River affects a lot of people in a lot of different states, and this is essentially acting like the only thing that matters is what happens in a single state," Noll said.

She characterized the difference between the 2017 analysis and last month’s as "extreme."

‘Either way it is a problem’

The new economic analysis could be a liability for the Trump administration in court, if a judge believes the administration improperly relied on the new analysis.

"There is case law that says if you rely on an economic analysis that is fundamentally flawed, it can be arbitrary and capricious," Noll said.

Whether the agency relied on it is an open question.

The final repeal states, "The agencies are repealing the 2015 rule to ensure that they do not exceed their statutory authority, not based on analyses of the economic impacts of the 2015 rule.

"While the agencies have striven to make the economic analysis supporting this final rule as transparent and accurate as possible, their goal in doing so is solely for informational purposes," it says.

Jonathan Adler, a law professor at Case Western Reserve University, said, "The fact that there is a new analysis out there, by itself, doesn’t mean they did something wrong.

"If it is true that they weren’t relying on it, and there is sufficient information in the record to justify the decision, then I would think they are OK," he said. "Multiple courts have already said that the Obama WOTUS rule is invalid, so there are lots of reasons they might have wanted to get rid of it."

He said a court will have to decide whether it agrees EPA and the Army Corps truly didn’t rely on the analysis.

Parenteau, at Vermont Law School, said the new economic analysis may not be the strongest piece of evidence for challengers seeking to get the repeal rule thrown out. A judge would have to consider not just whether the Trump administration "relied" on the new analysis, but also whether allowing the public to weigh in would have made a difference to the final rule.

"If the public had been able to comment, would it have changed their mind?" he asked.

But he said the Trump administration’s decision to redo the economic analysis in and of itself could undermine any argument that it did not rely on the analysis.

"It has to mean something, otherwise they wouldn’t have done it," he said. "All a court is doing in a case like this is policing foul lines, like calling balls and strikes. And I can see a court saying, that’s just not fair to the public to hide the ball."

Holman, at the SELC, said he will be paying close attention to whether the Department of Justice includes the new economic analysis in the administrative record it files in court. If it does, that could be a clue that the economic analysis was part of the administration’s decisionmaking.

"Either way it is a problem," he said. "Either they’ve relied on it explicitly and they didn’t give the public the opportunity to comment on it and critique it, or they say that they didn’t rely on it but they did," he added. "This is just a very strange process because they made the decision to repeal this rule, and bizarrely it took them two years to get it done, but then they were in enough of a hurry they couldn’t get the economic analysis on the public record."