EPA Looking to Overhaul Cost-Benefit Analysis Used in Rulemaking

EPA Looking to Overhaul Cost-Benefit Analysis Used in Rulemaking

The Environmental Protection Agency (EPA) Administrator Andrew Wheeler recently issued a memo to agency leadership directing them to reform how costs and benefits are considered in the agency’s rulemaking process. According to the EPA, the action “supports the Trump Administration’s efforts to identify regulations that impose costs that exceed benefits, providing clarity, transparency and consistency in how regulations are written.”

EPA’s Cost-Benefit Considerations

Shortly after taking office, President Donald Trump issued an executive order (82 FR 12285), which directed agencies to identify regulations that “impose costs that exceed benefits.” The EPA subsequently solicited public feedback on its rulemaking process, which included an Advanced Notice of Proposed Rulemaking seeking comments on ways to increase consistency and transparency for cost-benefit analyses.

Based on the feedback received, Administrator Wheeler has decided to move forward with reforms. His memo states:

I have determined that the agency should proceed with benefit-cost reforms using a media-specific approach, taking into account the variety of statutory programs. Specifically, I am asking the assistant administrators for the offices of Air and Radiation, Chemical Safety and Pollution Prevention, Land and Emergency Management and Water to develop reforms, including notice-and-comment rulemakings, that outline how benefit-cost considerations will be applied in areas that are in need of greater clarity, transparency and consistency.

The memo further states that the reforms of the EPA’s cost/benefit analysis must be guided by the following principles:

1. Ensuring the agency balances benefits and costs in regulatory decision-making. The EPA should evaluate and consider both benefits and costs in decision-making.
2. Increasing consistency in the interpretation of statutory terminology. The EPA should evaluate benefits and costs in a manner that applies consistent interpretations of key terms and concepts for specific statutes (e.g. “practical,” “appropriate,” “reasonable” and “feasible”).
3. Providing transparency in the weight assigned to various factors in regulatory decisions. The EPA should transparently identify which factors were and were not considered in regulatory analysis and how these factors were weighed to arrive at a particular regulatory outcome.
4. Promoting adherence to best practices in conducting the technical analysis used to inform decisions. The EPA’s technical analyses should follow sound economic and scientific principles and adhere to existing guidance and best practices for benefit-cost analysis, including the EPA’s Guidelines for Preparing Economic Analyses and other peer-reviewed standards of practice that are applicable to rulemaking.

Wheeler’s memo directs the Office of Air and Radiation to be the first to issue a proposal by the end of 2019, followed by the other offices. It also orders the Office of Policy to continue to improve and update the EPA’s Guidelines for Preparing Economic Analyses. “Revisions to the guidelines will help clarify best practices for how to conduct benefit-cost analysis, including guidance on key methodological and modeling choices, assumptions, uncertainties and context around benefits and costs,” the memo states.

Key Takeaway

The EPA’s decision to revamp its cost/benefit analysis may benefit the regulated community, many of whom have complained in recent years that EPA regulations imposed an unreasonable and significant burden while providing negligible environmental benefits.  However, the full impact of the cost-benefit analysis ordered by President Trump remains to be seen. We will continue to track the progress of the EPA’s action and provide updates as they become available.

If you have any questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Dan McKillop, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364