Last month, the Environmental Protection Agency (“EPA”) issued an Advance Notice of Proposed Rulemaking (“ANPRM”), entitled “Increasing Consistency and Transparency in Considering Costs and Benefits in the Rulemaking Process.” (83 FR 114; June 13, 2018). The ANPRM is soliciting public comment on whether and how the agency should revise the way it weighs costs and benefits in making its regulatory decisions. Various environmental laws like the Clean Air Act, Clean Water Act, and the Safe Drinking Water Act require a cost-benefit analysis in certain circumstances to assess overall usefulness and efficiency, and to determine whether the agency moves forward with implementing a regulatory action.

The conflicting methodologies in which cost-benefit analyses are conducted have been a point of contention for some time now. For example, Executive Order 12866 (58 FR 51735; October 4, 1993), entitled “Regulatory Planning and Review,” requires that every significant regulatory action be assessed so that the benefits justify the costs. In contrast, while there are statutory provisions with similar requirements, often the terms and the required nature and scope of the analysis vary from statute to statute. Further, the statutes most often provide discretion to the agency (and the Administration) in conducting the analysis. These factors have resulted in significant disagreement over the years during the administrative rulemaking process.

More recently, the agency’s cost-benefit analysis was put under the microscope when EPA, under the previous Administration, found that the benefits of enacting the proposed Mercury and Air Toxics Standards (“MATS”) regulation far outweighed the costs of implementing it. This conclusion, however, came under heavy scrutiny with the U.S. Supreme Court, consequently finding that EPA did not adequately measure the costs of implementing MATS. EPA subsequently issued a revised analysis taking into consideration the Court’s ruling and again found that the benefits outweighed the costs. According to EPA, the ANPRM and any subsequent changes in the cost-benefit analysis are primarily intended to provide consistency and transparency and to avoid a similar legal battle.

What Topics is EPA Seeking Public Input?

EPA has requested comments on a wide-range of issues to increase consistently and transparency in the decision-making process. In considering costs and benefits, the agency is soliciting comments with regard to the:

1. The nature and extent of concerns relating to possible inconsistency and lack of transparency in the rulemaking process and the impact of any improvements.
2. The approaches for increasing inconsistency and transparency. More specifically, should the agency consider adopting uniform definitions of specific terms and consider cumulative regulatory costs and benefits of multiple regulations during the rulemaking process? How should the agency document decisions and treat information that is barred from release by law? Moreover, should the agency consider a retrospective, systematic review of costs and benefits of promulgated regulations, and replace the agency’s historic periodic review?
3. The opportunities and challenges associated with promulgating regulations to govern EPA’s approach to cost and benefit considerations in future rulemakings.

One topic that will certainly have far-reaching effects is whether EPA should include co-benefits or ancillary benefits in its analysis of proposed regulations. Co-benefits are best described as the monetary benefits from reductions in pollutants that weren’t directly related to the regulation. For example, many of the prior regulations promulgated by EPA to regulate greenhouse gas (“GHG”) emissions were underpinned not only by the public health benefits, but also with the beneficial removal of other forms of harmful pollution from the air. By including this question and considering the current Administration’s view of GHG regulation, it would appear that the current EPA would not count any of these benefits in its analysis.  

Any New Proposed Regulations Might Face an Uphill Battle for Approval

These proposed rules have garnered support from certain key individuals in Congress, including Senator John Barrasso (R-WY) who chairs the Senate Committee on Environment and Public Works. However, there has been some significant pushback against these proposed rules from various environmental groups, including the Sierra Club. The Sierra Club has said publically that it has concerns that any new rules concerning cost-benefit analyses would increase the amount of programs and regulations that would be deemed “too costly” to implement.

Not only do these proposed changes face opposition from environmental groups, but they also face tough logistical and legal hurdles. There are various precedents set by the Supreme Court that address what EPA can and cannot do regarding its processes for assessing costs of regulations. Those cases, specifically Michigan v. EPA, 135 S. Ct. 2699 (2015), and Entergy Corp. v. Riverkeeper, 129 S. Ct. 1498 (2009), have been the guiding principles behind the current way in which these analyses are carried out. Changing the processes will likely be challenged in court, which potentially would require new rulings from the Supreme Court, something that does not happen overnight.

Conclusion

The future landscape of EPA’s regulatory process may be altered as a result of this ANPRM and any resulting changes to the agency’s cost-benefit analysis. Thus, it is critical for regulated industries to carefully review the ANPRM and consider whether to submit comments.

After several requests from interested parties, EPA recently extended the deadline for public comment until August 13, 2018 (originally the deadline was July 13, 2018). We expect a large number of parties will be filing comments; as of today, over 500 comments have been filed according to docket EPA-HQ-OA-2018-0107 on Regulations.gov. Clarity and transparency are crucial in these decisions, and many favor a more streamlined and improved rulemaking process, but it must be done in a thoughtful way.

Finally, we don’t believe that EPA Administrator Pruitt’s resignation will affect the future of this ANPRM and any resulting changes to the cost-benefit analysis. EPA Acting Administrator Andrew Wheeler will most likely push the same deregulatory agenda as his predecessor. The long-term future of the current Administration’s reform agenda is uncertain until Wheeler or someone else gets the permanent top EPA post.  

Weld Robinson, an intern, assisted in the preparation of this blog post.

Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. The author has provided the links referenced above for information purposes only and by doing so, does not adopt or incorporate the contents. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.

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