    [Senate Hearing 114-183]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 114-183

                        OVERSIGHT OF REGULATORY IMPACTS
                        ANALYSES FOR U.S. ENVIRONMENTAL
                         PROTECTION AGENCY REGULATIONS

    =======================================================================

                                    HEARING

                                   BEFORE THE

                        SUBCOMMITTEE ON SUPERFUND, WASTE
                      MANAGEMENT, AND REGULATORY OVERSIGHT

                                     of the

                                  COMMITTEE ON
                          ENVIRONMENT AND PUBLIC WORKS
                              UNITED STATES SENATE

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                OCTOBER 21, 2015

                                   __________

      Printed for the use of the Committee on Environment and Public Works

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

           Available via the World Wide Web: http://www.gpo.gov/fdsys
                                 __________

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                   COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                        ONE HUNDRED FOURTEENTH CONGRESS
                                 FIRST SESSION

                      BARBARA BOXER, California, Chairman
    MAX BAUCUS, Montana                  DAVID VITTER, Louisiana
    THOMAS R. CARPER, Delaware           JAMES M. INHOFE, Oklahoma
    BENJAMIN L. CARDIN, Maryland         JOHN BARRASSO, Wyoming
    BERNARD SANDERS, Vermont             JEFF SESSIONS, Alabama
    SHELDON WHITEHOUSE, Rhode Island     MIKE CRAPO, Idaho
    TOM UDALL, New Mexico                ROGER WICKER, Mississippi
    JEFF MERKLEY, Oregon                 JOHN BOOZMAN, Arkansas
    KIRSTEN GILLIBRAND, New York         DEB FISCHER, Nebraska
    CORY A. BOOKER, New Jersey

                    Bettina Poirier, Majority Staff Director
                      Zak Baig, Republican Staff Director
                                  ----------

                 Subcommittee on Superfund, Waste Management,
                            and Regulatory Oversight

                       MIKE ROUNDS,South Dakota Chairman
    DAVID VITTER, Louisiana              EDWARD L. MARKEY, Massachusetts
    MIKE CRAPO, Idaho                    THOMAS R. CARPER, Delaware
    JOHN BOOZMAN, Arkansas               JEFF MERKLEY, Oregon
    DAN SULLIVAN, Alaska                 CORY A. BOOKER, New Jersey
    JAMES M. INHOFE, Oklahoma(ex         BARBARA BOXER, California (ex
        officio)                             officio)

                                C O N T E N T S

                                  ----------
                                                                       Page

                                OCTOBER 21, 2015
                               OPENING STATEMENTS

    Rounds Hon. Mike, U.S. Senator from the State Of South Dakota....     1
    Markey, Hon. Edward J., U.S. Senator from the State of
      Massachusetts..................................................     4
    Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...   132

                                   WITNESSES

    Furchtgott-Roth, Diana, Senior Fellow And Director, Economics21,
      Manhattan Institute for Policy Research........................     6
        Prepared statement...........................................     8
    Kovacs, William L., Senior Vice President, Environment,
      Technology & Regulatory Affairs, U.S. Chamber Of Commerce......    25
        Prepared statement...........................................    27
    Batkins, Sam, Director of Regulatory Policy, American Action
      Forum..........................................................    54
        Prepared statement...........................................    56
    Rice, Mary B., M.D., Mph, Instructor In Medicine, Harvard Medical
      School, Physician, Division of Pulmonary, Critical Care & Sleep
      Medicine, Beth Israel Deaconess Medical Center.................    68
        Prepared statement...........................................    70
    Steinzor, Rena, Professor, University of Maryland Carey Law
      School and Member Scholar and Past President, Center for
      Progressive Reform.............................................    92
        Prepared statement...........................................    94

        OVERSIGHT OF REGULATORY IMPACT ANALYSES FOR U.S. ENVIRONMENTAL
                         PROTECTION AGENCY REGULATIONS

                                  ----------

                          WEDNESDAY, OCTOBER 21, 2015

                                   U.S. Senate,
             Committee on Environment and Public Works,
    Subcommittee on Superfund, Waste Management, and Regulatory
                                                      Oversight
                                                        Washington, DC.
        The committee met, pursuant to notice, at 10:02 a.m. in
    room 406, Dirksen Senate Office Building, Hon. Mike Rounds
    (chairman of the subcommittee) presiding.
        Present: Senators Rounds, Markey, Vitter, Crapo, Boozman,
    Sullivan, Inhofe, Carper, Merkley, Booker and Boxer.

                OPENING STATEMENT OF HON. MIKE ROUNDS,
              U.S. SENATOR FROM THE STATE OF SOUTH DAKOTA

        Senator Rounds. Good morning, everyone.
        Senator Markey, the ranking member, is on his way. He said
    it was OK with him if we begin early.
        At the same time I think Senator Inhofe will have to leave.
    As Senator Inhofe may indicate we have multiple committees.
        Senator Inhofe. Thank you, Mr. Chairman. We do have a
    problem, and I am saying this for the benefit of our five
    witnesses, many of whom have come a long ways and gone to a lot
    of inconvenience. I appreciate their being here.
        In this committee and the Armed Services Committee we have
    an overlap, I think, of eight members, so we finally have an
    agreement that they are going to have their committee hearings
    on Tuesday and Thursday; we would have ours on Wednesday.
    However, because of the unique situation of the availability of
    a witness, we are meeting right now at the same time. So that
    is the reason we don't have that many. They will be trickling
    in as they participate in the Senate Armed Services Committee.
        Thank you, Mr. Chairman.
        Senator Rounds. Thank you, sir.
        In the meantime, we will get started and try to do it on
    time to your benefit as well. We appreciate your being here.
        The Environment and Public Works Subcommittee on Superfund,
    Waste Management and Regulatory Oversight is meeting today to
    conduct a hearing on Oversight of Regulatory Impact Analyses
    for the United States Environmental Protection Agency
    Regulations.
        Since President Obama took office in January 2009, the EPA
    has issued more than 3,300 new regulations. These regulations
    impact every U.S. citizen and every U.S. industry, from
    agriculture to domestic manufacturing and energy production,
    industries that provide jobs for millions of Americans.
        Unfortunately, it is those same Americans who shoulder the
    burden of these broad, overreaching EPA regulations. According
    to the Office of Management and Budget, over the last 10 years,
    EPA regulations have imposed an estimated $42 billion in annual
    costs on this Country, costs paid for by American taxpayers and
    businesses.
        In this Congress, the Environment and Public Works
    Committee has taken a pointed look at the various regulations
    being promulgated by the EPA, such as WOTUS and the Clean Power
    Plan. Further, this subcommittee has specifically looked at the
    science used by the EPA in their rulemaking process and the
    impact that lawsuits have on the regulatory process.
        Today we will be taking a step back to analyze the EPA's
    rulemaking process as a whole. Our witnesses today will testify
    to the systematic issues and concerns they are continually
    seeing in the EPA's regulatory process.
        The EPA routinely fails to fully monetize the costs versus
    the benefits of their regulations, imposes unfunded mandates
    onto State and local governments, ignores the impacts of
    regulations on small businesses, and over-relies on ancillary
    benefits to justify their regulations.
        EPA is required to conduct Regulatory Impact Analysis,
    commonly known as RIAs, of their regulations to provide both
    the public and the agencies with accurate information on the
    costs and benefits of the proposed regulations. However, a July
    2014 report by the independent Government Accountability
    Office, the GAO, found the EPA failed to conduct a clear,
    thorough, and accurate analysis of the cost and benefits of, or
    alternatives to, major regulatory actions. Notably, the GAO
    concluded that ``EPA has not fulfilled its responsibility to
    provide the public with a clear explanation of the economic
    information supporting its decisionmaking.''
        As a result, EPA regulations that cost the United States
    economy, small businesses, and American taxpayers billions of
    dollars are being made by Washington bureaucrats who, rather
    than conducting a thorough, accurate, and public analysis of
    the impacts these regulations will have, are simply rubber-
    stamping major regulations that drastically reshape segments of
    the United States economy. This impacts American businesses
    ability to do business on a daily basis, to compete globally,
    and employ Americans in steady, well-paying jobs.
        The EPA is also imposing unfunded mandates on States and
    local governments at an increasing rate. Often, these
    regulations are finalized with little input by the affected
    States and local governments, yet these entities are required
    to use their limited funds and increasingly tight budgets to
    comply with these new Federal regulations. Furthermore, the
    EPA's failure to use accurate information to monetize the cost
    of these regulations provides the States with little guidance
    or ability to estimate the compliance costs of regulations.
        In October, in its last decision of the term, the Supreme
    Court ruled in Michigan v. EPA that the United States
    Environmental Protection Agency unreasonably failed to consider
    costs when deciding to regulate mercury emissions from power
    plants. Because of these exorbitant regulatory costs, the EPA
    has attempted to justify their air regulations by identifying
    ancillary benefits, which the EPA refers to as ``co-benefits''
    to help outweigh the cost of regulations. These co-benefits
    allow the Administration to claim a dramatic increase in the
    net benefits of the EPA regulations, regardless of the cost of
    the regulation.
        Everybody desires clean air and clean water, but we have to
    ask whether there is a better way to achieve it without
    imposing burdensome regulations in which the costs outweigh the
    benefits. Due to the EPA's failure to clearly and accurately
    quantify the costs and benefits of regulations, agencies are
    unable to make well-informed decisions. Even more troubling,
    the public, American businesses, and State and local
    governments are prevented from understanding the real impact of
    the regulation and meaningfully participate in the rulemaking
    process.
        I would like to thank our witnesses for being with us
    today, and I look forward to hearing their testimony.
        Now, as I shared earlier, Senator Markey was on his way in.
    We appreciate his being here and I would like to recognize my
    friend, Senator Markey, for a 5-minute opening statement, if
    you are ready to go, Senator.
        Senator Markey. I am ready to go. Thank you.
        Senator Rounds. Very good.
        [The prepared statement of Senator Rounds follows:]

                  Statement of Hon. Mike Rounds, U.S. Senator
                         from the State of South Dakota

        The Environment and Public Works Subcommittee on Superfund,
    Waste Management, and Regulatory Oversight is meeting today to
    conduct a hearing on ``Oversight of Regulatory Impact Analyses
    for U.S. Environmental Protection Agency Regulations.''
        Since President Obama took office in January 2009, the EPA
    has issued more than 3,300 new final regulations. These
    regulations impact every U.S. citizen and every U.S. industry--
    from agriculture to domestic manufacturing and energy
    production--industries that provide jobs for millions of
    Americans.
        Unfortunately, it is those same Americans who shoulder the
    burden of these broad, overreaching EPA regulations. According
    to the Office of Management and Budget, over the last 10 years,
    EPA regulations have imposed an estimated $42 billion in annual
    costs on this country--costs paid for by American taxpayers and
    businesses.
        In this Congress, the Environment and Public Works
    Committee has taken a pointed look at the various regulations
    being promulgated by the EPA, such as WOTUS and the Clean Power
    Plan. Further, this subcommittee has specifically looked at the
    science used by the EPA in their rulemaking process and the
    impact that lawsuits have on the regulatory process.
        Today we are taking a step back to analyze the EPA's
    rulemaking process as a whole. Our witnesses today will testify
    to the systematic issues and concerns they are continually
    seeing in EPA's regulatory process.
        The EPA routinely fails to fully monetize the costs versus
    the benefits of their regulations, imposes unfunded mandates
    onto State and local governments, ignores the impacts of
    regulations on small businesses and over-relies on ancillary
    benefits to justify their regulations.
        The EPA is required to conduct Regulatory Impact Analyses,
    commonly known as RIAs, of their regulations to provide both
    the public and the agencies with accurate information on the
    costs and benefits of proposed regulations. However, a July
    2014 report by the independent Government Accountability Office
    (GAO) found the EPA failed to conduct a clear, thorough and
    accurate analysis of the cost and benefits of, or alternatives
    to, major regulatory actions. Notably, the GAO concluded that
    ``EPA has not fulfilled its responsibility to provide the
    public with a clear explanation of the economic information
    supporting its decisionmaking'
        As a result, EPA regulations that cost the U.S. economy,
    small businesses and American taxpayers billions of dollars are
    being made by Washington bureaucrats who, rather than
    conducting a thorough, accurate and public analysis of the
    impacts these regulations will have, are simply rubber-stamping
    major regulations that drastically reshape segments of the U.S.
    economy. This impacts American businesses ability to do
    business on a daily basis, to compete globally, and employ
    Americans in steady, well-paying jobs.
        The EPA is also imposing unfunded mandates on states and
    local governments at an increasing rate. Often, these
    regulations are finalized with little input by the affected
    states and local governments, yet these entities are required
    to use their limited funds and increasingly tight budgets to
    comply with these new Federal regulations. Furthermore, the
    EPA's failure to use accurate information to monetize the cost
    of these regulations provides the states with little guidance
    or ability to estimate the compliance costs of regulations.
        In October, in its last decision of the term, the Supreme
    Court ruled in Michigan v. EPA, that the U.S. Environmental
    Protection Agency unreasonably failed to consider costs when
    deciding to regulate mercury emissions from power plants.
        Because of these exorbitant regulatory costs, the EPA has
    attempted to justify their air regulations by identifying
    ancillary benefits, which the EPA refers to as ``co-benefits''
    to help outweigh the cost of the regulations. These co-benefits
    allow the administration to claim a dramatic increase in the
    net benefits of EPA regulations, regardless of the cost of the
    regulation.
        Everybody desires clean air and clean water, but we have to
    ask whether there is a better way to achieve it without
    imposing burdensome regulations in which the costs outweigh the
    benefits.
        Due to the EPA's failure to clearly and accurately quantify
    the costs and benefits of regulations, agencies are unable to
    make well-informed decisions. Even more troubling, the public,
    American businesses and State and local governments are
    prevented from understanding the real impact of the regulation
    and meaningfully participating in the rulemaking process. I'd
    like to thank our witnesses for being with us here today and I
    look forward to hearing your testimony.

              OPENING STATEMENT OF HON. EDWARD J. MARKEY,
              U.S. SENATOR FROM THE STATE OF MASSACHUSETTS

        Senator Markey. Thank you, Mr. Chairman, very much. Thank
    you for having this very important hearing.
        The Clean Air Act is one of the most effective public
    health laws in American history. It has cut air pollution from
    power plants, from factories, and from vehicles. As of 2010,
    these regulations saved more than 164,000 adult lives and
    prevented tens of millions of lost work days due to fewer
    pollution related illnesses like asthma. And the United States
    gross domestic product rose 234 percent since President Nixon
    signed the 1970 Clean Air Act.
        The same is true of the 1972 Clean Water Act. It has
    stopped millions of tons of toxic pollution from degrading our
    waters and has increased the number of waterways that are safe
    for fishing, safe for swimming.
        We are here today discussing how the EPA develops
    Regulatory Impact Analysis, a tool used to estimate the costs
    and the benefits of regulation. This is an inherently
    challenging task because in many cases putting a dollar value
    on the benefits and costs of pollution is not straightforward.
        For example, scientists figured out that a majority of kids
    in the 1970's had an unsafe level of lead in their blood, and
    that this was largely caused by the use of leaded gasoline in
    cars. But how do you put a price on the cognitive impairment
    caused by elevated blood lead levels in a 5-year old? Or how
    about the price of lost schools days due to illnesses like
    asthma that are aggravated by ground level ozone?
        The diminished productivity caused by these childhood
    exposures may be subtle and span their entire lives. But that
    doesn't mean that complex and hard-to-quantify environmental
    and health impacts are not both real and important at the same
    time.
        History has shown that the benefits of environmental
    regulations are enormous compared to economic costs. Yet,
    whenever the EPA proposes a new regulation, the impacted
    industries always, always cry foul.
        In 1974, a Ford executive argued that if automobile fuel
    economy standards became law, the Ford product line could
    consist of all sub-Pinto sized cars. In 2001, GM's chief
    spokesman predicted that if the standard for trucks went up
    three miles per gallon, three miles per gallon, to 23.7 miles
    per gallon, they might have to stop making SUVs, four-wheel
    drive pickups, full-sized vans, and some two-wheel drive
    pickups. That is the top people at General Motors.
        From what I saw on my commute to work this morning, this
    just hasn't happened. There are SUVs still on the street, even
    though the goal is 54.5 miles per gallon by the year 2025. In
    fact, the projected fuel economy standard of light trucks
    itself in 2016 is 28.9 and 38.2 for automobiles. That is for
    2016. We are well on our way to meeting the highest goals ever,
    54.5 miles per gallon.
        Industry also said the sky was falling when the EPA
    established the acid rain program. To respond to the harm
    sulfur dioxide was causing to public health and the
    environment, Congress amended the Clean Air Act in 1990. In
    response, the EPA issued a rule on sulfur dioxide and nitrogen
    oxide emissions from fossil fuel burning power plants and other
    sources. The Edison Electric Institute and Peabody Coal Company
    estimated that complying with the acid rain program would cause
    $4 billion to $5 billion per year.
        By 2002, the acid rain concentrations in the Midwest were
    down by over 50 percent. Most Americans saw their electricity
    bills decrease. And in the end the Energy Information
    Administration found that the actual industry compliance costs
    were only about $836 million, one-fifth of the industry
    predictions.
        The health benefits of EPA regulations are clear and they
    are big. If the EPA hadn't taken action to protect the air and
    the water, our cities would still be thick with smog like
    China's are now. Our rivers would still be at risk for catching
    on fire. No critique of the EPA's Regulatory Impact Analysis
    can undermine the four decades of environmental regulatory
    successes. The fact of the matter is that the EPA is doing its
    job protecting us from harmful toxins and pollution, and the
    value of a healthy, thriving society at the same time is
    priceless.
        Thank you, Mr. Chairman.
        Senator Rounds. Thank you, Senator Markey.
        Our witnesses joining us for today's hearing are Diana
    Furchtgott-Roth, Senior Fellow and Director of Economics21 at
    the Manhattan Institute for Policy Research, welcome. William
    Kovacs, Senior Vice President in Environment, Technology &
    Regulatory Affairs at the United States Chamber of Commerce,
    welcome. Sam Batkins, Director of the Regulatory Policy at the
    American Action Forum, we welcome you today. Mary B. Rice,
    M.D., MPH, Instructor at Harvard Medical School, welcome. And
    Rena Steinzor, Professor at the University of Maryland Carey
    Law School, welcome today.
        Now we will turn to our first witness, Dr. Diana
    Furchtgott-Roth, for 5 minutes.
        Dr. Furchtgott-Roth, you may begin.

    STATEMENT OF DIANA FURCHTGOTT-ROTH, SENIOR FELLOW AND DIRECTOR,
          ECONOMICS21, MANHATTAN INSTITUTE FOR POLICY RESEARCH

        Ms. Furchtgott-Roth. Thank you very much, Mr. Chairman, but
    you flatter me, I am not a doctor. So I should just say that
    right for the record.
        Senator Rounds. Thank you. I will correct the record.
        Ms. Furchtgott-Roth. I am the author of five books, but I
    am not a doctor, at least not yet.
        Well, as you said before, everyone wants cleaner air, and
    the question is what is the balance. Under current Federal
    regulations, the air is getting cleaner every year, as old
    equipment is replaced by new. Greenhouse gas emissions from
    power plants declined by 15 percent from 2005 to 2013. The
    carbon intensity of the economy has fallen by 23 percent since
    2005, continuing a long decline since the end of the World War
    II.
        Absent heavy regulatory intervention, the United States is
    already making great strides toward a cleaner economy. Sales of
    pickup trucks and SUVs, by the way, have soared precisely
    because they have a different miles per gallon fuel standard
    than do smaller cars, which is why Senator Markey saw so many
    of them on his way to work this morning.
        Over the past 2 years, EPA has issued proposed or final
    regulations on emissions of mercury, ozone, and carbon. I would
    like to discuss the problems with the cost-benefit analysis
    used for these regulations. I will first discuss the problems
    with the calculations of the benefits, then the calculations of
    the costs, and then with the discount rate.
        The main problem with the calculations of the benefits are
    that the co-benefits of other substances are included. The
    carbon rule's putative benefits exceed its claimed costs not
    from reductions in carbon dioxide, say from the carbon rule,
    but from reductions in other substances, such as particulate
    matter, sulfur oxides, and nitrogen oxides. Without these
    alleged health benefits of these other substances, the rule
    would fail EPA's cost-benefit tests.
        As can be seen by the table I provided in the testimony,
    the benefits listed for the Clean Power Plan in EPA's
    Regulatory Impact Analysis, which I have right here, by the
    way, all 500 pages of it, are about $15 billion in 2025. But
    these benefits shrink to $3.6 billion if the health benefits of
    other substances are removed. In the mercury rule, benefits
    shrink from about $61 billion to less than $100 million when
    the co-benefits of other substances are removed. For the ozone
    rule, benefits shrink from about $29 billion to $8.7 billion
    when benefits of other particulates are emitted.
        These benefits, the net benefits, in other words, are
    accounting for the costs, are actually negative for mercury and
    ozone, and barely positive for carbon.
        While many States and localities are already in compliance
    with established national ambient air quality standards for
    NOx, SOx, and particulate matter, by claiming benefits from
    further reducing below the established safe level, EPA is in
    effect lowering the established standard without going through
    the legal requirements of a rulemaking focused on the relevant
    standard.
        EPA is adopting a regulation for carbon, mercury, and ozone
    that does not yield enough benefits to justify the cost.
    Instead, the agency is using supposed other benefits. And as we
    all know, particulate matter, SOx and NOx, are already
    regulated under other rules.
        Other problems are a double counting of health benefits
    from particulates. It is not clear that EPA is accurately
    accounting for all of its claims of particulate matter
    reduction benefits across many rulemakings. If, for example,
    there are health benefits, such as reductions in asthma, from
    one rule, one cannot count those benefits as reductions from a
    second rule because they will have already taken place. And it
    is not clear that double counting is not taking place.
        Third, there is the assumption that benefits that all
    particulates are equally harmful and some particulates might be
    more harmful than others.
        Fourth, there is the assumption that reductions in
    particulates have equal value independent of their base level,
    basically saying that reductions in particulates in New York
    City are equally valuable from reductions in particulates up in
    New York State, which has less levels of emission.
        It is very important that there is reliance on benefits
    from reductions in asthma, because over the past 25 years, as
    the air has got cleaner, incidents of asthma has arisen. Asthma
    is associated with obesity and lack of exercise, and if these
    trends are not reversed, then it is not clear that there will
    be any further reductions in asthma from particulate matter.
        There are also problems with the costs, major ones being
    that future increases in electricity prices are not accounted
    for. The EPA analysis specifically says there will be no
    effects on small business. They do not account effects of
    increases in electricity prices in small business.
        They omit the cost of energy-intensive industries going
    offshore. In other words, if we regulate them here, the EPA
    assumes that the emissions are going to disappear. But if they
    go to China or they go to Mexico, the emissions are going to
    stay the same and we are not going to have climate benefits. In
    fact, they might be even worse because China and Mexico have
    lower clean air regulations than we do.
        There are also problems with the discount rates that EPA
    uses, which are below the standard business rates. Business
    rates are often in the range of 10 percent. EPA uses discount
    rates that are 3 percent and 7 percent, and the benefits are
    discounted at a lower rate from the costs, which wouldn't be
    allowed in most analyses.
        Thank you very much for giving me the opportunity to
    testify today.
        [The prepared statement of Ms. Furchtgott-Roth follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Rounds. Thank you, Ms. Furchtgott-Roth. Thank you.
        Now we will hear from Mr. William Kovacs.
        Mr. Kovacs, you may begin.

        STATEMENT OF WILLIAM L. KOVACS, SENIOR VICE PRESIDENT,
     ENVIRONMENT, TECHNOLOGY & REGULATORY AFFAIRS, U.S. CHAMBER OF
                                COMMERCE

        Mr. Kovacs. Thank you, Mr. Chairman, Ranking Member Markey,
    and members of the committee for inviting me to testify today
    on the oversight of Regulatory Impact Analysis for EPA
    Regulations.
        Regulations are needed for an orderly society to protect
    health and the environment. But we must keep in mind that
    agencies are not an independent branch of government; they are
    not a fourth branch. Rather, they were created by Congress to
    implement congressional policy.
        In 1946, Congress enacted the Administrative Procedure Act,
    which is the bible of the administrative State, which delegates
    legislative and judicial powers to agencies. Over time,
    Congress passed numerous ambitious and broad bills that
    required agencies to fill in more and more of the details. Also
    over the same period of time, courts granted more and more
    deference to agency action.
        The result of this expanded gap-filling authority and
    greater judicial deference created a shield around agency
    action. In short, while the Constitution made your job in the
    Congress to legislate very difficult, as we now know, Congress
    and the courts made legislating by agencies very, very easy.
        For several decades, Congress has tried to reign in this
    growing power of agency through the passage of numerous, but
    toothless, statutory requirements like the Unfunded Mandates
    Act Reform, Information Quality, Regulatory Flexibility.
    Presidents from Jimmy Carter forward have issued executive
    orders to rein agencies in and instruct them how to do their
    job, all to no avail.
        The requirement for the Regulatory Impact Analysis comes
    from this effort. If used correctly, these tools assist
    regulators to understand the need for regulation, available
    regulatory alternatives, the costs and benefits of the
    regulation, the best available facts and how to get them, the
    impact of the regulation on jobs, and whether a regulation
    imposes unfunded mandates on State and local governments.
        Considering that the Administrative Procedure Act has not
    been amended since 1946, and the agencies have published over
    200,000 regulations, I must State that the APA, for routine
    regulations, generally works well. However, in the last few
    decades regulations have been issued that are extremely
    complex, costing billions of dollars annually, and impacting
    large segments of the economy.
        When agencies aggressively legislate, that is, when the
    agencies expand a few words or a few hundred words in a State
    into thousands of pages of regulatory mandates, the agency is
    legislating. It is that simple. And when legislating, the
    agency should be required to use all the tools provided by
    Congress and executive orders if it is to be given any court
    deference.
        Citizens should also be able to hold agencies in check and
    challenge the agency for failing to use these RIA type tools.
        And since today's focus is on EPA, it must be stated that
    EPA issues more rules costing over $1 billion a year than all
    other agencies combined. Between 2000 and 2014, all executive
    branch agencies issued 31 rules costing over $1 billion a year,
    and EPA issued 18 of those.
        In the last 5 months, EPA has issued three more mega-rules:
    Waters of the United States, Clean Power, and Ozone, without
    the use of many of the RIA tools. Had EPA undertaken a
    cumulative impact analysis of the three rules, examined the
    unfunded mandates it was imposing on State and local
    governments, hosted a small business review panel, evaluated
    the impacts on employment, the agency would have had a much
    deeper appreciation of the massive requirements it was imposing
    on State and local governments and the private sector.
        For example, States implement approximately 96 percent of
    all EPA's delegated programs, and the Federal Government pays
    25 percent of that cost. Therefore, the States find themselves
    literally commandeered by EPA to simultaneously implement
    WOTUS, CPP, and ozone. And when you try to implement three
    major acts, one covering the air, one covering the water, you
    have a lot of moving parts, and where you might be regulating
    waters you are finding out you have to put a new gas line and
    you may need a dredge and fill permit. So it is not as simple
    as that.
        So to address this issue there are several things. I think
    the Senate should pass the Regulatory Accountability Act or
    some equivalent that codifies the RIA requirements into
    environmental law.
        Thank you very much. I would be glad to answer any
    questions.
        [The prepared statement of Mr. Kovacs follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Rounds. Thank you for your testimony, Mr. Kovacs.
        Our next witness is Mr. Sam Batkins.
        Mr. Batkins, you may begin.

       STATEMENT OF SAM BATKINS, DIRECTOR OF REGULATORY POLICY,
                         AMERICAN ACTION FORUM

        Mr. Batkins. Chairman Rounds, Ranking Member Markey, and
    members of the committee, thank you for the opportunity to
    appear today. In this testimony I wish to highlight the
    following points:
        First, by virtually any metric, regulatory activity has
    increased at EPA. This is due to a variety of factors, but
    recently the Agency has finalized five regulations that impose
    more costs than benefits.
        Second, the Nation appears to be experiencing declining
    returns in air quality investments. Despite $12 billion in
    investments from the Obama administration, air quality gains
    have not been as pronounced as in the past.
        And, third, the rise of particulate matter and the social
    cost of carbon has made it easier for EPA to justify
    regulation. For example, in 2010, PM2.5 generated 100 percent
    of the benefits from four air quality regulations.
        The Office of Information and Regulatory Affairs, OIRA,
    recognizes EPA as the No. 1 regulator in the Federal
    Government. From 2003 to 2013, the Agency has issued 34 major
    rules, or 21 percent more than the next closest agency. As
    measured by rules that attribute the Unfunded Mandates Reform
    Act, EPA has increased from the pace of 1.75 annually to 3.1.
        The amount of paperwork EPA imposes has also increased,
    from 142 million hours in Fiscal Year 2004 to more than 163
    million hours today, a 15 percent increase. These burdens have
    benefits to the American people, but, in a recent trend, the
    Agency has finalized five rules where costs exceed the
    benefits.
        The Supreme Court recently reaffirmed the general principle
    that regulatory benefits should justify the costs. Every
    executive order since the Carter administration has affirmed
    this goal, and as Justice Scalia wrote in Michigan v. EPA early
    this year, no regulation is appropriate if it does
    significantly more harm than good. Yet, five recent EPA
    measures could impose $1.3 billion in annual costs, compared to
    just $700 million in benefits.
        On the declining returns on air quality investments,
    despite at least $12 billion in clean air rules since 2009, the
    rate of improvement has slowed in recent years. EPA describes
    very unhealthy days as health warnings of emergency conditions.
    For this category, the national air quality has not improved.
    In 2005, there were 46 very unhealthy days; in 2014, there were
    also 46 very unhealthy days.
        Now, there are likely a variety of factors behind this
    figure, but these extreme days recent regulation has not
    alleviated the problem. Air quality gains have also slowed
    somewhat recently. For example, from 2005 to 2009, the rate of
    unhealthy days per jurisdiction declined by 20 percent. Compare
    this for the recent decline during the Obama administration of
    9 percent. The slowing improvement in air quality under the
    Obama administration is in concert, of course, with a more, not
    less, active EPA.
        On the rise of PM2.5 and the social cost of carbon, the
    Agency, and the Federal Government as a whole, is increasingly
    reliant on particulate matter co-benefits to justify regulation
    in other areas, as has been mentioned. For example, the 2008
    NAAQS for ozone derived 70 percent of its benefits from
    reductions in particulate matter. Notably, in 2010, PM2.5
    generated 100 percent of the benefits from four air quality
    regulations.
        Perhaps most famously, the Agency's Mercury Air Toxic
    Standard, or MATS rule, derived more than 99 percent of its
    benefits from the reduction of particulate matter. Even though
    the goal of the regulation was the control of mercury, toxic
    gases, and other heavy metals, mercury contributed just 0.007
    percent of the rule's benefits.
        On the social cost of carbon, the Administration has
    generally ignored longstanding guidance and excluded a 7
    percent discount rate from its analysis. As Circular A-4
    states, ``As a default position, a real discount rate of 7
    percent should be used as a base-case for regulatory
    analysis.'' Using lower discount rates on the social cost of
    carbon allows EPA to more easily justify a variety of
    regulatory action. For comparison, the United Kingdom uses a
    central case discount rate of 6 percent and a higher rate of 10
    percent for sensitivity purposes.
        I would also like to point out that we are getting a sort
    of steady stream of retrospective studies that have called into
    question some of EPA's regulatory assumptions, including a
    recent one on greenhouse gas regulations for heavy duty trucks.
    A Resources for the Future study concluded that EPA
    underestimated the rebound effect of increased truck
    efficiency. This higher rebound effect, in the words of the
    study, lowers projected long-run fuel savings and greenhouse
    gas emission reductions. In the end, the actual rebound effect
    was four to six times larger than what EPA had assumed.
        Thankfully, this research might inform EPA's final rule for
    the second round of heavy-duty truck regulation, which has a
    projected total cost of more than $31 billion. But how many
    other regulations have regulators and scholars missed over the
    years, and what is the ultimate impact of those regulatory
    errors? How do we learn from these past mistakes and false
    assumptions to shape the future of regulatory policy?
        Thank you for your time, and I look forward to answering
    your questions.
        [The prepared statement of Mr. Batkins follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Rounds. Thank you, Mr. Batkins.
        We will now hear from our next witness, Dr. Mary Rice.
        Dr. Rice, you may begin.

     STATEMENT OF MARY B. RICE, M.D., MPH, INSTRUCTOR IN MEDICINE,
       HARVARD MEDICAL SCHOOL, PHYSICIAN, DIVISION OF PULMONARY,
     CRITICAL CARE & SLEEP MEDICINE, BETH ISRAEL DEACONESS MEDICAL
                                 CENTER

        Dr. Rice. Chairman Rounds, Ranking Member Markey, and
    members of the subcommittee, thank you for the opportunity to
    testify today. My name is Dr. Mary Rice, and I am a pulmonary
    and critical care physician at Beth Israel Deaconess Medical
    Center at Harvard Medical School, and I care for adults with
    lung disease, most of whom have severe asthma or emphysema. I
    also care for critically ill adults in the intensive care unit.
        You have my written testimony before you and there are a
    few points that I would like to emphasize today.
        First, it is now well established that exposure to outdoor
    air pollution, including ozone, particulate matter, mercury,
    and other air pollutants regulated by the EPA, is bad for human
    health. This has been known for decades. I will focus just on
    two of these pollutants, ozone and particulate matter, because
    their health effects are so extremely well described through
    hundreds and hundreds of research studies.
        Ozone is a respiratory irritant that is particularly
    harmful for people with lung disease, including people with
    asthma and emphysema; and ozone also harms the lungs of babies
    and young children, and even healthy adults. Research,
    including my own work with colleagues at Harvard, has shown
    that normal adults, when exposed to ozone at levels above 60
    parts per billion have lung function that is not as good as
    when the ozone levels are lower. And for the elderly and those
    with heart and lung disease, ozone increases the risk of death.
        Particulate matter pollution has been recognized as a cause
    of premature death since the early 1950's, and today it is
    clear that particulate matter also aggravates respiratory
    disease, including asthma and emphysema, and is a major trigger
    for devastating cardiovascular events such as heart attack,
    stroke, and heart failure.
        Second, the research evidence that has accumulated over the
    past three decades for these health effects of air pollution is
    comprehensive and consistent. Studies have used multiple
    scientific methods, including animal toxicology, human
    exposure, observational epidemiology, and natural experiments;
    and together these studies clearly show that exposure to ozone
    and particulate matters, at many cases at levels permissible by
    the EPA, is bad for children and adults.
        Third, our experience here in the United States has
    confirmed that when air pollution levels go down, health
    improves. A steel mill closed for a few months in Utah Valley,
    and the number of bronchitis and asthma emissions for
    preschool-aged children in that Valley fell by 50 percent.
    Traffic and ozone levels declined sharply during the 1996
    Atlanta Olympics and fewer kids had asthma attacks in the city
    of Atlanta.
        Particulate matter levels declined dramatically in Southern
    California, and children with and without asthma experienced
    greater growth in lung function. And, nationwide, particulate
    matter levels declined in the 1990's and 2000's, and this added
    months to U.S. life expectancy. When air pollution goes down,
    health improves and people live longer.
        Fourth of all, these are real people I am talking about. I
    focus a lot on asthma because I am a lung doctor and because it
    is abundantly clear that air pollution makes asthma worse. One
    of my patients, for example, is a 24-year-old African-American
    man who came to the city of Boston from the rural Midwest where
    he was a star athlete in college and he landed himself a
    brilliant job in finance in the city. And ever since coming to
    Boston, this young man has been struggling with asthma attacks
    every few weeks.
        Boston is a city that is generally compliant with EPA clean
    air standards, and he had to quit exercise for a month during
    peak ozone levels this summer due to labored breathing. He had
    severe coughing fits at work that forced him to walk out of
    meetings, and just keeping up with all the nebulizer
    treatments, doctor visits, and x-rays have caused him to miss a
    lot of work since starting his new job. He also feels exhausted
    and short of breath and miserable during these asthma attacks.
    This young man has an incredibly bright future ahead of him,
    and asthma attacks are getting in the way of that future.
        My older patients with severe asthma or emphysema can't
    continue to work when their disease gets worse. They go to the
    emergency room and are often hospitalized. Air pollution
    increases the risk of hospitalization for my patients and for
    people across the United States with lung disease. When air
    pollution goes down, their risk of getting sick goes down too.
        Last, is it any surprise that the benefits of EPA
    regulation to reduce air pollution are so great that they
    exceed costs? We breathe the outdoor air. Therefore, the health
    benefits of cleaner air are enjoyed by millions.
        While economists may debate the dollar value of avoided
    asthma medications, emergency room visits, hospital stays, or
    even the value of additional months of life that are brought by
    cleaner air, these health benefits are real, they are
    measurable, and they are clearly supported by the science.
        Thank you. I would be very happy to answer questions.
        [The prepared statement of Dr. Rice follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Senator Rounds. Thank you, Dr. Rice.
        Our next witness is Ms. Rena Steinzor.
        Ms. Steinzor, you may begin.

     STATEMENT OF RENA STEINZOR, PROFESSOR, UNIVERSITY OF MARYLAND
    CAREY LAW SCHOOL AND MEMBER SCHOLAR AND PAST PRESIDENT, CENTER
                         FOR PROGRESSIVE REFORM

        Ms. Steinzor. Thank you, Mr. Chairman, Ranking Member
    Markey, and members of the subcommittee. I appreciate the
    opportunity to testify today.
        EPA's work on cost-benefit analysis is the gold standard
    for all other government agencies. Its elaborate and meticulous
    studies conclude that benefits exceed costs. In fact, in the
    case of the Clean Air Act rules that Dr. Rice was just talking
    about, which are reserved for especially irrational
    condemnation by regulated industries, benefits exceed costs by
    a margin of 30 to 1. Rather than focus on the few marginal
    improvements that the GAO has recommended and that EPA is
    already addressing, I urge the subcommittee to applaud the
    Agency's diligent, thorough, and creative efforts to carry out
    one of the most difficult elements of its mission to preserve
    environmental quality.
        Few agencies have a more important role in improving public
    health than EPA. Just ask anyone whose children escaped brain
    damage because the agency took the lead out of gas, who turns
    on the faucet knowing the water will be safe, or who is
    unfortunate enough to live in an area afflicted by smog and is
    counting on EPA to lower the emissions that aggravate the
    asthma that afflicts so many Americans.
        As for the charge that an EPA-induced regulatory tsunami
    will cause irrevocable damage to the economy, the truth is that
    these rules and the civil servants who write them do not sweep
    industries' hard-earned money into a pile and set it on fire
    for no good reason. The regulations impose costs, and it is
    certainly appropriate to consider estimates of these financial
    burdens when deciding whether to promulgate a rule.
        Yet, as illustrated by Clean Air Act protections, EPA rules
    also deliver tremendous benefits. Ignoring these benefits has
    become standard practice in every one of the multiple fora
    organized by regulated industries to demonstrate EPA's perfidy.
        This approach is both biased and unsupportable from any
    objective perspective. The rules are required by statute. The
    appropriate remedy is to amend the law if you disagree with the
    statute, not cripple the Agency by stealth through budget cuts
    and excessive and redundant analytical requirements.
        Because of the business community's perception that EPA's
    popular mandate to clean up pollution would produce expensive
    rules, the Agency has experienced intensive scrutiny from its
    inception and was a pioneer in developing cost-benefit
    analysis. It performs such analyses today with sophistication,
    doing its best to produce reliable numbers from a methodology
    that is anything but precise.
        In fact, the most significant flaws inherent in cost-
    benefit analysis as it is practiced today are the pronounced
    understatement of benefits and significant overstatement of
    costs. Costs are inflated because EPA analysts have little
    choice but to rely upon companies they propose to regulate for
    the empirical data that underlies cost estimates, and such
    parties have ample incentives to inflate those numbers, as
    Senator Markey explained so eloquently at the beginning of the
    hearing.
        As for the propensity of cost-benefit analyses to
    underState benefits, the problem arises because EPA often
    confronts benefits that are difficult to monetize or turn into
    dollar amounts. What is the value of avoiding a severe asthma
    attack that does not require hospitalization, for example? The
    person experiencing such an attack is miserable for a time and
    may suffer some increment of long-term adverse effects on her
    health, but she does ultimately recover from the attack. EPA
    has great difficult when it attempts to monetize this
    suffering.
        EPA and other agencies have encouraged by OIRA to describe
    such implications without crunching numbers, but the reality is
    that any value not translated into a number most often gets
    lost in the shuffle. The Agency staff can write eloquently
    about brain damage suffered by infants, the likelihood that key
    elements of an aquatic system too small to be cooked for dinner
    will disappear as a result of water pollution, or the effects
    of sea level rise on iconic American cities. None of this
    narrative has anything close to the impact of a number crunched
    in a comparable fog of uncertainty.
        Thank you.
        [The prepared statement of Ms. Steinzor follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Rounds. Thank you for your testimony, Ms. Steinzor.
        Senators will now each have 5 minutes for questions, and I
    will begin.
        For Mr. Kovacs, in the Chevron deference by the courts, it
    has allowed the agencies to promulgate increasingly broad and
    wide-ranging regulations so long as they are not arbitrary and
    capricious. What, if any, impact do you believe King v. Burwell
    could have on the amount of deference the courts show agencies
    in the future when their regulations are challenged?
        Mr. Kovacs. Well, the King v. Burwell was really the first
    time in decades that the court has set a different type of
    standard other than deference for agency review, and it took
    the position that on those broad-ranging cases where there is
    deep political and social change, that the court was actually
    going to almost do a de novo review; and that is really
    welcomed because for the last 30 or 40 years the difficulty has
    been that when Congress delegates authority to the agencies to
    fill in the gaps and then the agencies fill in more and more
    gaps, and then the courts, through deference, give away their
    power to interpret laws, you end up in a position where the
    agencies really are not accountable.
        So the Burwell case, for the first time, brings the court
    back in and says at least for those mega type regulations we
    are going to take a much more detailed view and we are not
    going to grant the deference. So we welcome that.
        Senator Rounds. What, if any, impact will the recent ruling
    in Michigan v. EPA have in the way that the EPA goes about
    conducting economic analysis for future regulations?
        Mr. Kovacs. I think the Michigan case, for the first time,
    gets rid of the assumption that no matter what happens, no
    matter what EPA does, it doesn't have to look at costs. And for
    certain types of regulations, and granted, these are the
    toxics, it indicated that appropriate and necessary had to
    include under any reasonable set of circumstances costs. It
    really goes to what we would call truth in regulating.
        What we are hoping that the agencies will do is just be
    honest. And the reason why we need that is because if they are
    overregulating in one area, it means they are not spending
    money in another area that might need it. And if you have truth
    in regulating, the agency, for the first time, would have said
    in the Michigan case 4 percent, 5 percent of all the benefits
    went to mercury and the other 96 percent initially went to SO2
    and then the converted that to PM2.5. And what we are saying is
    go back to really the Clinton administration, where they said
    we are looking at this particular particulate and it costs this
    much per ton to take it out of society, so that you have some
    idea of what it is that we are getting for the money we are
    spending.
        Senator Rounds. Thank you.
        Ms. Furchtgott-Roth, in your testimony you say that in the
    Clean Power Plan specifically EPA is understating the costs of
    the regulation to the U.S. economy. Can you elaborate on what
    the costs the EPA is underestimating and explain how you
    believe the regulation would be different if the EPA had
    accurately stated all aspects of the costs of the regulation to
    the economy?
        Ms. Furchtgott-Roth. The major cost that is omitted is the
    cost to small businesses and businesses from the increased cost
    of electricity, the rise in the cost of the electricity. So
    here is this Regulatory Impact Analysis and on page 7-7 it says
    the EPA certifies that this action will not have a significant
    economic impact on a substantial number of small entities. And
    this action does not contain an unfunded mandate of $100
    million or more.
        Well, here is a situation where States or groups of States,
    depending if they use rate-based or mass-based, are going to
    have to cut back on their emissions-producing industries, power
    plants, energy-intensive factories. This is definitely going to
    have an economic effect, not just because these entities cut
    back their activities, but also because there are other firms,
    such as restaurants, dry cleaners, you can imagine, movie
    theaters, that depend on the activities of these large entities
    that are going to be cut back.
        In my testimony I show a chart based on EPA data that shows
    how much emissions are going to have to be cut back in
    different States. And, in fact, Mr. Chairman, your State
    actually is a winner. Your State is actually going to be able
    to increase its amount of carbon, but it is one of the few
    States that vote Republican that does. Most of the cutbacks are
    in Republican States, and most of the States where increases
    are allowed are Democratic States.
        Senator Rounds. Yes. And the unfortunate part for my
    consumers living in South Dakota is that they purchase their
    power from the States around them, which are going to have to
    have increases in costs passed on to them.
        Ms. Furchtgott-Roth. Right. Exactly.
        Senator Rounds. Thank you for your testimony.
        My time has expired. Senator Markey.
        Senator Markey. Thank you, Mr. Chairman, very much.
        Professor Steinzor, it is my understanding that the Office
    of Management and Budget guidance for Regulatory Impact
    Analysis directs, directs Federal agencies to count the
    additional co-benefits of regulations and accounting co-
    benefits has been the longstanding practice of Republican and
    Democratic administrations alike. Is that true?
        Ms. Steinzor. Yes.
        Senator Markey. So in order for the EPA to do their
    Regulatory Impact Analysis correctly, they need to count the
    additional co-benefits of the Clean Power Plan, the mercury
    rule, the ozone rule, is that correct?
        Ms. Steinzor. Yes.
        Senator Markey. OK. So that means that if reducing ozone
    and particulate matter have real benefits to public health,
    even if those reductions come from regulations targeting other
    pollutants like mercury.
        Ms. Steinzor. Yes. And it is also worth noting that they
    also subtract costs that are imposed by other rules. They don't
    do it in a one-sided way.
        Senator Markey. So, in other words, if there is a rule that
    says that a company has to reduce the amount of mercury it is
    sending up into the atmosphere, and simultaneously that rule
    also has the simultaneous benefit of reducing the amount of
    smog that is going up into the air or soot that is going up
    into the air that could wind up in the lungs of children and
    cause harm, the EPA could count that, and both Democrat and
    Republican administrations have counted that as a co-benefit.
    Even though you are trying to reduce the mercury, you are
    reducing this material that can go into the lungs of children,
    attach themselves to the lungs of children. We call it soot, we
    call it smog, or you can call it sulfur dioxide. You can get
    technical, but what ordinary people call it, it is a benefit,
    right?
        Ms. Steinzor. Yes.
        Senator Markey. And there isn't really a debate at any OMB
    that it should be counted, is that correct?
        Ms. Steinzor. No.
        Senator Markey. Oh. Well, that is important for us to know,
    because there are a lot of people who don't want to count those
    co-benefits, but that is really not the practice. And it is
    obvious why it is not the practice, because the benefits are so
    obvious if children are protected from these harms. If asthmas
    aren't as frequent from these harms, you have to add that up
    because that is going to be factored into how much it cost that
    company to keep the mercury from going into the sky. And if you
    add up the total benefit in that area, it is obviously going to
    be quite significant.
        So let's just talk to you, Dr. Rice. How does increased
    exposure to ozone impact the health of children and other
    vulnerable populations?
        Dr. Rice. Thank you, Senator Markey. That is an issue of
    great concern to me and other doctors in the field of
    respiratory medicine because the evidence, as I mentioned, is
    very clear that exposure to particles and to ozone increases
    the risk of a number of bad respiratory health effects in
    children and also in adults.
        Just to give you a few examples, it is now clear that
    exposure to ozone increases the risk of respiratory emissions
    for very small babies in the first month of life.
        Senator Markey. And, again, ozone is?
        Dr. Rice. Smog.
        Senator Markey. Smog. Right. Go ahead. Keep going.
        Dr. Rice. At levels that we experience today.
        Senator Markey. So if we put babies into smog, it is going
    to cause real problems. Is that what you are saying?
        Dr. Rice. That is what the evidence shows and that is what
    our experience has demonstrated when we look at the data of the
    exposure to ozone and the rates of hospital emissions in
    children.
        It also affects young kids, not just babies, but school-
    aged children. It increases the risk of having an asthma
    attack, landing in the emergency room for asthma attacks. There
    is evidence that children born to African-American mothers are
    at even higher risk of having an asthma attack when ozone
    levels go up.
        Senator Markey. Thank you.
        Professor Steinzor, EPA ranked fifth out of the 22 U.S.
    regulatory agencies in report card comparison on cost-benefit
    analysis performed by the conservative Mercatus Center at
    George Mason University. Professor Steinzor, do you agree that
    the EPA produces some of the most sophisticated cost-benefit
    analysis in the entire Government?
        Ms. Steinzor. Yes, I do, and I think the reason for that is
    that because the agency has been subject of special focus at
    the White House since President Nixon was elected, it has
    endured trial by fire and it has been perfected, it has been
    rigorously criticized and has responded, and does an excellent
    job.
        Senator Markey. God bless Richard Nixon and the fantastic
    job he did on these environmental issues.
        Ms. Steinzor. Well, he created EPA.
        Senator Markey. God bless him. And we thank God he did
    that. So I just want to get that out on the record as well.
        [Laughter.]
        Senator Markey. And I want to thank all of the witnesses
    for being here. I would also note that since 1990 Massachusetts
    has reduced its greenhouse gases by 40 percent and increased
    its GDP by 70 percent, just so that you can see the huge
    disconnect between the reduction in the harmful stuff and the
    increase in the beneficial job creation simultaneously.
        Thank you, Mr. Chairman.
        Senator Rounds. Senator Inhofe.
        Senator Inhofe. Thank you, Mr. Chairman.
        Senator Markey and I were both in the House at the time of
    the Clean Air Act amendments in 1990. You could use the same
    analogy here to say that if we are doing such a good job, why
    do we have to go into such a huge cost for the American people
    to come up with more regulations.
        I had requested, when I had to go down to Armed Services
    and come back up here, this document. It is from the EPA and
    this kind of fortifies what you are saying. It says that
    between 1980 and 2014, gross domestic product increased 147
    percent, vehicle miles traveled increased 97 percent, energy
    consumption increased 26 percent, and U.S. population grew by
    41 percent. During the same period, total emissions of the six
    principal air pollutants dropped 63 percent. That is there. And
    I think we have been doing a very good job. I was a cosponsor,
    as I suggest you were too, at that time.
        So some good things are happening and it seems like the
    people on the left will always talk about how dirty everything
    is and really don't talk about the successes that we have had,
    and I appreciate Senator Markey talking about those successes.
        Mr. Kovacs, in the last subcommittee hearing Senator Rounds
    held, we received testimony on the EPA's rampant use of sue and
    settle tactics to achieve its aggressive regulatory agenda.
    That is the subject of this hearing today. Even GAO confirmed
    sue and settle agreements can lead to gaps in EPA's cost-
    benefit calculations. So I would ask you to make a comment on
    what impact the sue and settle deadlines have on the EPA's
    cost-benefit calculations.
        Mr. Kovacs. Well, one of the difficulties with sue and
    settle is that if EPA is putting out 400 rules in the course of
    a year and they are sued on, let's say, 15 of those and they
    enter into a sue and settle agreement. What happens once the
    court enters the consent decree is EPA is really under a court
    order to push those 15 regulations to the front of the line.
    Many times when they are put in the front of the line they are
    on extremely tight deadlines, Boiler MACT, for example, even
    Utility MACT. What happens is they are taking a very complex
    issue and jamming it into a short period of time.
        What usually happens is they avoid forming the small
    business advisory panels; they avoid doing an analysis of what
    it is going to do to the States and unfunded mandates; they
    avoid doing Information Quality Act. What they do is they push
    it out and then the litigation continues. I think that is one
    of the reasons why there is so much litigation with EPA, is
    because they are constantly jammed and constantly missing
    deadlines.
        Senator Inhofe. OK, I appreciate that. I have two other
    questions. I am going to try to get them out kind of quickly.
    The next one is for you. Today's hearing is important to
    understanding how EPA decides the who and the what, the where,
    the when, the why prior to issuing a regulation, because once
    it is final it may be too late. The best example of that is
    this summer the EPA Administrator McCarthy shrugged off
    concerns over a court potentially vacating the mercury rule
    because ``the investments have been made.'' Another way of
    saying that is the damage has already been done. So in the case
    of the mercury rule we know what has happened with that.
        I would ask you, how robust was the RIA in making the case
    for the final regulation, which we now know has been overturned
    by the Supreme Court?
        Mr. Kovacs. Well, I think just look at the testimony,
    really, or the letter from small business council of advocacy.
    They made it very clear that EPA did not really talk to small
    business; they did not really try to understand what the impact
    was going to be on States. What happens when you have a
    regulation, a regulation, in my mind, is harder to get rid of
    than a law, because you can sue under it even if you change it.
        What happens is once the process goes into effect, it is
    there until it is overturned. They have tried, on Utility MACT,
    for example, several times to get a stay of it and they could
    not get a stay. So what happens is the regulation is in effect,
    the industry and the regulator community is going to be
    implementing that.
        Senator Inhofe. And in the case of Utility MACT the damage
    was done.
        Mr. Kovacs. It was done. And when the Supreme Court decided
    to send it back, at that point in time there was nothing that
    could be done, the damage was done. And I just put in a push
    for the Coats bill, which says that on those few large mega
    regulations, those over $1 billion that have national impact,
    and there are only a few a year, that there should be some
    mechanism to allow the regulated community to get a stay.
        Senator Inhofe. Well, and I know a lot of the people who
    were already hurt not just because it had gone into effect, but
    because they were anticipating it was going to be going into
    effect, so they had done their fuel switching and everything
    else, anticipating that.
        The other thing I wanted to bring up, and you can just
    answer it real quickly, this is for Mr. Batkins. I was the bad
    guy, as Senator Markey knows, back in 2002, and 2003, and 2004,
    and 2005 when they first started coming to the world coming to
    an end, global warming and all that. I actually, at that time,
    was the majority and chair of the subcommittee that Senator
    Rounds chairs now, and at that time I thought that was probably
    true until I found out the cost of this thing.
        At that time it was from Senator Markey's own MIT came out
    with the cost. The cost range at that time was between $300
    billion and $400 billion, and that was for the legislation that
    had been introduced. At that time it was introduced by McCain
    and Lieberman, I guess it was. And then Charles Rivers came
    along, they came along with the same approximate cost.
        So we know it is a very costly thing. So I think it was
    necessary for those on the other side to come up with something
    to offset that argument, so they came up with the social cost
    of carbon.
        Now, I would like to ask you, Mr. Batkins, the figure to
    claim alleged benefits of its climate regulations, what are
    some of the shortcomings with the current SCC figure?
        Mr. Batkins. Well, there is a lot of tension between the
    social cost of carbon on Circular A-4 and the Clean Air Act.
    What you will see broadly is, again, climate change, global
    climate change, so these are going to be generally global
    benefits accruing. So we have a majority of the benefits going
    overseas. For example, the Clean Power Plan, according to EPA's
    estimate, had $8.4 billion in costs.
        These costs are borne domestically, but a majority of the
    benefits are borne internationally. Again, it is a difficult
    task when we talk about projecting costs and benefits out to
    2100 or 2300. We are talking about generations.
        There is also the issue of the discount rate. I mentioned
    Circular A-4 generally prefers a discount rate of 3 and 7
    percent; other nations have slightly higher. And for this
    discount rate, just to give you an example of the range that we
    can have in social cost of carbon, depending on the discount
    rate, this year the social cost of carbon could be $12 per ton
    or $120 per ton. So there is generally a lot of tension between
    the social costs of carbon and what you will see with Circular
    A-4 and the Clean Air Act.
        Senator Inhofe. Good answer. Thank you.
        Senator Rounds. Senator Vitter.
        Senator Vitter. Thank you, Mr. Chairman.
        And thanks to all of you for your testimony.
        Ms. Furchtgott-Roth, thank you for your testimony. Back in
    2013, when I was ranking member of the committee, I procured a
    commitment for EPA's Science Advisory Board to pull together a
    group of economists to review how the Agency does economic
    modeling and a cost for cost and benefits, and it has taken
    them forever to get organized, but they finally are convening
    their first panel of experts this week. There are at least a
    few on the panel, I am happy to say, who seem truly
    independent.
        What would be the top three or four things you would
    suggest those experts focus on in terms of how EPA currently
    quantifies costs and benefits?
        Ms. Furchtgott-Roth. With regard to the co-benefit issue,
    if ozone and mercury have harmful effects, as other witnesses
    were saying, we should be able to see that in the cost-benefit
    analysis without the co-benefits. If EPA thinks that we have
    levels of particulates that are too high, then it should be
    able to issue a separate rule and look at those separately,
    because right now, according to EPA, the level of particulates,
    that standard is fine. Many places all over the Country are in
    attainment. So by saying that we are getting benefits from
    different levels of particulates, EPA is implicitly saying that
    its standard is not correct. So that is one particular error.
        I think also the costs of increased electricity prices have
    not been factored in. The costs on small businesses have been
    minimized. NERA, an economic consulting firm, says that the
    costs of electricity would rise by 17 percent, causing about
    $473 billion of damages.
        Most important, the climate benefits, we will not see these
    climate benefits if firms just relocate, because the same
    emissions will go out in the air and we won't have any reduced
    effect on global warming. We might have a greater effect, in
    fact, because other countries don't have as strict standards as
    we do, and those, right now, are not counted in the analysis.
    It is just assumed that emissions, if we regulate them, are
    going to go away. Same with the health benefits. We know that
    dirty air also travels.
        Senator Vitter. OK, thank you very much.
        Dr. Rice, thank you for being here as well. I have a pretty
    simple question that I think you can speak to as a doctor. It
    is my understanding that there is ample evidence and research
    that shows that there are real human health impacts from
    unemployment increases, areas with high unemployment. Some of
    those impacts include increased rates of alcoholism, child
    neglect and abuse, impacts on mental health.
        So my question is simply this: Do you believe it is
    accurate that there can be human health impacts from increases
    in unemployment, someone losing their job, potentially not
    being able to care adequately for their family?
        Dr. Rice. Thank you for that question, Senator Vitter. As I
    also mentioned in my testimony, when people don't have their
    health, that impairs their ability to work and to perform well
    and to get sleep and to keep their job because of doctor
    appointments that they might have. So you are absolutely right,
    there is a complicated intersection between health and
    employment. And I hope I have answered your question.
        Senator Vitter. I don't think you really have. So do you
    think there is a clear relationship between higher unemployment
    and negative health impacts on the population?
        Dr. Rice. I am a pulmonary doctor and I am not an expert on
    employment specifically as an exposure. But I agree generally
    that the better people are doing in all kinds of ways, and
    there are all kinds of exposures that affect health, and when
    people don't have their health they also can't work as well. So
    it is a complicated issue.
        Senator Vitter. OK. I would point to, in particular, there
    are lots of studies, but one is an American Academy of
    Pediatrics study that was presented at an exhibition in San
    Francisco that goes directly to this. In fact, one of the top
    predictors of health is income, employment, economic status.
        Could I have a little bit more time, Mr. Chairman?
        Senator Rounds. Certainly.
        Senator Vitter. Thank you.
        Just one other question for Mr. Kovacs. Another agreement I
    procured from EPA back in 2013 as ranking member was that they
    would finally provide the scientific data underlying the key
    studies that go to some of their past regulatory actions and
    would de-identify personal information so that data would be
    available and could be independently reviewed. Now, they have
    done a little bit of that and they have stonewalled on a lot of
    that, saying that they somehow can't de-identify data, can't
    take personal information out.
        Do you believe it is credible in 2015, with current
    technologies, that it is not possible to de-identify datasets,
    particularly datasets developed in the 1980's, to protect truly
    confidential patient information, but make these de-identified
    datasets available for independent analysis so we can judge and
    folks independently can judge if they really justify what EPA
    has pushed forward in terms of regulation?
        Mr. Kovacs. Well, it is certainly my understanding that
    even HHS de-identifies data and shares it with researchers.
    That I am fairly confident of and that happens every day. What
    you are referring to is the Pope and Dockery study. The reason
    this entire issue has become so contentious is because the Pope
    and Dockery studies in the late 1990's became the basis for
    literally all the studies that are going on today. And when
    Congress passed the Information Quality Act, it required that
    the data be peer-reviewed and that it be reproducible.
        And the difficulty that we are facing as we talk about all
    these outcomes, and why I have tried to get the regulations
    right as opposed to worrying about the outcome, is that no one
    can really determine whether or not, if this data is not
    correct, without getting the information to the public for
    checking on reproducibility, we are all sort of stuck and we
    are arguing about something we may not know the answer to, but
    it is easy to find.
        Now, EPA has been asked for the data and they said they
    don't own it, they say Harvard owns it, and we have been
    fighting over this for, I don't know, 20 years and this is the
    difficulty. And if there is anything that I can communicate in
    terms of my testimony, it is the regulatory process works for
    Congress and citizens, not for agencies, and we need to be able
    to have a process where we are open and transparent, and the
    data can be put on the table and we can actually deal with what
    is right, what is wrong.
        If we are going to regulate PM2.5, we have a statute where
    we can regulate it. If we are going to regulate SO2, we have a
    statute under NAAQS. And if you are going to regulate mercury,
    you have two, you have 111 and 112. But let's do it right and
    let's do it honest and let's do it transparently.
        Senator Vitter. Thank you very much.
        Dr. Rice. Senator Vitter, may I comment on that issue of
    the air pollution studies in Pope and Dockery? Would that be
    all right?
        Senator Rounds. Quickly.
        Dr. Rice. There have been hundreds and hundreds of studies
    on the issue of air pollution and mortality. Pope and Dockery
    was one of them. That was one of the earliest ones. I am not
    quite sure what Witness Kovacs means by the basis for all the
    other air pollution studies. There have been studies using all
    sorts of methodologies, and not all of them have taken place in
    the United States; some excellent studies in Europe and Asia as
    well. And this evidence overwhelmingly supports that there is
    an association between particulate matter exposure and death.
        Senator Vitter. Well, just to clarify, I think the point
    was correct that study in particular is a huge basis for both
    major EPA action and other related studies, and we have never
    gotten the data sets de-identified so that can be independently
    reviewed. I think that is the major point.
        Senator Rounds. Thank you, Senator Vitter.
        The purpose for this oversight hearing in the first place
    is to look at the analysis which is done by an agency within
    the Federal Government, the EPA. Whether you believe in the
    processes, as Senator Markey shared, whether you look at the
    impacts and the costs to the actual economy, as Senator Inhofe
    has shared, there is a common theme here that I think we would
    all agree on. That is, to be able to point at a process which
    provides confidence to the American public, one that you look
    at and you review and you find out what is working correctly
    and what may not be working correctly. That is when you begin
    to put together the confidence necessary for laws to be
    implemented and accepted.
        So today's hearing is as much about looking at the
    processes and finding ways to make them even better in the
    future than what they are today. When there are shortcomings
    identified, then we should work for both points of view to make
    it better than what it was in the past. I think that works to
    the benefit of both sides, when you can look at it and identify
    what is fact and what is a supposition or a proposition.
        So from my perspective today you have been very helpful,
    and I want to thank all of the members of the witnesses here,
    all of the witnesses that have come in today and helped us in
    our process as well.
        And I want to thank Senator Markey for his participation.
    It would be great to see some more members here as well. I
    understand that there are other conflicts as well.
        Senator Markey, do you have any closing thoughts?
        Senator Markey. Thank you, Mr. Chairman, very much. I ask
    unanimous consent to include in the record this explanation of
    the social cost of carbon from the New York University School
    of Law, which shows that the social cost of carbon uses a 3
    percent discount rate, which Mr. Batkins said was the preferred
    rate of OMB.
        Senator Rounds. Without objection.
        Senator Markey. Thank you.
        [The referenced information follows:]

      [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Markey. I would also like to say that historically
    this area doesn't really factor in the weight of innovation in
    the technology sector. The industry itself tends to be very,
    very pessimistic about what they can do; that is, the existing
    generation of executives just doesn't think they can do it. So
    that is what they testify to.
        For example, back in 2001, 2003, 2005 I kept making the
    same amendment on the floor of the House of Representatives,
    saying that the auto industry should average 35 miles per
    gallon by the year 2020 with their vehicles. The industry said
    we can't do that, you will bankrupt us; we can't do that, the
    technology just isn't there. So finally, in 2007, my law passed
    over in the House of Representatives that said 35 miles per
    gallon by the year 2020.
        Then the industry basically suffered a tremendous collapse
    in 2008 and 2009. They dropped all the way down to just 9
    million vehicles which they sold in the United States. Nine
    million is a very low number. And President Obama then
    promulgated the rules, saying they had to meet this much higher
    standard.
        Well, this is unbelievable. They are not going to have 35
    miles per gallon by the year 2020; they are going to have
    pretty close to 35 miles per gallon by 2016. So the industry
    dramatically underestimated how quickly they could move. They
    said they couldn't even meet that deadline of 2018, 2019, 2020.
    They are meeting it in 2016.
        Moreover, here is the big news: they are selling 16 million
    vehicles this year, these newer, more efficient vehicles out
    there that the public loves because they are saving money on
    gasoline and, by the way, sending up less pollution into the
    air; less carbon dioxide, less soot, less smog. It is just a
    completely win-win-win-win situation. But it does reflect how
    conservative these companies are.
        The utilities are the same way. The chairman of the full
    committee made reference to the 1990 Clean Air Act and how much
    more quickly the technology moved and how much greater the
    benefits were.
        So a lot of this kind of reflects, to a certain extent, the
    conservative view, which is understandable, of CEOs of
    companies in terms of what can happen after they are the CEOs
    of the company. That is just the way it is. But the truth is
    another generation taking another view of the same issues,
    bringing in perhaps younger technologists, younger scientists
    who have a more innovative spirit invariably, invariably
    results in dramatically faster implementation of new
    technologies and dramatically higher benefits that flow from
    the reduction in pollution that goes up into the atmosphere.
        So that has been my observation over my career, while also
    stipulating that I understand that motivation of the existing
    group of CEOs, but they are almost always wrong about the
    future, as right as they might be about the present. But the
    future has always been, from my perspective, a very elusive
    thing for the existing CEOs to grasp, especially if they have
    been on the same job for a prolonged period of time. They
    almost have a stake in the status quo and their vision being
    validated, because they don't have to worry about the future.
        So I thank you, Mr. Chairman, and I yield back the balance.
        Senator Rounds. Thank you.
        Senator Inhofe. The balance of what?
        [Laughter.]
        Senator Rounds. The chair is going to take prerogative on
    this and allow the chairman of the full committee to make a
    comment before we close.
        Senator Inhofe. Well, no, I learned a long time ago, and
    this surprises a lot of people. I used to say it and it really
    surprised them, that Barbara Boxer and I are good friends. This
    guy and I are good friends, and we have the kind of
    relationship that is a very honest relationship. He has every
    right to be wrong.
        And I really believe that when you look at the
    overregulation, the direct relationship between overregulation
    and jobs that are lost and the cost of the economy, we have all
    those figures, we have used them. You mentioned Utility MACT.
    Look at the number of people who have lost their jobs in
    anticipation of what would happen.
        So, anyway, we have a nice relationship and we will
    continue this, and that is one of the most significant things
    about this committee, I think. Anyhow, I will yield back.
        Senator Rounds. Thank you.
        Once again, I would just like to take this opportunity to
    thank our witnesses for the time to be with us today. I would
    also like to thank my colleagues who attended this hearing for
    their thoughts and their questions.
        The record for this meeting will be open for 2 weeks, which
    brings us to Wednesday, November 4th. With that, this hearing
    is adjourned. Thank you.
        [Whereupon, at 11:18 a.m. the committee was adjourned.]
        [Additional material submitted for the record follows.]

                Statement of Hon. James M. Inhofe, U.S. Senator
                           from the State of Oklahoma

        Thank you Subcommittee Chairman Rounds for convening
    today's oversight hearing, and thank you to our witnesses for
    being here to testify. At a time when the U.S. Environmental
    Protection Agency (EPA) is advancing an unprecedented
    regulatory agenda on top of mounting court challenges, today's
    hearing on regulatory impact analyses (RIAs) is absolutely
    critical to assessing the integrity of EPA's tools for
    developing regulatory actions.
        RIAs were designed to provide Federal agencies a framework
    for weighing the costs and benefits of a particular regulatory
    action and alternatives--prior to issuing a rule. In theory,
    robust RIAs should improve an agency's decisionmaking process
    and result in efficient actions. However, as witnesses today
    will testify, the deep flaws in recent EPA RIAs call into
    question many of EPA's recent rules. Specifically, testimony
    today will highlight several deficiencies across EPA RIAs that
    warrant congressional oversight, including: an over reliance on
    alleged benefits that are unrelated to the subject of the rule,
    such as benefits from reductions in fine particulate matter
    (PM2.5 ) in rules addressing other pollutants.
    Additional flaws include the use of a global estimate of the
    social cost of carbon to manufacture alleged climate benefits
    here in the United States and the recurring failure to conduct
    robust economic analyses of regulatory impacts in accordance
    with regulatory guidance, executive orders, and statutes
    designed to protect small businesses as well as state, local,
    and tribal governments.
        These shortcomings reveal a troubling pattern under the
    Obama EPA--where its tools for developing RIAs are highly
    speculative and deviate from the long-standing established
    regulatory process--in an effort to seemingly mold the RIA to
    fit a predetermined regulatory outcome.
        I co-sponsored the Clean Air Act Amendments of 1990 and the
    Clear Skies Act of 2003, where Congress gave EPA certain
    authorities to issue regulations. However, the Obama EPA has
    stepped outside of its legal boundaries and--as demonstrated in
    today's hearing--EPA has stepped outside the regulatory process
    by issuing RIAs with significant gaps. Quite simply, EPA has
    gone too far, issuing legally vulnerable rules under short time
    frames based on unsubstantiated science and incomplete economic
    analyses.
        Indeed, defective RIAs are likely to result in inefficient
    and overly burdensome regulations, many of which are challenged
    in the courts. But, by the time these challenges are resolved,
    often against EPA; regulated entities have already incurred the
    costs of compliance with an illegal regulation. If EPA
    Administrator Gina McCarthy's unconcern for the Supreme Court's
    determination that the mercury rule was invalid because
    ``investment had been made'' is any indication, testimony today
    will suggest the Agency is similarly disinterested in
    completing open and robust RIAs to inform regulatory action
    because by the time challenges surface, EPA will have issued
    the regulatory action it so desired and forced compliance.
        Accordingly, Congress must continue to conduct oversight of
    EPA RIAs and hold the Agency accountable in order to curb
    regulatory uncertainty over the true impact of rules and
    restore integrity to the regulatory process and subsequent
    actions coming from the EPA. I ask that my full statement be
    entered into the record. Thank you.

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