The White House released an overdue report on the cost of regulations that shows that the Environmental Protection Agency dominates all other agencies in both benefits and costs, as well as the number of regulations.
EPA is number one on costs, ranging from $37.6 billion to $45.4 billion from 2004 to 2014 in 2010 dollars. The second most costly agency is the Department of Transportation, ranging from $8.5 billion to $16.3 billion; third, the Department of Energy, ranging from $6.3 billion to $9.0 billion.
EPA also leads the pack in the number of rules, with 32 significant rules made final. Transportation is the second highest with 28 rules, Energy is again third with 20 rules and the Department of Health and Human Services is fourth with 16. Although thousands of rules were made final in that period, the Office of Management and Budget reviewed a sliver of the most significant.
Republican lawmakers on the Senate Environment and Public Works Committee had been prodding the agency to issue the report for weeks, which staff say appears to have worked in getting the report released after months of delays. Previous reports have been issued in the spring, between March and June. This was the first time the report had been sent to Congress in October, based on a review of previous reports going back to 2009.
"We sent a letter ... and coincidentally OMB released the report," said a committee staffer. This is the "latest it has ever been" in issuing the annual report on the cost of regulations to Congress. It was released quietly Oct. 16, with no fanfare, the staffer says. The Office of Management and Budget was "possibly sitting on the report because it was the first ever to reveal the cost" of regulations through 2014. The report is submitted to Congress and is open for public comment before being made final.
OMB did not respond to a request for comment.
The report was delayed until a week before the Clean Power Plan, the centerpiece of the president's climate agenda, was published in the Federal Register. The power plan was developed by the EPA's air and radiation office, which the OMB report says generated the most rules of any agency in the period between 2004-2014 and at the highest cost.
"Across the federal government, the rules with the highest estimated benefits as well as the highest estimated costs, by far, come from the Environmental Protection Agency and in particular its Office of Air and Radiation," the OMB report says. "Specifically, EPA rules account for 61 to 80 percent of the monetized benefits and 44 to 55 percent of the monetized costs," the report adds. "Of these, rules that have as either a primary or significant aim to improve air quality account for 98 to 99 percent of the benefits of EPA rules."
The agency points out that "while the benefits of these rules far exceed the costs, they are also among the costliest rules."
It points out that the Utility MACT rule, established to reduce dangerous pollutants from power plants, "is estimated to be the costliest of the EPA rules," with "annualized costs of about $8.2 billion," based on the value of a dollar in 2001. The power plant rule came under Supreme Court scrutiny earlier this year, with the justices telling the EPA to conduct a cost assessment, even though the agency said it did not have to.
The agency's newly updated ozone rules for controlling smog, as well as the climate regulations, were not evaluated by OMB in the report because the rules — although estimated to be some of the costliest in history — were not made final in 2014, the end year of the report's analysis.
The office points out that most of the benefits of EPA's rules come from the reduction in "fine particulate matter," particles of pollutants that may not be visible to the naked eye, but that can easily be breathed in and collect in the lungs. While many of the rules calculate their benefits based on the EPA's ability to monetize reductions in particulate matter, others have a harder time estimating their benefits because they use "ancillary reductions" in particulate matter, which is much more difficult to do.
Ancillary reductions refer to "co-benefits" of a rule in reducing particulate matter, even though the primary purpose of the rule has nothing to do with particulate matter. "For example, in the case of the Utility MACT, [particulate matter] 'co-benefits,' make up the majority of the monetized benefits, even though the regulation is designed to limit emissions of mercury and other hazardous air pollutants."
Diana Furchtgott-Roth, director of Economics21 at the Manhattan Institute for Policy Research, pointed out at a committee hearing on Thursday that if the ancillary benefits are removed from the Clean Power Plan, for example, the dollar amount of the rule's benefits shrinks dramatically. The EPA includes the limitation of substances that aren't carbon dioxide when calculating the dollar value of the plan's benefits, she said.
"The benefits listed for the Clean Power Plan are about $15 billion in 2025," she said. "But the benefits shrink to $3.6 billion if the health benefits of other substances [that are not carbon] are removed."
The OMB report, although it does not examine the Clean Power Plan, says the types of ancillary reductions that the EPA attributes to a rule's benefits "are difficult to quantify and monetize" because the data used to assess them is limited. OMB says it "will continue to work with agencies to ensure that they clearly communicate when such co-benefits constitute a significant share of the monetized benefits of a rule," implying that it is not always clear how an agency is calculating co-benefits.
Majority committee staff say the findings provide a window into how EPA justifies its most contentious rules such as the Clean Power Plan and other climate rules.
Critics of the rules say the health-benefits justification that the agency uses can be manipulated to show just about anything, especially when trying to monetize the benefits of reducing carbon dioxide, the gas associated with manmade climate change, and reductions in particulate matter can be seen as duplicative.
The "administration [is] saying one thing, [but] the devil is in the details," staff say. The cost of EPA air rules are "much more costly than they are revealing."