EPA to change how it considers costs, benefits of CAA regulations

The U.S. EPA on June 4 released a proposed rule that will require all future significant regulations promulgated under the Clean Air Act to be accompanied by a benefit-cost analysis (BCA). The Renewable Fuel Standard is among the CAA programs that will likely be affected.

The proposed rule follows an advanced notice of proposed rulemaking (ANPR) issued in June 2018 in which the EPA said it was soliciting public input on whether and how to change the way it considers costs and benefits when making regulatory decisions. The ANPR was related to Executive Order 13777, which was issued by President Trump in February 2017 and directed federal agencies to “alleviate unnecessary regulatory burdens placed on the American people.” In part, the executive order directed each federal agency to designate an agency official its regulatory reform officer (RRO). This RRO was tasked with identifying regulations that eliminate jobs, or inhibit job creation; are outdated, unnecessary or ineffective; impose costs that exceed benefits; create a serious inconsistency or otherwise interfere with regulatory reform initiatives and policies; are inconsistent with the requirements of section 515 of the Treasury and General Government Appropriations Act of 2001; or derive from or implement executive orders or other presidential directives that have been subsequently rescinded or substantially modified.

Roughly one year later, on May 13, 2019, EPA Administrator Andrew Wheeler issued a memorandum saying “the agency should ensure that its regulatory decisions are rooted in sound, transparent and consistent approaches to evaluating benefits and costs.” He said many EPA statutes consider benefits and costs as part of regulatory decision-making, but noted benefits and costs have historically been treated differently depending on the media office and underlying authority. “This has resulted in various concepts of benefits, costs and other factors that may be considered,” he continued. “This memorandum will initiate an effort to rectify these inconsistencies through statute-specific actions.”

The memo references the ANPR and indicates “a large cross-section of stakeholders identified instances when the agency underestimated costs, overestimated benefits or evaluated benefits and costs inconsistently.” Within the memo, Wheeler wrote, “Per the executive order and based on these public comments, the EPA decided to take further action to evaluate opportunities for reform.”

The proposed rule issued June 4 further builds on those efforts. In a statement, the EPA said the proposal aims to improve the rulemaking process under the CAA by establishing requirements to ensure consistent, high-quality analyses of benefits and costs are provided to the public for significant rules. “This proposal, when finalized, will codify best practices for benefit-cost analysis in rulemaking, and provide clarity for states, local communities and industry regarding EPA’s rulemaking considerations,” the agency said in a press release.

A fact sheet released by the agency says the proposed regulation contains three main requirements. Under the first, the EPA would prepare a BCA for all future significant proposed and final regulations under the CAA. Significant regulations are expected to include those with the largest annual impact on the economy; those that would disproportionately affect an industry, group or areas; or those that are novel or relevant for other policy reasons.

Second, the proposal states the BCA should be developed in accordance with best practices from the economic, engineering, physical and biological sciences. The proposal outlines required elements of BCA’s following established protocols for conducting best cost analyses published by the White House Office of Management and Budget and further elaborated in EPA’s “Guidelines for Preparing Economic Analyses.” The EPA said these include addresses all key elements of a benefit-cost analysis and—to the extent permitted by law—making underlying data available to the public.

Third, the EPA must increase transparency in the presentation of the benefits resulting from significant CAA regulations. The agency said in addition to a clear reporting of the overall results of the BCA, EPA proposes to require a summary presentation of the overall BCAs result in the rule, including total costs, benefits and net benefits. EPA also said it is proposing to require a separate reporting of the public health and welfare benefits that are specific to the objective of the CAA provision under which the rule is promulgated.

The EPA is also soliciting comments on how the agency would take into consideration the results of the BCA in future rulemakings under specific provisions of the CAA, and how EPA should weigh the results of the BCA in future CAA regulatory decisions.

A 45-day comment period will open on the proposal following its publication in the Federal Register. Additional information is available on EPA’s website.