Questionable Rulemaking Justifications
Hiding Data from Congress
The EPA is supposed to use sound scientific research to justify the need for the rules it creates. But often, the agency declines to tell the public just what research has led to some of the agency’s costliest regulations.
For example, Rep. Lamar Smith (R-Tex.), Chair of the House Committee on Science, Space, and Technology, pointed out:
[The EPA has developed a] Mercury and Air Toxics Standard (MATS) for power plants (previously known as “Utility MACT”) that the EPA estimates could cost up to $10 billion a year. Yet more than 99% of the EPA’s health-based justifications for the rule are derived from scientific research that the EPA won’t reveal. Taxpayers are supposed to take on faith that EPA policy is backed by good science.
Despite repeated requests from the House of Representatives, the EPA has still declined to make available to Congress the data that the agency used to justify the MATS. Americans will be forced to bear the cost of this regulation in the form of higher electric bills, but the agency will not reveal to the public the data showing why those standards are needed.
EPA Biodiesel Rule Costs Millions in Harm to Air Quality
In another instance, the EPA issued a rule in September 2012 increasing by 28 percent the amount of biodiesel required to meet the agency’s renewable fuel standard. Instead of justifying this standard by showing it is necessary to improve public health or benefit the environment, the agency says increased reliance on biodiesel is necessary for national energy security.
In fact, the EPA estimates that the new biodiesel standard have a modest negative effect on water quality and ecosystems. Overall, the EPA estimates that the new biodiesel standard will incur $263-$425 million in net costs.
The only real beneficiaries of the EPA’s new biodiesel standard are soybean farmers—an increased need for soybeans to produce biodiesel results in more money for those who grow them. Taxpayers incur the costs not only of the rule’s implementation, but also the negative air and water effects caused by the EPA’s new rule.
Tricky Accounting Practices
EPA rules are expensive to implement, costing industry billions each year in compliance costs. To justify that impact on the economy, the EPA argues that the “net benefits” of its rules outweigh the costs. But how the agency actually calculates those “net benefits” is far from straightforward.
Proving billions of dollars in “net benefits” often requires some questionable number crunching by EPA bureaucrats. Instead of focusing its calculations on the pollutant actually targeted by an EPA rule, the agency calculates “net benefits” by assuming generously that when the agency targets one pollutant, “co-benefits” will occur in the form of a reduction in other pollutants. This confusing process allows the agency to claim that for every dollar spent by industry to comply with its regulations, the public will receive hundreds of dollars in benefits from improved health.
By using this convoluted rationale, the agency can make even its most expensive regulations appear economically justified.
Take the EPA’s proposed rule limiting mercury emissions (MATS). In this instance, most of the billions of dollars in supposed improved public health benefits claimed by the EPA don’t come from a reduction in mercury emissions, but from a reduction in fine particles. (Learn more about the costs associated with these standards here.)
The Obama Administration’s EPA has been criticized for relying more on these “co-benefits” to justify its regulations. An analysis of the agency’s regulations by former head of the Office of Information and Regulatory Affairs (OIRA) Susan Dudley found “Fully two-thirds of the benefits of economically significant final rules reviewed by OIRA in 2010 were thanks to reductions in fine particles brought about by regulations that were actually aimed at something else.”
In addition to a heavy reliance on “co-benefits,” the Obama Administration’s EPA relies heavily on another confusing accounting trick–calculating “private benefits.” To justify fuel and energy efficiency regulations, the agency is considering private benefits, such as a reduced spending on fuel and electricity, in addition to normal social costs, such as the amount of pollution generated.
Even the left-leaning Brookings Institute pointed out the EPA’s reliance on these private benefits, pointing out: “private benefits such as reduced fuel consumption and shorter refueling times account for 90% of the $388 billion in lifetime benefits claimed for last year’s new fuel-economy standards for cars and light trucks. They also account for 92% and 70% of the benefits of new energy-efficiency standards for washing machines and refrigerators respectively.”
As The Economist commented, “The values placed on such private benefits are highly suspect. If consumers were really better off with more efficient cars or appliances, they would buy them without a prod from government.”