From: The Hill/RegWatch
By Julian Hattem
How much do new regulations cost? It depends on whom you ask.
That’s the message from a disagreement that emerged this week over the benefits of a draft rule to regulate some emissions of formaldehyde, a chemical that can cause irritation and may lead to cancer.
This week, newly released documents showed that the Environmental Protection Agency (EPA) had overestimated the benefits of its new proposal by up to $230 million, according to the White House office that oversees new regulations before publication.
That discrepancy should serve as an example, some say, of the complex and inscrutable regulatory process and the need for additional transparency in developing new rules.
The EPA’s proposal, which was formally released in May, would implement a 2010 law to set standards for emissions from wood products like particleboard and plywood, largely mirroring regulations already set by California.
Before being issued, though, like most new regulations and proposals, it had to be cleared through the Office of Information and Regulatory Affairs (OIRA), a small yet powerful arm of the White House’s budget office.
That office reviews new proposals and rules, consults with other parts of the government and sends revisions back to the issuing agency.
Documents posted by the administration this week show that OIRA dramatically scaled down the EPA’s predictions for the savings in reduced healthcare and others costs that the rule would bring, from an estimate of $91 million to $278 million, to between $9 million and $48 million.
Part of the discrepancy is due to a disagreement over whether the government could count reduced asthma cases and lowered infertility in its calculations. A spokeswoman for Rep. Doris Matsui (D-Calif.), who sponsored the 2010 law, said that her preliminary understanding was that the OIRA estimate accounted for the fact that most producers have already acted to become compliant with California’s standards.
In a statement to The Hill, White House budget office spokeswoman Ari Isaacman Astles said, “Changes made by an agency to a rule while it is under review at OIRA may happen in response to comments or information from a wide range of stakeholders – including the public and agencies across the U.S. government (including the agency that drafted the rule).”
In response to the disclosure, Sen. David Vitter (R-La.), the top Republican on the Senate’s Environment and Public Works Committee, said in a statement that the EPA “has been gaming the system by grossly exaggerating economic benefits to justify its costly regulations.”
The estimated benefits, however, are just some of the changes to the proposal. OIRA also deleted and revised whole paragraphs, for reasons that are not entirely clear.
“There’s a lot of stuff deleted and we don’t know why,” said Lisa Heinzerling, a law professor at Georgetown University.
“Honestly,” she added, “I just thought the discrepancy was very large. There were whole categories of benefits that were excised and it wasn’t explained.”
Though OIRA is required by executive order to notify agencies of its reasons for changing rules, that notice rarely makes it out to the public.
Except for laws specifically requiring public notification, like the Clean Air Act or the Toxic Substances Control Act, which the formaldehyde proposal would amend, OIRA often keeps its edits of new rules hidden.
As such, it’s difficult to know where estimates for new regulations’ costs and benefits come from.
“There’s a strong suspicion that OIRA plays this role in often disagreeing with the cost-benefit estimates or analyses from agencies,” said Amit Narang, a regulatory policy advocate with Public Citizen.
The difficulty in determining how much rules cost, Narang added, points to difficulties in relying too heavily on calculating monetary costs and benefits of new rules, a technique championed by former OIRA chief Cass Sunstein.
“I think it’s just another excellent example of how cost-benefit analyses are just essentially subjective in nature,” he said, “and that disagreements in terms of computing costs and benefits occur all the time. And at a certain point you have to let the agency do its job or not.”
Either way, consumer organizations argue, the public should know how OIRA reached its conclusions.
“I’m not talking about grammatical changes or typos,” said Heinzerling. “I’m talking about changes to the substance to the proposal and excising whole categories of benefits. … You should be able to describe why you did it.”
Aside from its rare disclosure of edits, many of OIRA’s reviews also take far longer than they are scheduled to.
OIRA is required to release rules within 90 days of receiving them from agencies, though it has the option to extend its review by an extra 30 days.
The office has been reviewing many rules for much longer than that, though.
Of the 141 rules currently at the office, 70 have been there longer than 90 days. One regulation, covering silica dust in workplaces, has been under review since February 2011.
The formaldehyde proposal sat at the White House for a year before being released in late May.