Trump's "2 for 1" EO: Can You Say "Arbitrary and Capricious"?

Posted on June 6, 2017 by Seth Jaffe

Last month, Mark Walker posted about Executive Order 13771.  Mark’s post was generally favorable, noting that a number of other countries have implemented some version of what is known as a “regulatory budget.”  This post provides something of a counterpoint to Mark’s. 

Put simply, I think that the Order is indefensible.  It’s not about regulatory reform.  It’s a transparent attempt to halt environmental regulation in its tracks, without regard to the benefit those regulations provide.

This week, on behalf of our client, the Union of Concerned Scientists, Foley Hoag filed an amicus brief in support of the plaintiffs in the case challenging the EO.  One paragraph from the brief pretty much summarizes the argument:

It is important to note, as Executive Order 13771 acknowledges, that agencies are already required, where not prohibited by law, to ensure that the benefits of regulations exceed their costs. Thus, the only impact of the Executive Order is to prohibit agencies from promulgating regulations whose benefits exceed their costs, unless they eliminate two other regulations whose benefits also exceed their costs. This is the definition of unreasoned decisionmaking. It is also a thumb in the eye of Congress, which enacted public health and environmental statutes in order to benefit the public.

It is a bitter irony that the government is defending the EO in part on the basis that it is just another in a long line of regulatory reform EOs, even though the EO is in fact a repudiation of those prior orders, not an extension of them.  This order is not about cost-benefit analysis; it is about cost-only analysis.  By definition this approach ignores the public benefits that the underlying statutes are intended to provide.  Thus, the “savings clause” cannot save the EO, because there is nothing left to save.

A Brief Rant on Cost-Effectiveness Analysis

Posted on October 2, 2015 by Seth Jaffe

On September 29, 2015, the 3rd Circuit Court of Appeals remanded EPA’s approval of Pennsylvania’s regional haze SIP.  Although I think that the decision was important and largely unobjectionable, it did get one issue wrong, and it happens to be an issue near and dear to my heart – cost-effectiveness analysis.  I am regularly surprised by the number of people who oppose its use and the number of people who just plain don’t get it.  The 3rd Circuit (and EPA and the plaintiffs) fall into the latter category in this case.

The issue here was what metric to use in measuring the cost-effectiveness of technologies intended to reduce regional haze.  Since this case involves compliance with a rule intended to reduce haze, I would have thought it self-evident that cost-effectiveness would be measured by the dollars spent divided by the amount of haze reduced.  Silly me.

For those of you who don’t know, there is a measure of visibility; it is known as a “deciview.”  Pennsylvania, to its credit, indeed measured cost-effectiveness on a dollars/deciview metric.  The plaintiffs argued that cost-effectiveness should be measured on the basis of dollars/ton of pollutant removed.  EPA waffled, first agreeing with the plaintiffs, but then concluding that, while its guidelines call for $/ton, it is acceptable to use $/dv.  The Court, following the rule of decision that it must evaluate EPA’s decision based on the reasoning used in the rule, rather than on a rationale first provided in litigation, concluded that, because EPA’s own guidelines found the $/dv metric to be “flawed”, EPA’s approval of the $/dv metric was unjustified and must be remanded.

I am not sure I can count the ways this was screwed up, but let me put it simply.  If we’re assessing cost effectiveness, and we have a measure of the outcomes we care about, we should use it.  To use a proxy – emissions – instead of the actual outcome the rule is intended to affect – visibility – is just plain nuts.

And I have to add that, not only did the Court get this 180 degrees wrong, but it did not even seem to be aware of just how bizarre it is to reject the metric that actually measures the outcomes the rule is trying to achieve.