Obama and Ozone: Executing Regulation by Presidential Order

The blog post was co-authored by Rena Steinzor and James Goodwin.

When President Obama issued his new Executive Order 13563 this past January – the one calling on agencies to “look-back” at existing regulations –speculation abounded as to what, if any effect, it would have on agencies’ rulemaking. Setting aside the look-back plan provisions (and the President’s unproductive anti-regulation rhetoric in the Wall Street Journal), the new Order didn’t seem to add much to the 18-year-old Executive Order 12866, save for a few broad platitudes relating to regulatory policy. But the President’s decision to kill EPA’s new ozone standard suggests that the new Order can and will be used to weaken regulations.

Last Thursday, EPA Administrator Lisa Jackson told Congress that the Obama Administration would revert to the ozone standard set by the Bush Administration: 75 parts per billion (ppb) in ambient air. Of course, EPA’s expert, blue ribbon scientific advisory board had unanimously recommended that the agency lower this standard to somewhere between 60 and 70 ppb. A 60 ppb standard for ozone would have prevented up to 12,000 premature deaths, 5,300 non-fatal heart attacks, 2,200 cases of chronic bronchitis, 420,000 lost work days, and 2,100,000 missed school days every year. A 70 ppb standard would have prevented up to 4,300 premature deaths, 2,200 non-fatal heart attacks, 880 cases of chronic bronchitis, 170,000 lost work days, and 600,000 missed school days. Under the 75 ppb standard, those benefits will effectively be cut in half. The Bush standard, now apparently the Obama standard, is projected to prevent only 2,100 premature deaths, 1,300 non-fatal heart attacks, 470 cases of chronic bronchitis, 88,000 lost work days, and 190,000 missed school days. 

The President’s transparently political decision to order EPA to stand down on ozone was couched in more erudite terms by Cass Sunstein in his “return letter” to Jackson.  Significantly, the letter contained no direct mention of Executive Order 12866, the major order that governs the regulatory process within the Administration, though it does refer to the principle that agencies “use the best available science.”  Instead, the letter relies heavily on the new EO 13,563, which imposes a new “regulatory uncertainty” requirement. In addition to that, Sunstein’s public statements in the charged aftermath of the ozone decision make clear that the White House either interprets its EO to impose a requirement that agencies consider “current economic conditions” before regulating, or simply intends to impose that requirement on its own, without bothering with an Executive Order to agencies.^* Either way, the White House is imposing new requirements that could make it much harder for agencies to issue rules that effectively protect people and the environment.

The Regulatory Uncertainty Requirement

EO 13,563 requires for the first time that rules cannot contribute to so-called “regulatory uncertainty.” The ozone return letter says: 

A key sentence of Executive Order 13563 states that our regulatory system “must promote predictability and reduce uncertainty.”  In this light, issuing a final rule in late 2011 would be problematic in view of the fact that a new assessment, and potentially new standards, will be developed in the relatively near future i.e., 2013. 

The Obama Administration’s acceptance of House Republicans’ disingenuous argument that regulatory uncertainty is impeding economic recovery will cripple its efforts to fulfill statutory mandates that Congress would never consider repealing. After all, what regulated industries and their House Republican allies really mean by “regulatory certainty” is unfettered freedom from regulation. Regulatory uncertainty is not what is preventing the U.S. economy from rebounding. Rather, it’s suppressed demand caused in part by high unemployment and in part by economic uncertainty. Many households and businesses have no idea what the economic future holds for them, and they are therefore reluctant to spend money. Shuttering the doors at the EPA will do nothing to change that.

The Catch-22 nature of the uncertainty argument is grimly illustrated by the ozone situation. Under the Clean Air Act, EPA must review the standard every five years and update it if the available science indicates that the current standard isn’t strong enough to protect human health with an adequate margin of safety. What would stop a future administration that is particularly hostile to regulation from refusing to undertake efforts to review, and possibly strengthen the ozone standard, given that the standard would have to be reviewed, and possibly strengthened again five years down the road? In essence, the uncertainty pretense turns the five-year review requirement into a no-win proposition: EPA should not force industry to expend money to comply with a new standard if it’s just going to be changed in five years.

Even if concerns for regulatory certainty were a useful decision-making criterion, its consideration is irrelevant to, and even prohibited by, most of the laws under which agencies issue regulations, including the Clean Air Act. These statutes mostly direct agency heads to set standards based on considerations of what is protective of health, or the availability of certain technology. Few of these statutes ask the agency to consider what will help polluters increase profits.

Of course, it’s not even clear how issuing the new ozone standard now would have increased regulatory uncertainty. If the EPA issues the new standard in 2011, it is not obliged to review it in 2013, as the Sunstein letter suggests. Rather, the 2011 standard could be used as the starting point for the next five-year cycle under the Clean Air Act. In the past, the EPA has been quite flexible in how it sets its five-year review cycles for ozone—to wit, the agency didn’t complete its five-year review of the 1998 standard until 2008.

Obama's 'Current Economic Conditions' Requirement

The White House is also asserting a new requirement: that the costs of a pending rule must now be evaluated in light of current economic realities.^* While defending the Administration’s decision to kill the ozone rule, Sunstein said during an interview: “We’re committed to protecting public health and welfare, but in a way that’s attuned to the economic situation.” This echoes statements that President Obama made in the press release announcing his decision to kill the ozone rule: 

I have continued to underscore the importance of reducing regulatory burdens and regulatory uncertainty, particularly as our economy continues to recover. With that in mind, and after careful consideration, I have requested that Administrator Jackson withdraw the draft Ozone National Ambient Air Quality Standards at this time. emphasis added

This reasoning implies that protective statutes such as the Clean Air Act mean one thing when the economy is good, and something else when the economy is bad. In other words, Obama's OIRA will put its thumb on the costs side of the cost-benefit analysis scale if the economy is doing poorly.

This blatant assertion of presidential power to reinterpret the law based on his take on the political implications of a bad economy contradicts the statutory mandates Congress gave the agencies in laws dating back to 1970. These laws aren’t preferences, suggestions, or well-meaning advice; they’re mandates. The Clean Air Act instructs EPA to review its National Ambient Air Quality Standards, covering ozone, fine particulate, sulfur dioxide, nitrogen oxide, and lead in consultation with the Clean Air Science Advisory Committee.  Inconvenience—political or economic—isn’t mentioned in the statute.

The trajectory of the economy is constantly shifting; agencies cannot be expected to be making rules “attuned” to unpredictable future conditions.  And, again, that’s what they are, future conditions, not present ones, because the rules take years to develop, are not usually implemented the moment they are finalized, and often don’t have their primary effects for years. The ozone standard is a good example. Even if the Obama Administration were to decide to strengthen the standard today, it would be many years before the EPA and the states began implementing the necessary pollution controls for meeting the standard. Indeed, full implementation could take up to 20 years; we will have long passed the current economic recession by 2031.

This new “economic conditions” requirement is also meaningless because, in most cases, the state of the economy involves a very subjective judgment call. Just by making the fundamentally untestable claim that “the economy isn’t strong enough,” a future president hostile to regulatory safeguards could water down or delay rules that are otherwise mandated by law.

The new requirement also lacks balance and is fundamentally anti-regulatory. After all, neither Sunstein nor Obama has made the corollary claim that strong economic times call for even more stringent regulations. More problematically, it is based on the anti-regulatory assumption that somehow regulations are an impediment to economic growth. This claim has been debunked several times.

Bottom Line: New Window Dressing for Political Decisions on Rules

Of course, all of the above is not to suggest that the Obama Administration was actually concerned with “regulatory uncertainty” or “current economic” conditions as genuine policy considerations when it dropped the ozone standard. This was clearly a political decision; well-connected industries whined loudly to sympathetic ears in the Administration, and President Obama, with an eye toward the 2012 election, folded.

The new uncertainty and state-of-the-economy requirements have all the same useful attributes as cost-benefit analysis for providing window dressing to cover a politicized decision on regulation. They are ripe for endless manipulation. And they embrace the unproven assumption that new regulations dampen job creation.   In this regard, they could help future administrations politicize the regulatory review process even more than it is now.

Some observers are not troubled by this development, believing that the centralized review process ought to become even more politicized than it is now. But this development is a blow to good government and to the protection of public health. Most health and safety statutes commit decisions like setting the ozone standard directly to agency heads precisely because Congress wanted to foster decisions on the merits by experts, rather than opportunistic decisions by political staff at the White House. As increasingly practiced by Sunstein, centralized review obscures from public view the rationale for agency decision-making behind malleable criteria, undermining public accountability.

The Obama Administration’s retreat on the ozone standard was a huge setback for public health and the environment. But it may one day be remembered as the first example of a deeply misguided executive order in action.

^*This sentence was edited after publication to clarify that the "current economic conditions" requirement referred to by the White House is not to be found in Executive Order 13563.