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EPA’S Forthcoming Ozone Rule Could Be Most Expensive Regulation in U.S. History

By at 25 September, 2014, 4:58 pm

Top Ten Costliest Rules:  EPA Has Published 9 out of 10

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By Kevin Neyland

As EPA prepares to issue more stringent National Ambient Air Quality Standards (NAAQS) for ozone, one can reasonably conclude that the next round of ozone rules could be the most expensive in U.S. history.

First, some background.  In 2009, EPA set out to “reconsider” the tougher ozone standards promulgated in 2008 by the Bush Administration.  Because those primary and secondary ozone standards (75 parts per billion) were set higher than the range recommended by EPA’s Clean Air Scientific Advisory Committee (CASAC) (60 to 70 ppb), then-EPA Administrator Lisa Jackson initiated a review to determine whether the Bush EPA followed the best available science.

In 2010, EPA eventually proposed new standards in the 60 to 70 ppb range.  The agency’s Regulatory Impact Analysis estimated the range of annual compliance costs to be $19 to $90 billion.  After an outcry from hordes of state and local officials over EPA’s proposal, President Obama eventually pulled the plug, and instead ordered EPA to follow the normal five-year review process for setting NAAQS under the Clean Air Act.

Which brings us to the present.  CASAC has once again recommended new ozone standards in the range of 60 to 70 ppb.  Many expect EPA to promulgate a new primary (health) standard within that range, and potentially at the lower end.  A new study from NERA Economic Consulting for the National Manufacturers Association analyzed the economic impacts of an ozone standard at 60 ppb. Between 2017 and 2040, average annual compliance costs amount to $270 billion.

Let’s assume NERA is off by 50 percent.  Even at half the $270 billion figure, EPA’s pending ozone rule would dwarf the cost of the federal government’s most notoriously expensive rules.  In fact, using data from annual cost-benefit reports from the White House Office of Management and Budget, EPA has promulgated 9 of the 10 most expensive, five of which are NAAQS or implementation of NAAQS.

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A frequent retort is that this only presents one side of the ledger. What about the benefits? Well, what about them? EPA is driving air quality standards to levels that are producing miniscule incremental benefits in the real world. In fact, in addition to counting particulate matter benefits that are controlled by a different NAAQS, it has started to count benefits below the standard and below background levels in order to bolster its ozone benefit estimates. The benefits are highly uncertain at best, as OMB noted this year in its “Draft Report to Congress on the Costs and Benefits of Federal Regulations.”

As it prepares to propose the most expensive rulemaking in history, EPA should first focus on getting the science right. An objective review will show that the current ozone standard sufficiently protects public health. EPA should also be transparent with the American public about what the costs will be, and what they would really be getting for them.

Kevin Neyland, a former Deputy Administrator of the White House Office of Information and Regulatory Affairs, is a Senior Fellow with the Center for Regulatory Solutions

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For more than 20 years, the Small Business & Entrepreneurship Council (SBE Council) – a nonprofit advocacy, research and education organization – has worked to protect small business and promote entrepreneurship. The Center for Regulatory Solutions is a project of SBE Council.

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