EPA Cost Analyses Not Always Clear, GAO Says

EPA Cost Analyses Not Always Clear, GAO Says

Government Accountability Office says EPA should better clarify the economic impacts of new regulations

The Government Accountability Office in a report released publicly this week questions the U.S. EPA's processes in calculating the economic impacts of new regulations.

The GAO report, EPA Should Improve Adherence to Guidance for Selected Elements of Regulatory Impact Analyses, finds that in studying seven RIAs, the information provided by the EPA was not always fully understandable.

In addition, the analyses did not always adhere to the Office of Management and Budget's guidelines for analyzing the effects of regulations, the report found.

Government Accountability Office says EPA should better clarify the economic impacts of new regulations

GAO explains that RIAs are used to assess the economic effects of rules deemed "economically significant" – those with an annual effect on the economy of $100 million or more or have a material adverse effect on a sector of the economy.

As a result of unclear descriptions of baselines and alternatives to proposed regulations, "EPA cannot ensure that its RIAs adhere to OMB's guidance to provide the public with a clear understanding of its decision making," the GAO report said.

The 53-page report details the seven RIAs considered, including one that addresses fuel and fuel additive changes to the Renewable Fuel Standard, and another considering the Spill Prevention Control and Countermeasure Rule.

All RIAs generally adhered to the OMB guidance regarding the need for the proposed regulatory action, though they weren't always clear, the report said.

In the RFS2 RIA, for example, GAO says the EPA explained the need for the proposed rule—to assess the projected impacts of the renewable fuel volumes established through the Energy Independence and Security Act of 2007—but did not describe the problem the rule intended to address.

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GAO addressed several other issues it found with the RFS2 RIA, including failure to explain the benefits, costs, and other economic effects included in its accounting statement.

In both the SPCC and RFS2 RIA, GAO says EPA did not present information for a range of alternatives to the proposed rule, though EPA maintains that the information was included in a previous RIA for SPCC and was not justifiable in the RFS2 case.

In considering the regulations' impacts on economics, GAO says EPA also used outdated employment data in some cases, and it "may have inaccurately characterized the relationship between those regulations and employment."

Though officials told GAO that they have begun to explore new ways to analyze employment effects, GAO says this issue may render EPA's RIAs "limited in their usefulness for helping decision makers and the public understand the potential effects of the agency’s regulations on employment."

GAO recommended the EPA enhance its RIA review process by improving adherence to OMB guidelines; in response, EPA said it generally agreed with the report's findings.

The American Farm Bureau earlier this year also questioned EPA's economic review of proposed changes to the Waters of the U.S. definition under the Clean Water Act.

In a May report prepared by University of California-Berkley faculty member Dr. David Sunding with support from AFBF and other members of the Waters Advocacy Coalition, Sunding says the EPA's analysis of the rule "suffers from a lack of transparency" and does not provide calculations or basic assumptions on which the analysis is based.

Ultimately, the report suggests that a "more thorough analysis is required to properly assess the economic impacts of a definitional change."

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