Committee Leaders Request Information on EPA’s Cost Estimation Practices

July 9, 2013

WASHINGTON, DC – House Energy and Commerce Committee leaders today wrote to Environmental Protection Agency (EPA) Acting Administrator Bob Perciasepe requesting information about the methodology used by the agency to estimate the cost impacts of its rulemakings. Setting a July 24, 2013, deadline to respond, members are concerned EPA’s economic analyses neglect economy-wide impacts and lack full consideration of a proposed rule’s effect on jobs.

The committee leaders wrote, “Many economically significant Clean Air Act regulations issued by EPA in recent years affect far more than just the directly regulated industry sectors. The regulations’ compliance costs include price effects and other costs that ripple through the U.S. economy. Yet EPA does not typically report these costs to the wider economy in its public Regulatory Impact Analyses (RIAs). Instead, EPA approaches cost estimation in a manner that restricts analysis to limited sectors, even though it has developed economy-wide modeling capability that could provide fuller information about the price and employment impacts of its rules.”

The members continued, “In addition to concerns about EPA’s failure to report fuller economic impacts of its rules, we have concerns about the jobs impacts the agency actually does report. EPA has used a simplistic formula to develop its sector-specific cost estimates in a number of recent rulemakings in which the estimated compliance costs are multiplied by a fixed estimate of ‘jobs increased per dollar of compliance spending.’ That fixed estimate was taken from a paper that considered totally different regulations, with no analysis of productivity impacts reflective of the new rule under consideration. According to testimony received by the Subcommittee on Energy and Power in April 2013, this formula ‘will always conclude that the new regulation will create jobs’. … Given concerns about the current methods EPA chooses to use, which effectively deny the public accurate estimates of the economic impact of rules’ compliance costs, we seek to examine EPA’s planning, performance, and decision-making surrounding the use of its economic cost estimates.”

The letter was signed by full committee Chairman Fred Upton (R-MI), Chairman Emeritus Joe Barton (R-TX), Vice Chairman Marsha Blackburn (R-TN), Oversight and Investigations Subcommittee Chairman Tim Murphy (R-PA), Vice Chairman Michael C. Burgess, M.D. (R-TX), Energy and Power Subcommittee Chairman Ed Whitfield (R-KY), and Environment and the Economy Subcommittee Chairman John Shimkus (R-IL).

To read the letter to EPA, click here.