245 Sullivan Street, Suite 472 • New York, NY • (212) 992-8932

Alexander Livnat 

Office of Resource Conservation and Recovery, EPA

Livnat.Alexander@epa.gov 

Steve Souders 

Office of Resource Conservation and Recovery, EPA

Souders.Steve@epa.gov

Michael Fitzpatrick

Associate Administrator, OIRA

Michael_A._Fitzpatrick@omb.eop.gov

June 4, 2010

Subject: Clarifying Net Benefits of the Pre-Publication Coal Combustion Residuals Rule

Greetings:

The unofficial, pre-publication copy of the Coal Combustion Residuals Rule (RIN 2050-AE81),1

As the catastrophic and costly containment failure in Tennessee in December 2008 proved, 

regulation of coal combustion residuals is long overdue and crucially needed. The Institute for 

Policy Integrity has studied this subject and preliminarily found that better regulation of coal ash 

could generate net benefits worth billions of dollars.

proposed by EPA and reviewed by OIRA, contains a misleading presentation of net benefits, which 

could interfere both with effective public comment and, ultimately, with rational policymaking. 

EPA should take this opportunity, before the proposal is published, to correct the mistake.

2

Specifically, EPA estimates the potential impact of the Subtitle C regulatory proposal on the 

beneficial use of coal combustion residuals—i.e., recycling the waste coal ash in construction, 

landscaping, or other applications. Tables 10 through 12 of the draft rule explore three scenarios: 

(1) beneficial use increases, generating substantial economic and social benefits; (2) beneficial use 

decreases, generating substantial economic and social costs; and (3) no change. Unfortunately, in 

summarizing the net benefits in Table 1 and generally throughout the draft rule, EPA presents 

scenarios one and two as equally likely outcomes that define the minimum and maximum points for 

the range of net benefits (Table 1 does not reflect the “no change” scenario 3).

 EPA will soon propose regulation of coal 

combustion residuals under one of two possible sections of the Resources Conservation and 

Recovery Act (Subtitles C and D). Unfortunately, EPA’s presentation of the net benefits of those 

policy alternatives is misleading and will likely steer the agency away from adopting what might be 

the best policy option.

 1 EPA, Coal Combustion Residuals—Proposed Rule Correction Notice (corrected, unofficial, pre-publication version signed 

May 18, 2010), available at http://www.epa.gov/wastes/nonhaz/industrial/special/fossil/ccr-rule/fr-corrections.pdf. 2 J. Scott Holladay, No More Excuses: The Economic Case for Coal Ash Regulation (Institute for Policy Integrity Brief No. 3, 

June 2009).
2

Such a presentation is misleading and goes against best practices for economic analysis and 

decisionmaking. For scenario one, EPA calculates a “lower-bound estimate” for what the agency 

thinks will be the most “realistic” outcome (i.e., an increase in beneficial use).3 For scenario two, 

EPA calculates a “worst case” estimate for what is implicitly an un-realistic outcome (i.e., a decrease 

in beneficial use) based on vague, speculative, and unsupported concerns raised by stakeholders.4

This treatment of the two scenarios injects two distinct biases into the presentation of net benefits. 

First, the two outcomes are not equally probable: one is most realistic and based on historical 

evidence; the other is a low-probability event based on hypothetical claims. Second, the two 

calculations are not made using comparable assumptions: one number is a lower-bound estimate, 

presumably reflecting conservative assumptions; the other is a worst-case scenario, presumably 

reflecting more extreme assumptions. Yet despite these significant differences, the two estimates 

are given equal weight in EPA’s summary of net benefits.5

Guidance from both OIRA and EPA on proper economic analysis cautions against such unqualified 

presentation of uncertain outcomes and against the unbalanced use of worst-case scenarios;

The best-case estimate for the realistic 

scenario that would be directly analogous to the worst-case estimate for the unrealistic scenario is 

never calculated, making an effective comparison of costs and benefits impossible. 

6

instead such guidance instructs agencies to give preference to the most plausible values, to present 

primary estimates along with minimum and maximum values, and to apply quantitative analysis to 

uncertain outcomes, using probability distributions with estimates of central tendency.7

In this case, by putting a lower bound estimate of the most realistic scenario (which generates 

significant positive net benefits) on equal footing with a worst-case estimate of an unrealistic 

scenario, EPA risks not presenting the public with accurate information on the likely net benefits of 

regulatory alternatives. Moreover, the improper characterization and presentation of an uncertain 

outcome skews analysis in a way that suggests the Subtitle C regulatory proposal is much less netbenefit justified than it most likely is.

 Failing to 

do so skews the analysis away from the most rational conclusions.

With OIRA’s assistance, EPA should recalculate net benefits and revise Tables 1, 10, 11, and 12—

and related text—of its Coal Combustion Residuals Rule before officially publishing the proposed 

rule. We look forward to submitting additional comments on the rule once it is published, and to 

working with EPA further on this issue.

Respectfully,

Michael A. Livermore Jason A Schwartz

Executive Director Legal Fellow

 3 Supra note 1, at 186. 4 Id. at 186-87. 5 Id. at tbl. 1 (presenting the results of both scenarios in the same table without any additional explanation). 6 See Office of Mgmt. & Budget, Circular A-4, at 40 (2003) (explaining that for rules with impacts of over a billion dollars, 

quantitative analysis should be applied to uncertainties, in particular the use of probability distributions and central 

estimates); id. (cautioning against creating a false sense of precision); id. (“worst-case or conservative analyses are not 

usually adequate because they do not convey the complete probability distribution of outcomes, and they do not permit 

calculation of an expected value of net benefits”); see also EPA, Guidelines for the Preparation of Economic Analysis 27 

(2000) (on the treatment of uncertainty). 7 Circular A-4, supra note 6, at 40; Guidelines for the Preparation of Economic Analysis, supra note 6, at 27 

(recommending the use of the “most plausible values”); EPA, Draft of 2008 Update to Guidelines for the Preparation of 

Economic Analysis 10-5 (2008) (recommending, based on OMB guidance, presenting “primary estimates” along with 

minimum and maximum values).