```

[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
                             __________

                         U.S. GOVERNMENT PUBLISHING OFFICE 

98-668 PDF                     WASHINGTON : 2016 
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                          Washington, DC 20402-0001

               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:]
    
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    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:]
    
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        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:]
    
    
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    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:]
    
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    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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