Whose agency is it, anyway? How OMB runs EPA - Office of Management and Budget, Environmental Protection Agency

Washington Monthly, Dec, 1985 by Jim Sibbison

Before he was elected president, Ronald Reagan complained that the Environmental Protection Agency lacked an understanding of industry's problems. In his five years in the Oval Office, he has changed all that. Today industry executives help rewrite some EPA regulations before they go into effect, giving corporations more influence over the nation's environmental policies than ever before.

The procedure works this way: EPA writes the first draft of a new regulation after receiving volumes of facts and opinions from industry, environmental organizations, and other concerned parties. This process is legal and similar to those in other government agencies. But Reagan has added an extra loop to the circuit. An executive order issued right after his inauguration in 1981 directs the White House Office of Management and Budget to clear every new EPA regulation before it is promulgated.

In time, most regulations win perfunctory approval. Occasionally, however, the projected cost to the affected industry is huge. In such situations, OMB officials have quietly teamed up with corporate representatives, who tell them how they want the regulation changed to reduce the cost. OMB has demanded that EPA make the necessary changes, and OMB tends to get what it wants. No records of these OMB-business contacts are kept. It's all done in secret, outside of the law.

As a former EPA press officer, I can say confidently that even Richard Nixon never established an arrangement for corporate influence as ingenious as this one. To the contrary, when I was at EPA during the Nixon, Ford and Carter years, the White House would sometimes exert pressure on the agency's leaders to do industry a favor-- no president ever lobbies for environmental causes--but its role was advisory and informal.

That's no longer the case. Looking back now, it's possible to say that the first known instance of the silent shift of power to OMB and the White House took place in the days of Anne Burford's tenure at EPA. Her chief of staff, John Daniel, noticed something strange about the way a water pollution regulation affecting the iron and steel industry was written after it came back from OMB. The languae, Daniel noticed, was so technical that no OMB lawyer could have written it. He knew it had to have been done by industry personnel. The final version also happened to save industry a bundle of money. Daniel explained OMB's role in the matter at a House of Representatives hearing. When Albert Gore Jr. asked Daniel whether he thought OMB in general "acted as a back door channel to let the corporations affected hotwire the regulatory process to get the result they wanted,' Daniel replied, "I think you have correctly characterized it. Yes.'

By the time William Ruckelshaus replaced Burford in 1983--he had been the first administrator of the EPA in the early 1970s--the steel producers were back for more. This time they wanted a standard set that permitted increased emissions of soot, smoke and dust, even though an EPA study showed a tighter standard was needed to protect public health. OMB automatically sided with the industry. So did Vice President George Bush, who had received a letter favoring a weaker standard from Walter Williams, president of Bethlehem Steel. In reply to the letter, Bush wrote, "I appreciate your thoughts on this issue and have shared your letter with Bill Ruckelshaus.' According to congressional documents, a weakened smoke standard is now under consideration at EPA.

As the world burns

Of all the examples of OMB interference at EPA, none is more egregious than the revision of the agency's plan for the asbestos industry. Lee Thomas, EPA's current administrator, completed a bold plan begun by Ruckelshaus to dismantle the asbestos industry over the next ten years, reducing the hazard from that well-known carcinogen. The asbestos companies complained to OMB, which, in turn, directed EPA to lay off. Not long after, top EPA officials told the press they were yielding authority to regulate asbestos to the Occupational Safety and Health Administration (OSHA) and the Consumer Product Safety Commission (CPSC). The officials used the specious excuse that the law left them no choice. Rep. John Dingell was not so easily deceived. After he opened an investigation, EPA rescinded its decision to yield its regulatory authority over asbestos. The agency now promises that it will phase out the asbestos industry as planned. EPA has been delaying for months, however, its decision to publish the regulation. This foot-dragging inspires little faith in the agency's resolve.

Increasingly, EPA officials seem like actors in a soap opera. We see them and we hear them speak, but for all we know they're getting their lines and cues from the crew offstage at OMB. On a rare occasion, EPA may win a dispute with OMB. The decision to prohibit most of the lead in gasoline is such an instance. But as long as the OMB-EPA relationship remains out of sight, there is no way of ascertaining much of what is going on in the development of environmental policy.

The evidence I cite comes from the files of Dingell's Oversight and Investigations Subcommittee of the House Committee on Energy and Commerce. Its inquiry into the EPA-OMB power shift goes back three years, and the work is truly impressive. To get a more complete idea of how EPA has been subverted, it's worth reconstructing from the documents and testimony how EPA lost so much of its regulatory power in the asbestos case.

The dangers of asbestos are well known: U.S. workers die by the thousands every year from a variety of asbestos-induced cancers and other diseases. We are all familiar with the panic aroused by the discovery of asbestos in schools and other public buildings. The illnesses usually do not manifest themselves until 30 or 40 years after the victims first inhale asbestos dust. While the production of goods containing asbestos has declined considerably in America, many workers are still at risk. The largest use of asbestos products is in the construction industry, where workers handle asbestos-cement pipe, sheet roofing products and flooring. Garage mechanics who repair automobile brakes are also exposed to dangerous quantities of asbestos dust from brake linings.

At EPA, regulations prohibiting asbestos production and the use of some common asbestos products have been in preparation since the days of Jimmy Carter. During his 1983-1984 stewardship of the agency, Ruckelshaus decided to implement them for the first time. As he put it in an April 1984 letter to John Dingell, measures aimed simply at controlling asbestos emissions from industry would still result in "unreasonable' health risks. The industry, he said, had to be eliminated.

It was a flash of the Ruckelshaus of old. His uncompromising stance emboldened his senior staff, as well. Edward Klein, EPA's chemical control director, told an assemblage of asbestos industry executives: "You can fill your war chests and donate money to fight the government, or you can use that money to find asbestos substitutes.' That kind of talk distressed B.J. Pigg, executive director of the industry's Asbestos Information Association. Pigg sent a letter of protest to Ruckelshaus calling the plan "unwise and inappropriate' and implored Ruckelshaus to reconsider. Neither Ruckelshaus nor his successor, Thomas, would budge.

So Pigg turned to a higher authority. On May 22, 1984 he contacted John Morrall, an OMB economist, and began a seven-month correspondence with him. As the Dingell investigation records show, Morrall and OMB's Brian Mannix, another economist, also heard protests from Paul Lafleur, a commerce officer at the Canadian embassy. More than 90 percent of the asbestos used in the U.S. is mined in Canada.

By this time, members of the president's staff had bestirred themselves. The White House routinely gets copies of regulatory proposals likely to be controversial; in this case it also received a request from Ruckelshaus for a meeting to discuss the worsening relations with OMB. Ruckelshaus and several senior EPA staff members met with Craig Fuller, Fred Fielding, and Randy Davis of the White House and Douglas Ginsburg, then OMB administrator for information and regulatory affairs. Whatever was said there, EPA came out the loser. Soon after Lee Thomas took over, his deputy. A. James Barnes, paid a visit to OMB. There he was handed a briefing book on the asbestos rules, which had been prepared for OMB Director David Stockman. The substance of the message was: OSHA and CPSC, not EPA, will regulate asbestos. There would be no phasing out of the industry.

OMB's decision was a disaster for morale at EPA. Almost five years of effort by staff members, for whom this would have been the greatest contribution to public health of their careers, went down the drain. Even more disquieting than that personal defeat was the potential impact on EPA's role as the supposed defender of the public from disease. If allowed to serve as a precedent, the asbestos decision will effectively take EPA out of the cancer protection business. As John Moore, EPA's assistant administrator for pesticides and toxic substances, once told congressional investigators, if EPA can't regulate asbestos, it can't regulate anything.

That may well be what OMB and White House officials have in mind. Certainly, no law enacted by Congress assigns them a role to participate in life and death decisions affecting public health. Their authority is drawn only from Reagan's executive order, which directs OMB to review regulatory actions to insure "aggregate net benefits to society . . . to the extent permitted by law.' Nor are OMB officials qualified by training to evaluate environmental cancer risks. They are lawyers and economists, not scientists. But what OMB lacks in expertise and legal authority, it makes up for in support from the White House. At the moment, that's all that seems to matter.

The price of life

For all its power, however, OMB needed a rationale to forbid EPA asbestos regulation. The answer was "cost-benefit' analysis. The cost was the economic impact of the asbestos industry phase-out and product bans. The benefit was the avoidance of pain and death the regulation would provide to people who would otherwise have contracted asbestos-induced cancer and other diseases. The catch in the OMB formula was that, in using it, EPA was obliged to calculate the benefits by assigning a value to a human life. Though a common procedure for life insurance companies and personal injury lawyers, this analysis had never been used by government before Reagan's arrival in the White House.

In the asbestos case, $1 million was the arbitrary value assigned to the life of a child or adult. But that's not the figure the Reaganites compared to the cost of removing asbestos from the individual's environment to prevent cancer. Instead, OMB reasoned that a victim will not develop a malignancy for approximately 40 years, during which time he will probably enjoy a healthy life. Therefore, OMB required EPA to discount the life at an annual rate of 10 percent for those 40 years, leaving a human life worth a grand total of $22,094.93. OMB figured that at this rate, the cost of dismantling the asbestos industry would be greater than that of the lives affected by asbestos. Result: the EPA plan had to be dropped.

It's hard not to feel sorry for the EPA personnel who saw their work discarded in favor of such "analysis.' Unlike those who oversee them at the White House and OMB, the men and women at EPA like to believe they work for the public's health. The OMB formula forced them to compromise their principles to keep their jobs, and they didn't like it. Don Clay, a senior EPA official, came right out and told the Dingell committee he opposed the OMB formula on ethical grounds. Furthermore, he said, it would impede any effort to regulate other substances that cause diseases with latency periods, such as cancer. A. James Barnes also had misgivings. He told a Senate hearing that he had a "great deal of ethical difficulty' with the formula. "The lives of my three children are worth every bit as much to me ten years from now as they are now,' he said. He also said he had discussed the formula with Lee Thomas, and it did "not find favor with him' either.

EPA's leaders don't believe in what they're doing. And the asbestos case is just one symptom of the decline of an agency that can no longer be taken seriously as a protector of public health. Even if EPA does start phasing out the asbestos industry, the manufacturers have scored an extremely important victory: they can use OMB to reverse and EPA regulatory decision. Surely industries producing less well-known contaminants can also expect to find friends at OMB. Given the secrecy of these negotiations, the public will never know the difference.

According to the Dingell subcommittee, other industries are already seeking favors. OMB officials, for example, have raised objections to EPA regulations controlling arsenic emissions. OMB contends that EPA failed to discount the price of life during the 15-year period it takes for arsenic-related cancer to develop. OMB has also pressured EPA to use cost-benefit considerations in setting health standards for air pollutants, and it held up EPA standards for underground tanks containing hazardous wastes.

There is only one way to reverse this ominous trend: another, even more exhaustive congressional investigation and passage of legislation to prevent OMB meddling. Congress has a large stake in this. OMB is flouting environmental laws that explicitly prohibit the use of cost as a consideration in protecting public health. Unless Congress acts, the agency once at the forefront of the environmental movement will continue to act as a rubber stamp for OMB-industry manipulations.

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