Regulatory experts say EPA’s recent directive to increase consistency in regulatory cost-benefit analyses appears more limited and complicated than the agency had initially planned.
This week, EPA Administrator Andrew Wheeler directed his assistant administrators to reform how cost-benefit analysis is applied "in areas that are in need of greater clarity, transparency and consistency."
Such reforms could include rulemakings involving notice and comment, and the reforms would be specific to each program office’s work (Climatewire, May 22).
The mandate has added to concerns the agency would seek to limit its consideration of co-benefits. Those relate to pollutants that are reduced as a result of a regulation, but are not the pollutant directly targeted by the rule.
The new memo is a shift from the advance notice of proposed rulemaking the agency released last year, which appeared to be considering an agencywide rulemaking, said Stuart Shapiro, a professor at Rutgers University and former White House Office of Information and Regulatory Affairs official under President George W. Bush.
"What I read from that is they got comments that the air office operates under the Clean Air Act and sets up a different framework for how it considers costs and benefits, so an agencywide rulemaking probably won’t work," Shapiro said. "It sets them up for a more complicated process."
Instead of drafting a single reform, the Office of Air and Radiation will draft its own action first, followed by rulemaking from three other program offices.
The different program offices are covered by different environmental laws. Even within a single office, certain pollutants are governed under different sections of the law.
‘I don’t know the problem’
Former EPA officials questioned the utility of the agency’s proposed actions, noting that leaders could have instead opted to release guidance on cost-benefit analysis.
Janet McCabe, the former acting assistant administrator of the air office under President Obama, said industry groups had made comments about changing EPA’s approach to cost-benefit analysis "a lot."
"It was interesting to read the memo, because some of the things it said the agency should do sounds like what the agency does, and has always done," McCabe said. "There were not inconsistencies that I was aware of."
McCabe added that she was not surprised EPA was focusing on rulemaking out of the air office first because of the number of rules that impose costs on industry and that also provide substantial health and environmental benefits.
The former EPA air chief pointed out that the memo did not necessarily mean program offices will decide to proceed with rulemaking, but listed it as an option on the table.
She said the "piecemeal" approach to reforms could end up limiting who would be able to weigh in on the changes.
Some observers compared the actions to the agency’s highly controversial efforts to repeal the "appropriate and necessary" finding underlying the Mercury and Air Toxics Standards, as a possible model for how the agency might proceed with individually focused cost-benefit analysis rulemaking.
"I don’t know the problem they are trying to solve by doing this," said Ellen Kurlansky, a former EPA policy analyst, of the memo.
She noted that the agency’s effort on MATS "seems to be farther along in manipulating costs and benefits" than in other rulemaking.
"They want to see cost-benefit more ingrained into the design of the rule. In order to do that, they want to see only some of the consequences costed out. They don’t want to look at co-benefits or benefits that can’t be quantified, and yet, on the cost side, they do look at co-costs," Kurlansky said.
‘Risk is not zero’
John Graham, the former OIRA administrator under Bush, said "the devil is in the details" on whether the cost-benefit changes would end up affecting how the agency counted co-benefits or included benefits of rulemaking that are difficult to quantify.
"I think it’s hard to tell. I don’t interpret it as getting into changing calculations in how costs and benefits are done. It is trying to clarify the role of cost-benefit analysis," said Graham.
Shapiro, a proponent of cost-benefit analysis, said a good model for the agency would be the Office of Management and Budget’s Circular A-4.
"The risk is not zero" that the agency could use any cost-benefit rulemaking to limit consideration of co-benefits, he said.
"But the specific departments within EPA are going to be guided by statute first. Our statute tells us we have to consider all public harms, and the statute tells we have to look at all of the science," Shapiro said.
McCabe also noted that the definitions of statutory terminology the agency is considering in its reforms have often been interpreted in case law "in one statutory context or another."
She said, "If they are thinking of actually changing the meaning, they can’t do that by policy."