Industry groups see another wish about to come true under President Trump.
EPA Administrator Andrew Wheeler released a memo last week urging the agency's top officials to revise the way EPA weighs the costs of regulating pollutants against the benefits of limiting their release for public health and the environment.
Instead of drafting an agencywide rulemaking as initially projected last year, the offices of Air and Radiation, Chemical Safety and Pollution Prevention, Land and Emergency Management, and Water are being asked to make their approach to cost-benefit analysis more consistent.
The planned changes follow years of industry requests. Industry wants EPA to draft rules by first assessing whether benefits outweigh the costs, and it wants regulations that are least burdensome while still providing environmental protection, groups say.
"We are very excited about the potential of this regulatory effort," said Ross Eisenberg, vice president of energy and resources policy at the National Association of Manufacturers.
Industry groups have called out EPA for the way it has included co-benefits — the reduction of pollutants not directly targeted by rulemaking — in its estimates of benefits. Groups such as the American Chemistry Council, the National Association of Manufacturers and the American Petroleum Institute challenge the extent to which EPA includes the benefits of reducing fine particulate matter — also known as PM2.5 — a pollutant associated with cardiovascular problems, aggravated asthma and premature death.
The groups contend EPA's approach has led to double-counting benefits, and they want the agency to narrow its focus so it calculates benefits only from reducing targeted pollutants. Public health experts and former EPA officials counter that the agency is clearly directed to consider co-benefits. They say that there is no known safe level of fine particle pollution exposure and that efforts to limit consideration of the pollutant would endanger public health (Climatewire, Aug. 6, 2018).
Industry groups also want EPA to codify guidelines on cost-benefit analysis as outlined in the Office of Management and Budget's guidance on regulatory analysis and in presidential executive orders requiring agencies to assess costs and benefits of certain rules.
Members of the National Association of Manufacturers hope the agency will decide to draft new rules on how EPA conducts cost-benefit analysis, though it's not clear yet whether that will be EPA's ultimate approach. Rulemaking would more firmly codify cost-benefit principles outlined in OMB's Circular A-4 and in Executive Order 12866, said Eisenberg. If the agency instead opts for guidance, that could more easily be overturned by a different administration.
The industry group describes changes to the cost-benefit analyses as more significant than "any single regulatory action" (Climatewire, May 22).
"If you are going to examine a scope of benefits, you are going to examine a scope of costs. You need to be consistent from rule to rule, that is the issue," Eisenberg said.
NAM brought its requests on cost-benefit to the administration early on, during the initial transition period at EPA. Eisenberg said the group would have preferred a legislative fix, but that didn't appear to be "in the tea leaves."
The request also included a reassessment of the social cost of carbon, the metric used to put a dollar value on the emission of a ton of carbon dioxide. Eisenberg argued that a better system of cost-benefit analysis would result in a better estimate of how to assess the economic costs of climate change into the future.
"There should be a social cost of carbon, but it should be done better," said Eisenberg.
He described industry concern about cost-benefit analysis as having "reached a fever pitch" over the last decade.
Karyn Schmidt, senior director of regulatory and technical affairs at the American Chemistry Council, said her group promoted "high-quality review" for decades. She called cost-benefit review "absolutely foundational."
ACC also supported EPA's shift toward initiating regulatory action on cost-benefit analysis at the program office level, as Wheeler outlined last week. Schmidt said the agency's proposed approach made "eminent sense."
"The improper use of co-benefits can skew results. We would expect EPA to take a hard look at how it weighs co-benefits," she said.
The American Petroleum Institute has also urged EPA to abandon its reliance on the co-benefits of reducing PM2.5 in rules aimed at other pollutants.
"API simply requests that when utilizing cost-benefit analysis to justify rulemakings, EPA ensures through regulations that the regulated pollutant drives the cost-benefit analysis," Howard Feldman, API's senior director of regulatory and scientific affairs, wrote in public comments to EPA last year.
API had recommended that EPA go through "multiple rulemaking processes" that were "statute-specific" to improve its approach to cost-benefit analysis.
"We believe this would strike the right balance between the need for consistency and the challenges associated with variations from statute to statute," the comments read.
EPA adopted the recommendation of API and other groups that the agency focus on cost-benefit analysis under the Clean Air Act first. Wheeler's memo announced that the Office of Air and Radiation would be the first of the four EPA offices to come out with a proposal.
The changes also hark back to an issue that EPA's air chief Bill Wehrum had worked on as a partner at the law firm Hunton & Williams LLP. In 2015, he represented the now-disbanded Utility Air Regulatory Group in the Supreme Court case Michigan v. EPA challenging the Mercury and Air Toxics Standards.
At the time, he told E&E News that the issue of co-benefits "is still going to come up in any kind of litigation that follows" if EPA went forward with MATS (Greenwire, July 1, 2015).
Wheeler has also pointed to the Supreme Court case as a reason to review the use of co-benefits.
"Where the Supreme Court was directing us was to get away from the overreliance of the co-benefit to justify regulation. I think the result will be a decreased use of co-benefits," he told S&P Global in March.
The agency's new approach will build on steps the Trump administration has already taken in individual rulemaking on weighing the costs and benefits of rules.
"We've seen a broad effort on the part of agency to alter cost-benefit analysis. It's pretty clear that they believe it will be beneficial to their agenda," said Hayden Hashimoto, a legal fellow at the Clean Air Task Force.
"The approach thus far has been to muddy the waters to provide multiple calculations of benefits," he said. "They use the scientifically sound value with these other values; it makes it look like, who really knows what's best?"
Richard Revesz, director of the Institute for Policy Integrity at New York University, agreed: "I see it as a way to eventually operationalize things we already see EPA doing on the ground."
The most striking example so far has been EPA's effort to undo the finding underpinning the Mercury and Air Toxics Standards. In that rule, EPA suggested a change that would effectively give no weight to the benefits of reducing fine particles and instead would focus on the benefits of reducing hazardous air pollutants, Hashimoto said.
This would result in a significant change as the vast majority of the rule's benefits came from fine particle pollution reductions.
The agency also altered its assessment of PM2.5 in its rewriting of the Obama administration's Clean Power Plan. In this rule, EPA suggested the agency would no longer count fine particle pollution below a set threshold, either at levels below what is regulated by the National Ambient Air Quality Standards or at the lowest measurable level of fine particle pollution measured in epidemiological studies. Public health experts warn such an approach ignores decades of research showing there is no known safe level of exposure to fine particle pollution.
These changes to cost-benefit analysis are also happening as EPA is seeking to finalize a rule in December it says will increase transparency. But environmental groups warn it could end up limiting the type of public health data EPA could use to draft rules.
Revesz described EPA's efforts as "cynical," saying the agency's proposal was trying to bypass "the tremendous expertise" of EPA economists at the National Center for Environmental Economics, which is within EPA's Office of Policy. The center's goal is to ensure the quality of economic analysis across the agency. Instead, politically appointed assistant administrators at program offices would lead the reform efforts.
Hashimoto said with so few details outlined in the recent memo, it's hard to tell how likely it is that any cost-benefit changes would persist under a different administration.
"I think it is safe to assume environmental groups will challenge the rulemaking, if they go that route," he said.