"In order for CBA cost benefit analysis to be workable, regulators need to have a relatively restricted range of possibilities." That's what OIRA Administrator Cass Sunstein wrote in a 2007 book. So how about from $82 billion to negative $251 billion, a third of a trillion dollars – is that a relatively restricted range?
Those are the estimated net benefit figures, over 50 years, in the Regulatory Impact Analysis (RIA) for EPA's "strong" coal ash regulation proposal. Do those numbers actually mean much? No. Yet there they are, trumpeted as if they have meaning. They don't.
As regular readers know, the regulation of coal ash has been quite the journey. We take the next step in the trek today, when the public comment period ends on EPA's current proposals. CPR President Rena Steinzor submitted comments on the coal ash rulemaking this morning (press release).
Let me step back a minute to explain the comments and the context. The Kingston, Tennessee, coal ash spill disaster in 2008 spurred the EPA to action; it said it would announce a specific regulatory proposal by the end of 2009. The agency submitted its proposal (which we now know was strong) to the White House's Office of Information and Regulatory Affairs (OIRA) in October. By Executive Order, OIRA has no more than 120 days to review proposed regulations, but the office went beyond its allowed limit, delaying action while it hosted some 47 meetings on the rule, mostly with industry opponents. In May of this year, the EPA was finally allowed to release a revised proposal reflecting OIRA's changes.
Documents later posted on the EPA website showed that OIRA had made more than 100 pages of deletions and edits to the EPA's original proposal, and also added dozens of pages to it. Despite its limited scientific expertise, OIRA even added entirely new proposals; the EPA's May announcement included both a modified version of the original "strong" regulation as well as additional, weaker proposals. The accompanying RIA – following OIRA's edits – is the source of the huge range of estimated cost and benefits I mentioned.
The huge negative benefits suggested in the RIA are almost entirely the result of a predicted “stigma effect,” which is estimated to cost $231 billion in losses. Companies that reuse coal ash have argued that consumers and companies would no longer buy products that incorporate recycled coal ash if coal ash disposed at power plants is regulated as a hazardous waste (or euphemistically, as a "special waste"). The EPA's "strong" proposal would treat coal ash dumped into the ground as hazardous, but would not regulate coal ash when it is reused. The $231-billion argument accepts industry’s notion that companies (largely construction companies) will use more expensive materials to avoid using the same recycled coal ash they’re using right now, while utility companies will similarly forego their economic incentives to provide coal ash for reuse – instead paying more to dispose of it, out of an overwhelming fear of liability. A "stigma" argument of this scale is unprecedented in a rulemaking, and defies the history of regulation of toxic chemicals: increasing safety requirements for the disposal of a substance nearly always increases, not decreases, the incentives to recycle more of the product.
The Regulatory Impact Analysis strongly suggests that coal ash reuse will decrease by 51 percent. So where did that number come from? Apparently it's a “reasonable approximation in the absence of information to the contrary.” That's what I call stringent economic analysis at work.
Did the RIA at least do a better job estimating the positive benefits of regulating coal ash? No. For example, what value do you give for the health benefits of regulating coal ash dumps strongly so they don't leach cadmium, lead, or mercury into the nearby water (sometimes including drinking water)? The RIA's answer was easy: value those benefits at $0. With math like that, it sounds as if regulating coal ash is a pretty silly idea.
This whole process has lost touch with reality.
It's time for EPA to retake control of a rulemaking process that was hijacked by OIRA, and time for President Obama to tell OIRA to stop serving as a conduit for industry, and to leave the scientific judgments in the hands of the agencies designated by Congress. Protecting the public health depends on it.