EPA cost-benefit studies criticized at Senate hearing

WASHINGTON, Oct. 21, 2015 – Lawmakers and witnesses at a Senate Environment and Public Works subcommittee hearing today sparred over the way the EPA measures the benefits and costs of its regulations.

Republican committee members argued that the agency routinely overestimates benefits and underestimates costs, while Democrat Edward Markey defended the EPA and said health benefits from EPA rules trump estimated costs.

Sen. Mike Rounds, R-S.D., presided over the oversight hearing of the Subcommittee on Superfund, Waste Management, and Regulatory Oversight, which he chairs. Other senators in attendance at the sparsely attended hearing included James Inhofe, R-Okla., chairman of the full committee; Markey, of Massachusetts, the subcommittee’s ranking member; and fellow subcommittee member David Vitter, R-La.

At issue were regulatory impact analyses (RIAs) produced by EPA. Since 1993, RIAs have been required by Executive Order for all rules likely to cost more than $100 million annually. At the hearing, most of the discussion focused on EPA’s air quality regulations – in particular, the Oct. 1 rule setting the standard for ground-level ozone at 70 parts per billion, and the Aug. 3 Clean Power Plan (CPP) final rule, targeting carbon emissions from existing power plants.

The EPA-Army Corps of Engineers rule defining “waters of the United States” under the Clean Water Act also came in for criticism, if only in written testimony from the U.S. Chamber of Commerce.

William Kovacs, that group’s senior vice president for Environment, Technology and Regulatory Affairs, said the rule “will intrude so far into traditional state and local land use authority that it is difficult to imagine that any discretion would be left to state, county and municipal governments.”

Farm groups overwhelmingly oppose the WOTUS rule, which was promulgated in May, but whose implementation has since been stayed by the U.S. Court of Appeals for the Sixth Circuit. At least nine lawsuits are pending in seven district courts around the country.

After the hearing, Rounds mentioned WOTUS as the biggest concern for agriculture, saying he had been told by the Minnehaha County Highway Department in his home state that the rule would prevent it from spraying its own roadside ditches unless it obtained a Section 404 permit under the Clean Water Act.

Rounds also criticized the agencies’ categorical determination that prairie potholes, which exist largely on private land, should be considered together when looking at whether they should be subject to CWA restrictions. The rule, said EPA, “protects the nation’s regional water treasures” – including prairie potholes, western vernal pools in California, and coastal prairie wetlands in Texas -- “when they impact downstream waters.”

Specific charges leveled at EPA during the hearing were that the agency quantifies not just the benefits that flow from reduction of the targeted pollutant, but also the “co-benefits.”

Diana Furchtgott-Roth, senior fellow and director of Economics21 at the Manhattan Institute for Policy Research, said the Clean Power Plan rule’s “putative benefits exceed its claimed costs not from reductions in carbon dioxide, but from reductions in other substances, such as particulate matter, sulfur dioxides and nitrogen oxides.

“Without the alleged positive health effects of [reducing] these other substances, the rule would fail EPA’s cost-benefit test,” she said.

Inhofe said "additional flaws" in EPA's analyses “include the use of a global estimate of the social cost of carbon to manufacture alleged climate benefits here in the United States and the recurring failure to conduct robust economic analyses of regulatory impacts in accordance with regulatory guidance, executive orders, and statutes designed to protect small businesses as well as state, local, and tribal governments.”

Markey and other witnesses provided a counterpoint. Markey said that when it comes to proposed environmental standards, "The regulated industries always cry foul." As an example, he said that for years, automakers fought higher fuel-economy standards, claiming they would cripple the industry.

Instead, "We are well on our way to meeting the highest standards," and the industry is thriving, Markey said.

 Rena Steinzor, a law professor at the University of Maryland’s Carey Law School, said EPA’s RIAs represent the “gold standard” for all other government agencies.

“Its elaborate studies invariably conclude that benefits exceed costs,” she said. “In fact, in the case of the Clean Air Act rules, reserved for especially irrational condemnation by regulated industries, benefits exceed costs by a margin of 30 to one.”

Mary Rice, a pulmonologist and critical care physician at Beth Israel Deaconess Medical Center and instructor at Harvard Medical School in Boston (and also vice chair of the Environmental Health Policy Committee of the American Thoracic Society), emphasized the harmful effects of air pollution and pointed to Office of Management and Budget estimates showing that “over the past 10 years, the benefits of EPA regulations exceed costs at a minimum of 2-1, and possibly by as much as 20-1.”

A recently released draft OMB report estimates that from 2004-2014, the “major rules” ($100 million in annual costs) issued by cabinet-level agencies cost $68.4 billion to $102.9 billion, while providing benefits of $260.9 billion to $981 billion.

The USDA portion of that was a wash -- $1 billion to $1.4 billion in costs and the same amount in benefits.

Legislation that cleared the House in January -- H.R. 185, the Regulatory Accountability Act of 2015 – would require agencies to undertake more detailed reviews of major regulations. A Senate version of the bill was introduced in August by Sen. Rob Portman, R-Ohio, and referred to the Committee on Homeland Security and Governmental Affairs. It has six co-sponsors.