een in? dams and try in the monitor by permit .risdiction arly years ?neril ifits :onsistent ning and nation?s 1W wm_yl .. . ..-. h. animate? m-m? Aswan-q WW, I I ?'an - ?Jr. 1- - .- . J-r-u .no. Cost-Bene?t Analysis: An Inadequate Basis for Health, Safety, and Environmental Regulatory Decisionmaking* ?lth/me! S. Hardin? INTRODUCTION The use of cost-bene?t analysis in agency decisionniaking has been hailed as the cure for numerous dissatisfactions with governmen- tal regulation. Using this form of economic analysis arguably promotes rational decisionmaking and prevents health. safety. and environmen- tal regulations from having in?ationary and other adverse economic impacts. Closer analysis. however. reveals that the cost-benefit ap- proach to regulatory decisiontnaking su?'ers from major n?ietliodologi- cal limitations and institutional abuses. In practice. regulatory uses of cost-bene?t analysis sti?e and obstruct the achievement of legislutcl health, safety. and environmental goals. This Article critically renews the methodological limitations of cost-benefit analysis. current agency uses of cost-bene?t analysis under statutory requirements. the impact of recent Executive orders mardat- ing economic balancing analyses for all major regulatory agency deci- sions, and agency efforts to structure their discretion in the use of cost-- bene?t analysis. The Article concludes that if the health. safety. and environmental regulators continue to use cost-bene?t analysis. proce- Copyright WED by Michael 5. Permit. This study was originally prepared for the Conference of the United States (ACUS). The author has her-.c.ited from the insights anc. assistance of Messrs. Lavid Martin and David Pritzitcr ot? ACUS. Chairman Janus ?v'ir'esnet and members of the ACUS Committee on Decisions! Processes. particularly Professor Walter Gellhom. The study is based in part on research. information. and ?ndings developed under two other research projects supported by the National Science Foundation's Program on Ethics and Values in Science and Technology. and Brookhaicn National Laboratn.-ry Of?ce of Low ronmental Policy. The author also wishes to thank the foil?wing people {or their assistance: Raymond Miyarcs and Sheila Jasano?'ot' Bracken. Selig Harriet; and Barbara Shimmer. George Collins. MaLLIievt Epstein. Ronald Shiplcy. and Rolicit Parodi. students at the Franklin Pierce Law Center. Finally. the author to thank Ronald Cr. Associate Editor. Ecology Law Quarterly. for his editorial asiistance Partner in bracken. Selig Baram. Boston. Mass; Professor of Law and Director ot?the Program on Government Regulation. Franklin Pierce Law Center. Concord. Nil. 473 . r" - 'Wr ?gnaw?? t-L mug; -4..- . . ., - A-.. .ws.m~.aa~u u" .1 m1 474 ECOLOGY QUARTERLY 8:473 dural reforms are needed to promote greater accountability and public participation in the decisionmaking process. Further, to the extent that economic factors are permissible considerations under enabling stat- utes, agencies should conduct cost-effectiveness analysis, which aids in determining the least costly means to designated goals, rather than cost-bene?t analysis, which impr0perly determines regulatory ends as well as means. I COST-BENEFIT ANALYSIS AS A MEANS TO STRUCTURE AGENCY DISCRETION A. Delegation q/?Aur/zorlyl to Achieve Objectives In reSponse to increasing concerns about risks to health, safety, and environmental quality. Congress has enacted several statutesl pro- 1. Health. safety. and environmental provisions requiring regulatory and public works agencies to weigh multiple considerations before taking action include the following: Fed- eral Insecticide. Fungicide. and Rodenticide Act. 7 U.S.CA. 136(bb) {West Stipp. 1979) (determination that a pesticide has ?unreasonable adverse effects? takes into account the economic. social. and environmental costs and bene?ts ofits use}; Consumer Product Safety Act. 15 U.S.C. ?2058(c) (1976} (promulgation of safety rules requires consideration of the risks of injury. number of products subject to the rule. public need for the product. probable effect of the rule on utility. cost. and availability of the product. and means of minimizing adverse effects on competition and manufacturing); id 2076(m)(4)(A)(i) (West Supp. 1979) (product safety standards must take into account the cost impact on and bene?t to consum- ers and affected businesses): Toxic Substances Control Act. 15 U.S.C. 2601(c) (1970) (En- vironmental Protection Agency (EPA) Administrator required to consider environmental. economic. and social impact of actions): National Forest Management Act of 1976. 16 U.S.C. 1604(1) and (I976) (process must be devised to assess costs and bene?ts of reforestation. timber stand improvement. and sale of timber); Soil and Water Resources Conservation Act of 1977. 16 U.S.C. (Supp. 1 1979) (development of conserva- tion program shall analyze costs and benefits of alternatives); Clean Water Act 303(c)(2). 33 1313(c)(2)(1976) (establishment ofstate water quality standards requires consid- eration of public health and safety. the waters? value for public supply. fish and wildlife propagation. and recreational. agricultural. industrial. and navigational uses): id. 33 U.S.C. ?1314(b)tl) (determination of best practicable pollution control measures must consider cost of technology. age of equipment and facilities. engineering as- pects. and nonwatcr quality environmental impact); id ?315(a). 33 U.S.C. 1325(a) (Na- tional Study COmmission to evaluate social. economic. and environmental eifects of achieving or not achieving ef?uent limitations); Water Resources Planning Act and Water Resources Development Act of 1974. 42 U.S.C. 1962-2. Hold-5e 1962d-l7 (1976) (con- gressioual intent ofassessing regional and national economic development and environmen- tal protection in evaluating costs and bene?ts of water resource projects; establishment of wetlands authorized if environmental. economic. and social benefitsjustify increased costs; discount rate set for regional or river basin plans); National [Environmental Policy Act of 1969. 42 U.S.C. (1976) (all federal agencies required to give appro? priate consideration to environmental values along with economic and technical factors); Solar Energy Research. DeveIOpment. and Demonstration Act of 1974. 42 U.S.C. 5556(b) (1976) (cost-bene?t analysis required to demonstrate successful solar energy development program): Energy Reorganization Act of 1974. 42 U.S.C. 5877(c) (1976) (Nuclear Regula? tory Commission (NRC) must state goals and priorities related to costs. benefits. and risks of commercial nuclear power); Energy Conservation Standards for New Buildings Act of 1976. I WWHW who? - public xtent that tling stat- :h aids in ther than ends as "ves h, safety, Litesl pro- iublic works )wing: Fed? Supp. 1979) account the )duct Safety 'ation of the ct. probable minimizing Supp. 1979) to consum- (1976) (En- ?ironmental. of I976. l6 1 bene?ts of Resources if conserva- 303(c)(2). rires consid- ind wildlife uses); fa! ion control as- 325(a) (Na? effects of and Water '1976) (con- nvironmen- ulishment of eased costs: alicy Act of give appro- cal factors); 3. 5556(b) eveloptticnt ear Regula- and risks of Act of I976. .219? MM mu fall-?nal? - 1980] 475 viding new schemes for agency decisionmaking. These statutes specify the problems to be addressed and the procedures to be followed. but provide little guidance on the analytical processes the federal agency should use in reaching regulatory decisions. The statutes typically prescribe a variety of general policy objec- tives, decisiona] criteria. and legislative ?ndings to guide the agency in dealing with the substantive aspects of its decisionmaking. These fac- tors usually fall into two competing categories: (I) the reduction of certain risks to health, safety. or environmental quality: and (2) the minimization of adverse economic effects on regulated entities. their employees, and consumers. In addition. an agency may be required to consider using the best practicable or available technology to reduce risks, promote energy conservation or national security, protect the small business sector. or encourageinnovation. Agencies must also consider the additional, and often inconsistent, objectives and requirements imposed by other statutes.2 Operating with limited resources and conflicting objectives. federal agencies must therefore ?make policy when Congress could make none" and afford ?a fair degree of predictability of decision in the great majority of cases and of intelligibility in all."3 The statutes are usually silent as to the analytical method by which 42 U.S.C. ?6339 (Supp- (energy conservation performance standards must take into account ef?ciency. economic cost and bene?t. and impacts upon affected groups}; Clean Air Act. 42 U.S.C. (Supp. 1 l977) (scienti?c review committee to advise EPA Administrator of adverse public health. welfare. social, economic. and energy effects of attainment strategies for ambient air quality standards); id. 42 U.S.C. ?74l (existing source performance standards to be established with refer- ence to best technological system. with consideration ofcosl. nonair quality health and envi- ronmental impacts. and energy requirements}: id. 164(b)(l 42 U.S.C. 7474(bit I (description and analysis of health. environmental. economic. social. and energy cti'ects re- quired prior to air quality area redesignation): id. ?202(a)(3)(Al 42 U.S.C. (motor vehicle emission standards to be established by considering cost. noise. energy. and safety effects of emission reduction); fat 2! 42 U.S.C.A. (West Supp. 19?9) (cost-bene?l analysis required for emission control de- vices before control or prohibition of certain fuels or fuel additives). 2. See NATIONAL ACADEMY OF DECISION MAKING FOR REGULATING CHEMICALS IN THE ENVIRONMENT 17-22 ([975) [hereinafter cited as CHEMICALS 3. Federal Agencies: Tire herd/iv ?t'rrer Dc?/Imbn of Standards. 75 HARV. L. REV. 873. 874 (1962]. Although structuring discretion to accommo- date multiple considerations in dccisionmaking has not received sufficient congressional at- tention. there are recent indications ofcongressional concern over excessive delegation. Sec SENATE COMM. on GOVERNMENTAL AFFAIRS. 95TH 5 STUDY ON FED- ERAL REGULATION (Comm. Print [977). which recommends. in part: "The mandates ofthe independent regulatory agencies should be drafted by Congress in as narrow and speci?c a manner as possible. Where broad delegations ofautlioriiy are determined by Congress to be unavoidable. congressional oversight of subsequent agency action should be significantly increased.? Id at See aim letter from Senator Edmund Muskie to Comptroller Gen- eral Elmer Staats (Aug. 5. I977). GENERAL ACCOUNTING OFFICE. FORMULATION AND PRESENTATION or: WATER Ri-sotiitCLS PROJECT ALTERNATIVES PRO- A BASIS FOR Barren MANAGEMENT DECISIONS l3 (Feb. 1. l9?8) [hereinafter cited as . wx?. _.vn run476 ECOLOGY LAFV QUARTERLY 8:473 the agency must balance these diverse factors. At most, Congress occa- sionally Specifies that certain factors are subordinate to others.4 As a result, Congress delegates considerable discretion to the agency to structure the central feature of its decisionmaking?the balancing of 1 multiple objectives necessary to reach a decision.5 Judicial review of agency action ensures compliance with express or implied statutory balancing requirements. According to the District of Columbia Circuit. for example. the National Environmental Policy Act of 1969 (NEPAP requires agencies to use a ?case by case balancing judgment? in which ?the particular economic and technical bene?ts of planned action must be assessed and then weighed against the environ- mental costs."7 This court also construed the Safe Drinking Water Act,3 a statute generally assumed to promote the single objective of public health, to require a balancing of multiple considerations" Muskie letter to (requesting a report describing how the Corps of Engineers and other water resource agencies limit their discretion in decisionmaking). Economists. engineers, and other of public sector decisionmaking are address- ing the multiple objective problem. See R. Kurzmav H. RAIFFA. DECISIONS MULTI- PLE OBJECt'tvras: PREFERENCES AND VALUE TRADE-OFFS E. STOREY R. A PRIMER ron Porter (1978) [hereinafter cited as Sroxey 8: 4. Sec, 9.3.. Clean Air Act 42 U.S.C. 76l7te) (1976) (consideration ofeco- nomic effects does not lessen the Administrator's duty to protect public health and welfare). 5. Judge llazclon has observed: Traditionally, in democratic societies. it is elected legislatures that make the hard value choices. Indeed. this is precisely what legislatures are designed to do. In- creasingly. however. our legislatures have been delegating these value choices to administrative agencies?institutions which cannot resolve value conflicts through the relatively simple expedient of a show of hands. D. Bazelon, Coping with Technology Through the Legal Process 12 (Jan. ID. 1977) (paper presented at Atomic Industrial Forum. lne.. Conference on United States Energy Policy. Washington. DC). See alto Battelle Paci?c Northwest Labs. Review of Decision Method- ologies for Evaluating Regulatory Actions Affecting Public Health and Safety (Dec. l976) [hereinafter cited as Battelle Report]. The report states: The most signi?cant feature ofthe legal setting for health and safety regulations is that both Congress and the courts give the agencies broad discretion in making 1 decisions. With few exceptioas . . . . Congress has simply told the agencies to protect public health and safety and has not indicated guidelines for acceptable 1 incremental safety expenditures or ways to determine an acceptable approach. Id. at ix. See also CHEMICALS Rat-oar. .riqs?m note 2. at 11-22. 1 6. 42 U.S.C.A. 4321-4368 (West Supp. 19m i 7. Calvert Clilfs' Coordinating Comm'n v. AEC. 449 F.2d [109. [[23 (DC. Cir. l9'll). 8. 42 U.S.C.A. 300f?300j-l0 (West Supp. I974-1978). . 9. Environmental Defense Fund v. Costle. 578 F.2d 337 (DC. Cir. 1973). The court observed: The task of the agency here is largely one of line drawing. Agency expertise and judgment must be applied in determining the optimal balance between promotion . of the public welfare and avoidance of unnecessary expense. [The court] will not interfere so long as the agency strikes a balance that reasonable [.tv?cl promotes the legislative purpose. Id at 346. Similarly, the Fifth Circuit construed the Occupational Safety and Health Act. 29 I 5?.ch MlmA .aumh .412 4.. L. A - ?r?v qu wu- vu-g ?r ?r u,v-u . . 7v . ?mur? .. .. .. . 4?5. - ?NM-imam;- HHJM - ALLA 477 1980] (it: There is, however, no consensus as to how courts should review agency to agency balancmg. dudge believed that theyudrczary should ancino of play a central role in ensuring the integration and balanced assessment of environmental and nonenvtronmental considerations in federal agency decisionmalting."l0 [T]o the extent that special knowledge [is] involved. it [is] the knowl- lc edge of how matters are proven. and that is a ?eld in which courts have tal Policy always had a special interest and in which they cannot escape keeping balancing up with the scienti?c times. . . . There may be reconditel problems on bene?ts of the frontier of statistical and probability theory that a court cannot 3 chiron- meaningfully handle. Basically. however. a court can. by diligence and 3g Water attentiveness, address itself to issues of how matters are proven. even iective of though understanding such issues may involve some inkling of statisti- cal signi?cance.? In contrast to Judge Leventhal?s urging that courts evaluate the rsand other substantive and analytical aspects of agency decisionmaking, Judge are address- Bazelon concludes that courts should defer to the scienti?c and techno- Mum- logical determinations and value preferences of the agencies. Instead. 5? ?the imponant thing is that the agency generate a record in which the factual issues are fully developed? in order to ?make possible effective tion ofeco- professional peer review, as well as legislative and public oversight?? ?1 ?Ham As a result of these statutory and judicial attitudes about balanc? hard mg, regulatory agencies have sought to develop new techniques for lo. ln- structunng their discretion. Most of these techniques are variations on ?0 the theme of cost-bene?t analysis. trough . :77; (Paper 8. Use of arr-Bene?t Analysis rgy Policy, tn Method- Dtsy?i/zrhg Corr-Bene?r Arza?i'sllr Dec. 1976) . Cost-bene?t analysis derives from simple pro?t and loss account- Sign: ing traditionally practiced by business organizations.? Cost-bene?t :ics to analysis phable involves translating the attribute performances of alternatives into dol- lar quantities. The favorable attribute performances are added to- (DC. Cir. U.S.C. ?652(8) (1976). to require that the Occupational Safety and Health Administration (OSHA) justify its workplace health standard for benzene by demonstrating a reasonable relationship between the quanti?ed costs and bene?ts of the proposed regulation. Amen?can The court Petroleum Institute v. OSHA. 58! F.2d 493. 503-05 (5th Cir. 1978), can. gramcd sub. nom. Marshall v. American Petroleum institute, 440 US. 906 (1979). .e and 10. Leventhal. En wironmr'nm/ and (Ire Rule oft/tr Courts, l22 U. PA. L. lotion REV. 509. 555 (1974). 11! not ll. Id. at 533. 65 ?It 12. D. Bazelon. supra note 5. at 8. But see Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council. Inc. 435 US. 519 (1978). in which the Supreme Court limited the authority of federal courts to require procedures beyond those provided by the AC1. 29 Administrative Procedure Act. 5 U.S.C. 500?700 (1976}. See note 22 ri?e. . - - I ry?th-rw-MW' - 13. See EJ. Cosr BlileFlT ANALYSIS 6 (1973). . . .. - .p?w . .. . .9. .. 478 ECOLOGY LAW QUARTERLY 8:473 *1 gether to become the bene?ts. The sum of the unfavorable attribute performances is the cost. Thus. the cost-bene?t analysis can be viewed as a process of deriving dollar values for each entry in a performance matrix and aggregating all of the performances into one attribute. ei- ther net benefits (bene?t minus cost) or a bene?t to cost ratio.? A decision is justi?able when net bene?t is positive or a bene?t-to?cost ratio is greater than one. Policy have broadened the meaning of cost-bene?t analy- sis to encompass virtually any analytical method that organizes infor- mation on alternative courses of action or displays possible trade-off 1 Opportunities, thereby structuring decisionmaking.I5 Thus, the cost~ bene?t rubric encompasses many different types of analyses. Some of these analyses simply adopt a previously determined objective, leaving only the ?cost" side ofthe balance sheet to be developed. For example, in establishing an emission standard for the discharge ofionizing radia- tion from a nuclear reactor. an analyst may be ?given? a preexisting 5 standard for the ambient level of radiation necessary to protect human health near the reactor. This standard represents a conclusive determi- nation of the degree of societal benefit to be achieved and reduces the analyst?s task to ?nding the most cost?effective method to meet the am- bient standard. Hence. the analysis in this truncated format is a sim- pler task of cost-effectiveness analysis. Cori-bene?t ana?tzrrir, then, is used by the decisionmaker to establish societal goals as well as the . means for achieving these goals. whereas 021041513 only i compares alternative means for achieving ?given" goals.? This Article focuses on cost-bene?t analysis. A - .a l4. Battelle Report. .rayrra note 5. at 53. See aim STOREY 8.: ZECKHAUSER, supra note 3. at 136-37. See CHEMICALS REPORT. supra note 2. at 39: ,1 Benefit-cost analysis . . . is not a rule or formula which would make the decision or predetermine the choice for the decision maker. Rather. it refers to the system- atic analysis and evaluation of alternative courses of action drawing upon the ana- lytical tools and insights provided by economics and decision theory. it is a framework and a set of procedures to help organize the available information, dis- play trade-o?s. and point out uncertainties. . . . Cost?bene?t analysis is thought to simplify decisions ?by reducing the relevant factors to numbers that can be added. subtracted and compared. The only unit generally considered feasible for doing this is the dollar. but the use of dollar values poses a great many problems.? Id. at See also Battelle Report. .ngara note 5; W. Rowe. AN ANATOMY or . RISK and EJ. MISHAN. supra note l3. For a lucid review of lo techniques for ana- lyzing and improving systems frequently used in the data and organization stages of cost- bene?t analysis. see McCauley. Statistics-Based Systems Techniques: Concepts. Exam? ples. Applications (Feb. 16. (IBM Data Processing Technical Publication). l6. See discussion of this distinction in llaram. Legal and lm-rrimriana/Aapecrs of Using Bene?t-Car! Comm! Ionizing Radiation. in CONSIDERATIONS or HEALTH BEN a- FIT-COST ANALYSIS rort ACTIVITIES IONIZING RADIATION Exeosurte AND At.- TERNATIVES lO7-l2 (1977) (EPA Rep. No. 520/4-77-003) [hereinafter cited as RADIATION See 0/10 Weinberg. Analysis andl/Ie Linear {{Iponfterir, 27l NATURE 596 (1978). .m ran-4 AMA-nix . .. M. qr! 4, . ?nurg-W ?r-th . ribute iewed nance te. ei- it analy- es infor- trade-o?? he cost- Some of leaving xample, .g radia- :existing human letermi- aces the the am- a sim- then. is . as the sis" only Article ?pro note ision tem- ana- is a dis- Tactors to msidered :at many TOMY or . for ana- of cost- 5. Exam- 'q/Ust?ng BENE- AND AL- tor-trim: NATURE . 1980] YSIS 479 2. Adoplt'on qf Cost-Benq?r Aim/[tarry by Federal, Agenck?s? The continuing efforts of regulatory agencies to balance competing considerations,'7 such as public health and economic feasibility. are be? set by a number of special problems. The technical problems include an ever-expanding. but limited and generally inconclusive data base.18 disagreement among experts on methods for using data. lack of consen- sus as to ?ndings and their applicability to problems at hand, and un- quanti?able attributes. Regulators must also value low probability. high cost events while taking into consideration the diverse and chang- ing values of our pluralistic society.19 Moreover. an atmosphere of ?crisis management? is promoted by statutory time limitations and pressures from various interests. Mandated by statutes20 and recent Executive orders? to conduct complex ?balancing analyses? to reach decisions, regulatory agencies are under considerable pressure to adopt cost?bene?t analysis.22 The 17. Public works agencies have used cost-bene?t analysis since the late l9th century. M. Baram. Federal Energy Regulation and the Use of Cost-Bene?t Analysis: Legal and Public Policy Considerations l-8 (Oct. I. (Report to Environmental Policy O?ice. Brookhaven Natiorial Laboratory) [hereinafter cited as Brookhaven Report]; Tarr 8.: F. McMicltael. 77w Elvin/ion of ??nancier rat-Imam and rim Dene/opmem of (are Regal/a? rim: A Retrospective Alm?'?if in TFt'llHt)LOtiY at l65 Tarr ed. [977). Congress speci?cally approved the technique in water resource develop- ment projects in 1936 (Flood Control Act of 1936. 33 U.S.CA. 70l-709(a) (West Supp. and most federal public works agencres adopted cost-bene?t analysis soon afterward. This early use or cost-bene?t analysis by public works agencies was deticient in several re- spects. For example. the agencies failed to consider environmental costs and applied inade- quately low interest rates to discount future bene?ts and costs to present .tlues. Sic Roberts. 15?6?ch 05! Arm?s ris. In Use (Hume) in diluting i? an? Resource Prry'rcri I4 AM. Bus 73. 81- 83 (1976); R. Mikesell. The Rate of Discount lor Evaluating Public Projects ([977) (American Enterprise Institute for Public Policy Research); and U. DKim. A Bene?t-Cost App-oath to Water Resource Investments: Theory and its Application (Sept. I977) (unpublished paper. Dep?t of Economics and Business Management. Cath. U.. Wash- ington. DC). The enactment of the National Environmental l?olicy Act of 196? (NEPAL 42 U.S.CA. 4321?4368 (West Supp. WW). and an increased discount rate have partially alleviated this problem. See Roberts. supra. See who U.S. Comptroller General. Survey of Use by Federal Agencies of the Discounting Technique in Evaluating Future Programs (Jan. 28. 1968) (Report to the Joint Economic Committee). l8. Sec. 8.5.. Chalfant. Ilartmann t5; Blakcboro. Recombinant DNA: A Case Smaft' in Regulation cfSciemy?ir Research. 8 ECOLOGY LQ. 55 (1979) [hereinafter cited as Recombi- nant For background on decisionmaking from an uncertain data base. see W. LOWRENCF. OF ACCEPTABLE. RISK (I976), Battellc Report. .mpra note 5. and CHEMICALS REPORT. supra note 2. 19. For a more detailed description of problems associated with societal values, such as public preference for voluntary over involuntary risks. sec Recombinant DNA. supra note 18See note 1 supra 21. Exec. Order No. ll. 821. 3 C. F. R. 926 (l97I- l975 Compilation). amendm'bi Exec. Order No. 11.949. 42 Fed. Reg. 1017 (t9?i6); Exec. Order No. l2..044 3 C. F.R. l52 ([978 Compilation). 22. However. the courts have given the regulatory agencies a relatively free hand to establish procedures for conducting cost-bene?t analysis. See Vermont Yankee Nuclear 2: WW?Pva-rw- . . - .H M-npaunupu ..- . .. .. . -. (LL. .24. .: - . ?mi Ml ?dim??Jun?:- 480 QUARTERL 8:473 use of cost-benefit analysis in regulatory decision processes has been promoted by economic consultants and advisory committees to the agencies drawn from the scienti?c and engineering communities. in- eluding the National Academy of Sciences.23 In addition. regulated in- dustries have urged agencies to use cost-bene?t analysis in considering i the economic impacts of regulations. Their elforts include challenging agency actions not premised on cost?bene?t analysis in lawsuits. lobby~ ing for amendments to existing statutes to require agencies to engage in 1 cost-benefit analysis, conducting studies demonstrating the in?ationary and other adverse economic effects of agency deeisionmaking not pre- mised on cost-benefit analysis. and advertising campaigns against regu- lation conducted without cost-bene?t analysis??1 The public also has become increasingly critical of regulation as a cause of societal and ec- onomic ills.25 In response to these demands for reform, Presidents Ford and Carter issued several Executive orders requiring agencies to conduct ?in?ationary impact analyses? and other regulatory analyses of a monetary or economic nature in their major rulcmaking activi- ties?" The increasing pressure upon agencies to use cost-benefit analysis raises a variety of methodological. legal. and public policy issues: quanti?cation of hitherto unquantitiable factors, such as aesthetics. ecological change, and human mortality; the proper degree of congres? sional, judicial. and public deference to agency decisions; the choice of an?. .1 Ila 5.- Power Corp. v. Natural Resources Defense Council. lnc.. 435 U.S. 5l9 in that case, the NRDC challenged an AEC rulcmaking procedure dealing with Spent fuel from a reactor and the use of the rule in cost-benefit analysis for licensing Vermont Yankee's light water reactor. The District of Columbia Court of Appeals overturned the rulemaking because of the ABC's failure to employ certain procedural devices beyond the statutory minima. The Supreme Court held that the circuit court had improperly intruded int?. the ABC's rulemalt- 1 ing authority and remanded the case. 23. See, eg, CHLMICALS Rut-oar. .rupm note 2; L. Lave 6: E. AIR POLLUTION 1 AND HUMAN HEALTH. 209-51 NATIONAL OF SCIENCES. 1 IN THE ENVIRONMENTAL RADIATION REPORT. .mpnz note 16; cht2, ??at Erick: Should We Rmr?. 74 New 320 0i. Sryi'ri' a! .Jaji' Price. REGULATION l6 (Nov/Dec. 1977); Comments of Paul W. MacAvoy, Government Regula- tion: Where Do We Go From Here? (Dec. 1977] (Round table discussion sponsored by 1 American Enterprise Institute for Public Policy Research). 24. See. eg. Mobil Oil's live-part series on "The Capitalist Revolution" culminating in Proposal for Change." nhich calls for requirement that clear and unbiased Eco- nomic Impact Statements?spelling out their ell?ccts on jobs. costs. in?ation and the national economy?accompany all new major regulations and legislation.? NY. Times. July 27. 1978. A, at 19. 25. A public survey by the National Science Foundation indicates that the public over- whelmingly believes governmental decisionmzikcrs are most at fault when science and tech- nology cause problems. Sixty percent of those sun eyed attributed such problems to governmental decisionmalters. only l4?; to business and 12% to the scien? ti?c and engineering communities. National Science Board. National Science Foundation. Science indicators I976 26. See note 2 supra. w? ?at?A? "WM-memn arm?m - ?no-.3 - r, 1 ?Jan . ol. 8:473 has been :es to the nities, in- ,ulated in- insidering tallenging its, lobby- engage in flationary not pre- .inst regu? also has al and co? ??residents gencies to analyses ng activi- analysis :y issues: testhetics, con gres? choice of [n that case. am a reactor light water because of inima. The T's rulemalt- POLLUTION IONMAKING pm note '1 Ant Price. ent Regula- ionsored by Initiating in biased Eco- the national es. July 27, public over- :e and tech- iroblems to the scien- :oundation, pix vu-w-p?w-? - Wueu? '-4rv- . 1980] 48] discount rates for dealing with future social costs and bene?ts; constitu- tional requirements for separation of powers, due process. and equal protection; and potential conflicts between highly specific Executive or- ders and general statutory requirements. The following sections ad- dress the major methodological problems and limitations inherent in cost-bene?t analysis, several agencies? experience with cost-bene?t analysis, and suggestions for dealing with specific problems. 11 METHODOLOGICAL ISSUES IN REGULATORY USES OF BENEFIT ANALYSIS Many studies have identi?ed the methodological limitations in the use of cost-bene?t analysis as a basis for governmental decisionmak- ing.27 Nevertheless, regulatory agencies continue to use cost-bene?t analysis on many questions that present signi?cant dif?culties. The problems discussed in this section are not uniquely attributable to the analytical restraints of cost?bene?t analysis. but stem from estimates based on scanty technical facts and the consideration of diverse values. Furthermore, many of the cost-bene?t analysis problems are funda- mental problems of the regulatory process itself, including good faith objectivity, effective citizen participation, and agency accountability. Other problems arise front unresolved constitutional problems. includ- ing the congressional delegation of broad and unguided authority to agencies and presidential intervention to promote consideration of eco- nomic factors conflicting with statutory requirements that stress health, safety, or environmental considerations. The following discussion briefly inventories methodological issues? raised by the use of cost- 27. The literature on cost-bene?t analysis is curious in that a typical article will can- didly treat the limitations of cost-bene?t analysis and warn against overreliance upon its use. but thereafter describe its possible use in a particular situation and finally urge adoption of the results. See. for example, the cautionary beginnings. ambiguous discussion. earnest ap- plication. and upbeat conclusions on cost-benefit analysis in the National Academy of Sci- ences reports cited in notes 2 3: 23 J?tqinl. In addition to the works cited in notes 5. l3. 23. myara, useful background informa- tion is provided by reviewing the following congressional committee studies and reports: JOINT ECONOMIC COMM.. 94 21) Sass. FAST BRENNER REACTOR DECISION: AN ANALYSH 0F LIMITS AND THE LIMITS OF ANALYSIS (Comm. Print [976): 0N AND ENVIRONMENT or TllL- House COMM. 0N lmmtoa AND INSULAR AFFAIRS. 94TH Cor-40., 2d. Sass. PROCEEDINGS or A CONGRESSIONAL SEMINAR on ION- IZING RADIATION (Comm. Print 1976); on OVERSIGHT AND INVESTIGATIONS OF THE HOUSE COMM. 0N INTI-.RSTATE AND FOREIGN 94TH CONG.. Sass. FED- ERM. REGULATION AND REGULATORY Rttmasi (Comm. Print I976). 28. This Article does not address the theoretical problems underlying cost-bene?t anal- ysis. For instance. not every economically ellicient policy, one whose bene?ts exCeed its costs. will increase overall social welfare if economic inef?ciencies exist in other sectors of the economy. See Lipsey Lancaster. 77w General Theory afSewmI' Best, 24 REV. ECON. STUD. 11-32 0956-57). -- .AL HA .5 ?It A snot, .. . . I- 482 ECOLOGY LAW QUARTERL 1? 8:473 bene?t analysis in regulatory agency decisionrnaking.29 A. Inadequate of or]: and Bene?ts of Proyoscd Action One of the ?rst steps in cost-benefit analysis is identifying the im- plications of regulatory options. Forecasting techniques notoriously fail to identify the possible primary. secondary. and tertiary conse- quences of a proposed action?particularly if that action sets a stan- dard with diffuse health or environmental consequences that extend geographically and temporally. For example, have great dif?- culty estimating the speci?c social and economic costs and bene?ts of regulatory options for controlling carcinogens)0 Cost-bene?t analysis ?offers no protection against historically bad assumptions. . . . [F]oolproof techniques for forecasting unforeseen consequences are by de?nition nonexistent.?31 The problem of inadequate or impossible measurement of attrib- utes is related to the de?ciencies of forecasting techniques. For in- stance, the ?skimpy science? of toxicity is an acknowledged problem for regulatory of?cials seeking to measure costs and bene?ts of possible regulatory options for the control of toxic substances??2 Without the knowledge, techniques, trained personnel, and funds to measure these factors adequately, gross error in estimation may result. Similarly, many environmental effects, such as changes in ecosystems, cannot be 29. For further information on the methodological problems of cost-benefit analysis. see publications cited in notes 2. 5. 13, 23 supra. The author has viritten extensively on many of these problems. See Brookhaven Repon. note I7, at l-S: RADIATION PORT. supra note 16; Baram. An Assessment oft/re Lire in ng?l/ld/UCV Agency Daemon Making. in TECHNOLOGY at IS Ta rr ed. [977]; Baram, Radiation/ram Nut/car Power Plants: Tire A?ecdfar Congremhnm? Brit-actives, l4 1. LEGIS. 905 (I977): Baram. Regulation qf Environmental Girr'r'nogenss Corr-Bene?t Anafysr?s May Be Harmful to Your [lea/(It. 78 REV. 41 (1976); posrirm.? kirk-Bene?t Assessment Goremmema/ Denirr'on Jig/ring. 45 GEO. WASH. L. REV. 901 (I977). 30. See D. Rice 8: T. Hodgson. Social and Economic Implications of Cancer in the United States (June [978) (report preset-ed by statisticians and economists at the National Center for Health Statistics, US. Dcp't ofllealth Education and Welfare to Expert Commit- tee on Cancer Statistics ofthc World Health Organimtion and the International Agency for Research on Cancer at Madrid, Spain) [hereinafter cited as Rice and llodgson}. This paper raises numerous questions about the application of cost-bene?t analysis to the regulation of carcinogens, including whether the economic benefits of regulating a carcinogen include reducing the need for extra household help and special diets for patients, transportation costs for receiving medical treatment. and losses to patients that otherwise would occur in the form of reduced capital gains arising from their forced sale of assets. The report also questions whether analysis should include anxieties, personality changes. reduced sexual functions. and other social costs. indeed, the report raises so many types of costs and bene?ts that it is doubtful whether any agency would have the resources to undertake the analysis. 31. Sroxev ZECKHAUSER, note 3. at 148-49. 32. interview with Steven Jellineck. Assistant Administrator for Toxic Substances. US. Environmental Protection Agency, in Washington. DC. (Mar. 17, I978). h- trad A crion ing the im- notoriously .ary conse- :ets a stan- hat extend great dif?- bene?ts of ?t analysis utions. . . . ices are by of attrib- s. For in- problem of possible ?itltout the tsure these Similarly, cannot be ae?t analysis. on .Diarios RE- r'n Regrn?amry 976. at 15 (J. ongrembna! I Cererhogens': (1976); 53m- L. Rev. Iancer in the the National pert COmmit- 31 Agency for This paper regulation of ogen include ransportation auld occur in re report also duced sexual types of costs to undenakc )stances. U.S. 1980] 483 estimated with con?dence because no acceptable method exists to measure these attributes.33 Furthermore. characterization of attributes may be problematic. An attribute deemed a bene?t by an agency of?cial may pose the prob- lem of bene?ciaries who do not desire the bene?t or who do not even consider the attribute to be a benefit. For example. ?cheap energy" is normally characterized as a bene?t in a proceeding considering the construction of an energy facility. It may. however. be immaterial to those who have enough energy. or may be viewed as a cost to propo- nents of resource conservation.? Even if costs and bene?ts are identi?ed, they may not be included in subsequent analysis for pragmatic reasons. Attributes may be too costly or too complex to measure. Exclusion may be based on a tenu- ous causal connection between the planned action and the possible at? tribute, as with the predicted probabilities of secondary or tertiary effects of a pr0posed agency action. Identi?ed attributes also may be excluded for self-serving reasons. For example. if consideration of a possible disastrous consequence of a regulatory decision would tilt the outcome of the analysis against a favored agency action. it might be omitted from the ?nal balancing process.35 3. Quam?i/zg (/16 Value of flu/mm Lgfe and Other Trad?imm?zt! Unquamf?ab/e Attributes Cost-bene?t analysis works best when a socially accepted method, such as market pricing. is available to measure the costs and bene?ts, and (2) the measurement can be expressed in dollars or some other commensurable unit. Regulatory agencies using cost-benefit analysis face a critical problem when confronted with attributes that defy traditional economic valuation.? are well aware of these problems. Some refrain from placing their own values on immeasurable attributes and redirect their 33. See Suacosm. 0N OVERSIGHT AND INVESTIGAIIONS or Tm: House Comm. ON INTERSTATE AND FOREIGN COMMERCE, 94TH 2r) Sass. FEDERAL REULLATIONS AND REGULATORY REFORM 5l5 (Comm. Print I970). which concludes that inability to measure some attributes accurately militates against certain uses of cost-benefit analysis. 34. See further discussion of the often ambiguous character of attributes included in cost-bene?t analysis in Lovins. in A'nrrgi' Puller: 45 Geo. WASH. L. REV. 9ll (I977). Lovins entertainingly describes how different values lead to different characterizations of an attribute: "ls an artful new kind desert a bene?t or a disgrace?" Id at 914. 35. See Mark 8: Stuart-Alexander. Dims??! a5 a Necessary Par! dutifu- .rer, 197 SCI. H60 (1977). 36. The implications of DNA experimentation present a striking example ofintangible decisional criticra that raise critical cost-bene?t valuation problems. Seegenera/{r Recombi- nant DNA. .rupm note .. r-y w. WWt?rw-fv v?v-n. ., w. -. . o~mo~ - .9 .. 434 ECOLOGY LAW QUARTERLY 8:473 analyses.37 More typically. recommend cautious use of cost? bene?t analysis.3H lnconclusive analyses of valuation dif?culties in cost?bene?t literature reflect the hope that the problem will fade or be forgotten. For instance. although Stokey and Zeckhauser maintain that the complexity and importance of measuring intangible costs and bene?ts should not be underestimated, they ultimately conclude that perhaps quanti?cation should be consciously postponed. In some cases, it may be best to avoid quantifying some intangibles as long as possible, carrying them along instead in the form ofa written paragraph of description. Maybe we will ?nd that the intangible con- siderations point toward the same decision as the more easily quanti- ?ed attributes. Maybe one or a few of them can be adequately handled by a decision-maker without resort to quanti?cation. We will ?nd no escape from the numbers. . . . Ultimately the ?nal decision will im- plicitly quantify a host of intangibles: there are no incommensurables when decisions are made in the real world.39 This use ofcost-beneftt analysis is morally and intellectually irresponsi- ble. 37. In evaluating control options for sulfur dioxide air pollution from stationary sources. Dr. Granger Morgan asserts: There is no way that I can put a dollar value on this case. That would require me to place a dollar value on human life, and no reasonable person is prepared to do that. But I might reasonably ask how much money society is prepared to invest in order to statistically prevent one additional air pollution related death. G. Morgan, Technical Uncertainty in the Policy~Making Process l8 (Oct. 25. l977'} (paper presented at Sixth Annual Conference of Illinois Institute for Environmental Quality}. 38. The National A .?ademy of Sciences Committee on Principles of Decision-Making for Regulating Chemicals in the Environment notes: "Different individuals place different values on things such as human life. aesthetics, or national security. Thus an analysis that assigns a quantitative value to. . . these factors is necessarily subjective and. to some degree arbitrary." CHEMICALS Riapottr. supra note 2. at 40. The Committee notes that even where the analyst refrains from placing a dollar value on human life. a particular decision re?ects an implicit valuation oflife. Nevertheless. the Committee concludes that compared to other methods, cost-bene?t analysis represents a signi?cant advance and recommends its own ver- sion. called ?Hazard-Cost-Bene?t Comparison.? Id. at 39-50. 39. Sroxev supra note 3. at 153. Others have responded to the prob- lem of valuation as an opportunity to exhibit their statistical ?nesse. For example. Vt alter 0i has undertaken to determine the price'society is willing to pay for more safety. The situation becomes a bit more complicated when the accidents involve truly nontraded goods like lives and limbs. Even here. market prices can be used to infer some implicit valuations ofthe contingent accident costs. Usin data on wage dilTerentials. Thaler and Rosen found that workers behaved as ift ey attached a value to life to 5260.000. Robert S. Smith. using a different body of data. came up with considerably higher implicit values of up to SLS mil- lion for a life. Some variations ought to be expected because human lives are not homogenous goods like bags of No. 2 wheat. 0i, supra note 23. at l9. Oi concludes that ?[slafety and health are important economic issues." and that ?[wlhether it is direct or indirect. stated or implicit. there is always a ?price' for reducing illness and accidents." Inf at 23. This intolerance of the experts for intangibles?for matters not expressed in dollars or other economic units of value?and this limited perspective on health. safety. and the environment pervades the cost-bene?t analysis literature and has in- ?uenced agency users of cost-bene?t analysis. w-rv-qv r-v?uur a? . ?a - --, v' .Au?ua- L. -rma-JxA .1 use of cost- l?culties in fade or be :r maintain .e costs and aelude that gibles as 1 written .ble con- quanti? handled ?nd no will im- surables irresponsi- stationary [hire me ed to do nvest in l9?l7) (paper Quality}. don-Making see different Inalysis that some degree even it here sion re?ects red to ether its Own ver- to the prob- ple, Walter ety. truly (I) 't wage shed a ?erent 5 mil- 11?: not and that reducing For matters pective IMAM . .J-mhum ?a .g . L4 1980] COST-BENEFIT ANAL r515 485 Today, a number of agencies assign monetary values to human life. The Nuclear Regulatory Commission (NRC) uses a value of $1,000 per whole-body rem in its cost-bene?t analysis.40 This ?gure, multiplied by the number of rems capable of producing different types of deaths, provides dollar values for human life. The Environmental Protection Agency?s Office of Radiation Programs establishes its envi- ronmental radiation standards at levels that will not cost more than $500,000 for each life to be saved.? The Consumer Product Safety Commission uses values ranging from $200,000 to $2,000,000 per life in its analyses.?12 But the fundamental issue is whether cost-bene?t analysis is ap- propriate at all. Without an answer to this question from Congress or the courts, consideration turns to lesser issues: the proper method of valuation;13 the substantive basis for valuation (possibly relying on in- surance statistics, jury awards, or potential lifetime earnings), and the 40. 10 C.F.R. pt. 50 app. 1 (I979). 41. interview with Dr. William Rowe. Chief Radiation Program Office, EPA. in Wash- ington, DC. (1977). Dr. Rowe stated that EPA would not propose a radiation standard for the uranium fuel cycle that would cost more than $500,000 to save an additional. unspeci?ed human life in the general population; it would save a life ifthe cost were less than $100,000. For costs in between. EPA makes an ad hoc determination. 42. See B. Shimmei, Consumer Product Safety Commission: Risk Management Regu? lation and the Use of Cost-Bene?t Analysis (May I978) (unpublished draft for M. Baram project on Federal Regulation and Risk Management. based in part on extensive interviews with CPSC personnel). For an extensive Department of Transportation report setting values for human life, see NATION AL HIGHWAY TRAFFIC SAFETY ADMINISTRATION, U.S. or TRANSPORTATION. SOCIETAL Cosrs or? Moron VEHICLE ACCIDENTS (Dee. I976). This work and its periodic revisions are frequently consulted and cited with respect to monetary valuation of human life and health. The National Bureau ofStandards. in its studies to ?nd technical solutions to problems of ?amma ble fabrics and other consumer ha7ards for regula- tory agencies such as the Consumer Product Safety Com mission (CPSC). has used a value of $300,000 per life in arriving at its recommendations. See US. NATIONAL BUREAU OF STAN- DARDS, PRELIMINARY REPORT ON EVALUATING ALTERNATIVES FOR REDUCING UPHOL- srenao FURNITURE FIRE Losses 13 (Nov. I977) 43. Consider the approach adepted by statisticians and economists at the Department of Health, Education and Welfare in their reports on the cancer data base available for use by regulatory agencies: One. if not the chief. issue with respect to indirect costs is how to value human life. The method in this repon is referred to as the "human capital? approach because it views an employed person as producing a stream of output over the years that is valued at the individual?s earnings. The main criticism ot'this methodology is that it excludes intangibles. only counting earnings. and under-values some groups rela- tive to others because earnings may not re?ect one's ability to produce. Thus. men are more highly valued than women. whites more than blacks, and the middle- aged more than the young and elderly. . . . An alternative approach favored by some is that of ?willingneSS to pay." This method values human life according to the amount people are willing to spend to obtain reductions in the probability of death. Objections to this are that the value of individual lives depends on the income distribution. with the rich able to pay more than the poor. and that it is ly ditlicult for persons to place a value on small reductions in the probability of eath. Rice 8: Hodgson. supra note 30. at l8-l9. Hwy-u.- .- whim-aw.? 1? vn-u- .- .9. . .n-u-h knullir.? .s A?h - A?h? .11436 ECOLOGY LAW QUARTERLY 8:473 extent agencies should articulate these issues and provide procedures for participation in the valuation process. To date, agencies have expressed surprisingly little concern about these unresolved problems associated with cost-bene?t analysis.? Al? though of?cials deny valuing unquanti?able factors.45 these valuations are implicit in any cost-bene?t based policy decision involving risks to human life. Responsible decisionmaking demands that implicit valua- tions be acknowledged and addressed explicitly. The Chronic Prob/em of the Discount Rare for Valuing Future Bene?ts and 03!: in Present? Anafyses The discount rate is yet another controversial issue a?licting cost- bene?t analysis. Stokey and Zeckhauser note that ?no observed rate of return can provide an accurate reading of the intertemporal preferences of the society as a whole. . . . [T]he choice of a discount rate should be used deliberately to apportion costs and bene?ts among income groups and . . . generations. according to the values held by Con- gress and the courts, however, have not decided upon a standard dis? count rate to establish the present value for future dollar levels of predicted attributes. such as future ecological dislocation. mutagenic ef- fects on future generations, and other long-term consequences of ac- tions taken by regulatory agencies. Absent a societal decision on the apprOpriate discount rate, the task of establishing a present value for the future effects of agency deci- sions falls upon the individual analyst. This has resulted in arbitrary, inconsistent determinations in many cost-bene?t analysis decisions.47 44. For a rare exception and candid expression of concern. see W. Prunella. A Qualita- tive Assessment of Cost-Bene?t Analysis and its Application in the Area of Product Safety 3-4 (undated draft received Feb. 1978 from Economic Program Analysis Division. Con- sumer Product Safety Commission): No accepted monetary ?gures for the value of life exist: nor should we expect them to exist. . . . [Flactors such as age or Occupation will in?uence the money value placed on costs incurred. . . . [llf children and the poor are victims. remedial ac- tion may not scent justi?ed from the calculation of cost?bene?t ratios. when at the same time. if the victims had been of a dill'erent age or income level. action would be more readily supportable. 45. Steven Jellineck. Assistant Administrator for Toxic Substances. U.S. Environmen- tal Protection Agency. declared at a meeting of the Administrator's Advisory Cemmiltec on Toxic Substances. Nov. I977 that his division was not going to put a dollar value on life. in light of the statutory requirements of? 6(c) of the Toxics Substances Control Act. 15 U.S.C. 2605(c) (Supp. 1 1977). however. it appears that some form of cost?bene?t analysis will be adopted to regulate toxic substances. See discussion of EPA in part of this Article. 46. d: ZECKHAUSER. supra note 3. at [73. See R. Campbell. Food Safety Reg- ulation 19(AEl-Hoover Study l2. Aug. [974). 47. Indeed. have chosen rates that tend to con?rm the outcomes they desire. Critics have attacked the use of self-serving and essentially arbitrary discount rates in the water resource projects of developer agencies such as the Corps of Engineers. The use of low discount rates, such as 2.63% in the [950?s and I960's provided higher values for the .3..st Mt - . ?7 -v vr-Iwn 8:473 )rocedures :ern about ysis.?14 Al- valuations ng risks to Licit valua- Future cling cost- ved rate of treferences :should be me groups {3?46 Con- ndard dis- levels of tagenic ef- tces of ae? rate, the ;ency deci? . arbitrary, lecisions.? la. A Qualita- roduct Safety tivision. Con- :ect them my value redial ac- en at the on would Environmen- Zommittee on Inc on life. In Act. l5 U.S.C. nalysis will be is Article. id Safety Reg- :s they desire. at rates in the The use of values for the m. .. -- - . or ,c-?yn ru- -- .- -- - 1980] ANAL 487 For instance, agency have not agreed on a discount rate for the long-term carcinogenic and mutagenic effects of radioactive isotopes and toxic chemicals. Suggested rates for the future costs of cancer and other diseases range from six to ten percent, without any notable un- derlying rationale.48 seem to be feeling their way toward some sign of societal acquiescence on a discount rate for long-term health and environmental attributes.? But focusing on the search for the societally acceptable number for discounting the future clouds the larger issue: whether using these eco- nomic principles in contemporary decisionmaking adequately ensures the desirable quality of life and health for future generations.50 Ulti- mately, the discount rate issue is an ethical problem that transcends economic and legal persPectives.5 D. Improper of Costs and Bene?t: Every regulatory decision on health, safety, or environmental problems results in costs and bene?ts that will be distributed in some pattern across different population sectors, and in many cases, over sev- eral generations. liar example, a decision to allow the commercial dis- tribution of a toxic substance may result i?onomic?ne?ts to the inc?istria] users, their shareholders and employees. and consumers. It may also result, however, in adverse health effects audioperty dam? age to plant employees and those living near the plant. In addition, futumations may suffer mutagenic health effects or the depletion or pollution of natural resources. estimated future benefits of planned projects to Corps resulting in positive cost- bene?t analysis ratios and favorable decisions on water resource projects. These low rates were below the yield on long-tern- governmental securities and Treasury issues. The debate over an appropriate discount rate for water resources projects continues today. as evidenced by President Carter?s objections to proposed projects based upon a 6.38% discount rate. R. Mikesell. The Rate of Discount for Evaluating Public Projects 3-5 Studies [84, 1977). For .etailed background. see U. Kim. A Benefit-Cost Approach to Water Resource Invest- ments: Theory and its Application (unpublished paper. Dep't of Economics and Business Management, Cath. U.. Washington. DC.) 48. Rice Hodgson, rayon: note 30. at 13. 49. For further discussion of the arbitrary choice of discount rates. sec W. Prunella. note 44. at 4. 50. if the discount rate were 5 percent . . . 1 case [of poisoning by chemicals] today would be valued the same as HBO cases occuring in 200 years. or the same as the current world population (more than 3 billion cases) in 450 years. Clearly. intergencrational e?ects of these magnitudes are ethically unacceptable. yet they might be made to appear acceptable if the traditional social rate of discount con- cept were applied. There is as yet no generally accepted method for weighting the intergenerational incidence of bene?ts and costs. CHEMICALS REPORT. .mpra note 2. at 43. For a briefexpression of this concern by the National Academy of Sciences' Com- mittee on the Biological lilTects of Ionizing Radiations. see RADIATION REPORT. supra note I6. at 68-70. .- 'Mgr-r-rn '11 488 ECOLOGY LAW QUARTERLY 8:473 and decisionmakers using cost-bene?t analysis recognize these implications. Nonetheless, in the absence of public policy direc- tives, frequently apply personal assumptions about the alloca- tion of costs and bene?ts while calling for objective ?fairness? in dealing with distributional problems.52 Thus according to Stokey and Zeckhauser: l. A program should be adopted when it will yield bene?ts to one group that are greater than the losses of another group, provided that the two groups are in roughly equivalent circumstances and the changes in welfare are not of great magnitude. . . 2. If the bene?ts of a preposed policy are greater for one group than the costs for another group, and if it redresses the discriminatory effects of earlier policy choices, that policy should be under- takenclear whether policies should be undertaken if they will bene?t some groups only by imposing signi?cant costs on others. It is sometimes proposed that a policy change should be adopted if and only if it passes a two?part test: it yields positive net bene- ?ts, and the redistributional effects of the change are bene?- cial. . . .53 Such earnest analytical approaches to determining fair distribu- tions of costs and bene?ts5?1 ignore constitutional precepts underlying public sector decisionmaking. Constitutional guarantees of due proc- ess, equal protection, property rights, and representative government should carry greater weight in solving the distributional problem than assumptions about fairness developed by economists and Issues of temporal distribution, involving the allocation of costs and bene?ts for future generations, transcend even these constitutional values. Future generations possess neither present interests nor desig? nated representatives to advance those interests. Our laws and values favor current bene?ts to those that accrue later. Cost-bene?t analysis also re?ects a preference for current bene?ts over future ones.55 Distri? 52. See Lucas. Dividing Up the Pie. 1. ENGINEERING: CORNELL Q. 53. S'rortev ZECKHAUSER, supra note 3, at 281-82. See also the assumptions in D. HARRISON, tho PAYS FOR CLEAN AIR 127-34 (1975). 54. Cost-bene?t analysis practitioners often obscure the distributional elfects on spe- ci?c population sectors in reaching ?societally optimal" decisions. Environmental Impact Statements of NRC, for example. usually state that no undue distribution of costs and bene- ?ts will occur from a proposed power plant. But the underlying health etfects analyses re- veal that the most harmful exposures to ionizing radiation occur in the plant environs. whereas most of the bene?ts from the energy will be distributed in a broader geographic region. Sec Brookhaven Report. supra note 17. at 75-134. 55. The choice of a particular discount rate can make long-term costs and bene?ts vir- tually irrelevant to the decisionmaking process. For example. at a discount rate of per year, the present value of one dollar's worth of bene?t or cost received 10 years in the future is only 39 cents. received in 20 years its present value is only [5 cents. in 30 years. six cents. L. ANDERSON R. SETTLE. BENEFIT-COST ANALYSIS: A PRACTICAL GUIDE. Table A-l at 128 (1977). -- "v unv- . -v u?-v rw?r . nu?w- nv-Y . .91, .. . an?! new? 8:473 is recognize tolicy direc- the alloca- ?airness? in Stokey and ts to one provided aces and cup than minatory :2 under? they will athers. It :10pted if Jet bene- bene?- ir distribu- underlying fdue proc- government Jblem than an of costs nstitutional nor desig- and values ?t analysis 5.55 Distri- i973). mptions in D. :ffects on spe- nental impact 0515 and bene- ts analyses re- lant environs. ier geographic .d bene?ts vir- atc of per '3 in the future ears. six cents. a. Table A?l at 1980] COST-35WEF1TANAL YSIS 489 bution over time. therefore, like the discount rate, is essentially an ethi- cal issue for the nation. The assumptions that must make about temporal distributions in using cost-bene?t analysis are inade- quate precisely because and not society, have made them.56 Promotthg Selfilnterest and Other Analytical Tenmtatt'ons Users of cost-bene?t analysis can easily play a ?numbers game? to arrive at decisions that promote or justify agency actions reached on other grounds.? The purportedly objective framework of cost-bene?t analysis can be used to promote rather than to analyze options by manipulating the discount rate, assigning arbitrary values to identi?ed costs and bene?ts, excluding costs that would tilt the outcome against the preferred option, and using self-serving assumptions about distribu- tional fairness. Indeed, the very use of cost-bene?t analysis leads some observers to conclude that the action under consideration is scheduled for approval.53 Even self-corrective measures are suspect. For exam- ple, the use of safety factors-59 ostensibly chosen to avoid certain effects may prove to be a facile solution that does not alter the preferred ana- lytical result if these factors are determined only War completing a preliminary analysis. Furthermore, these factors are usually based on 56. For futher discussion. see JOINT ECONOMIC COMM.. 94TH CONO., 21) Sass. FAST BREEDER REACTOR DECISION: AN ANALYSIS OF LIMITS AND THE LIMITS OF ANALYSIS 2 (Comm. Print 1976). dealing with the ?heroic assumptions" that discredit cost-benefit analy- ses on the breeder reactor program; CHEMICALS REPORT. supra note 2. at 42-43; RADIATION REPORT. supra note 16. at 68-69. Ill. The common use of "willingness to pay" valuation to quantify bene?ts and costs in dollars raises an additional distributional issue. Willingness to pay. of course. is directly related to ability to pay. The interests of lower income groups therefore will be under- represented in cost-bene?t analysis decisionmaking. 1f the underlying distribution of in- come is changed. willingness to pay for bene?ts and costs may likewise change. See L. ANDERSON R. SETTLE. supra note 55, at 11-12. 57. The decision permitting regular Concorde ?ights into the United States provides a striking example of how the institutional bias of the analyst may determine the outcome of the balancing process, particularly when subjective and incomparable factors predOminate. EPA. Council on Environmental Quality (C and Federal Energy Administration (FEA) each found the costs of expanded Concorde operations to outweigh the benefits of the pro- posed ?ights. After applying cost?benetit analysis to the same data. however. the Federal Aviation Administration. Department of State. and National Aeronautics and Space Ad- ministration concluded that Concorde ?ights were justi?ed. See Note. The Concorde Calculus. 45 GEO. WASH. L. REV. 1037. 1061-63 (1977). See also Green. Cort-Risk Bang?! Assessment and (Ire Law: and Perspective. I'd. at 901. 58. Burke Zimmerman. Staff Scientist for the House Subcommittee on Health and the Environment. remembers ?no instance where risk-benefit analysis resulted in the conclusion that an [agency] action should be stopped." Zimmerman. Risk?Bene?t The Cap- 0ut ty?Govemmenm! Regalia/Ion. l4 TRIAL 43. 46 (1978). S9. Self-corrective measures may include allowing a wide margin of safety or delaying decisions until additional information reduces uncertainties. For a discussion of these tech- niques in the area of DNA research. see Recombinant DNA, 171/de note 18. at 66-67, 83-84. .. A .144 .. - - .. can ?hag?hapmm ?HMu-?Aunu?h A LA 490 ECOLOGY LAW QUARTERLY 8:473 technical estimates and do not properly consider the value-laden as? pects of large. irreversible risks. In addition, the ?technology-forcing function? of regulatory pro- grams can be sti?ed by limited technical and economic information. Governmental o?icials must often rely on the regulated industry for news of recent technological develoPments. Industry information is likely to be unduly pessimistic about the costs, reliability, and availabil- ity of new techniques. Thus, cost~bene?t analysis based upon indus- trial information may beeome a mechanism for economically convenient regulation that tends to perpetuate the technological status quo. This result is particularly predictable when regulatory agencies have not de?ned their objectives. If such objectives were established initially, they would ?drive? the regulatory process and more readily force development of new technology."0 Special Prob/ems ofAc?cozmmMIi?y The use of cost-benefit analysis raises new-issues in addition to the usual problems of ensuring agency accountability to the courts, Con- gress, the President, and the public. Certainly the jargon, presumably objective numbers, and analytical complexities of cost-bene?t analysis obscure the subjective assumptions, uncertain data. and arbitrary dis? tributions and valuations of the decisionmaking process. thereby preventing meaningful review of agency activity. Agency uses of cost? bene?t analysis tend to promote the role of experts and diminish the participatory and review roles of nonexperts.?I Senator Muskie has voiced his concern about agencies including ?questionable bene?ts" that can make projects appear ?economically 60. See RADIATION REPORT. Supra note at [09-1 1; [197516 ENVIR. REP. (BNA) MONOGRAPIIS No. See Senator Muskie?s letter requesting that ?the general methodology Ofthe bene- fit-cost ratio analysis as carried out by the Corps of Engineers . . . be investigated." and that ?the use Of probability analysis in the calculation of benefits for water resources projects . . . be reviewed." Muskie letter to GAO. supra note 3, at 19. The subsequent report of the General Accounting Ollice calling for reforms in the Corps? presentation is not responsive to the Muskie request. See US. ACCOUNTING OFFICE. IMPROVED FORMULATION AND PRESENTATION OF WA'I?lzl?t RESOURCES PROJECT ALTERNATIVES Pao- VIDE A BASIS FOR Barren MANAGEMENT Dt-ictstONs (Feb. 1, 1978). See also numerous NRC Regulatory Guides and Environmental impact Analyses. For example. Envi- ronmental Statement on the Tyrone Energy Park (Apr. I977) (NUREG-OZZO) contains ex- tensive cross-references to technical analyses, reports, and other background com-benefit analyses and information adopted by NRC. One Ofthe critical issues, however. is dealt with by a simple concluding sentence disconnected from the foregoing analysis: ?The sta?' eon- cludes that the distribution of costs and bene?ts does not place unreasonable costs on any segment of the population." Id at [0-24. The cost-bene?t approaches of NRC and the National Bureau of Standards are examples of complex regulatory decision records that are virtually incomprehensible and unreviewable except by highly persistent and technically so- phisticated individuals. 1 an?. - Turn?w W- rv; M. 8:473 e-laden as- iatory pro- formation. idustry for rmation is iavailabil- Don indus- )nomically gical status agencies :stablished are readily tion to the urts, Con- resumably it analysis itrary dis- thereby es of cost? ninish the including nomically of the bene? and that projects. . . epon of the ltematites is a. IMPROVED PRO- so numerous NRC's Envi- coniains eit- cost-bene?t is dealt with he Sta?' con- costs on any RC and the ords that are clinically SO1980] ANAL YSIS 491 sound.?2 He has called for evaluating projects at different stages of completion ?to ?nd ifthe validity of bene?ts claimed at project author- ization can be reaf?rmed during and after construction?? No govern- mental agency has adopted this approach despite its obvious value in improving subsequent uses of cost-bene?t analysis. In its cost-bene?t analysis of nuclear reactor licensing decisions. NRC estimates the population that will live near the reactor site in the future. Yet neither NRC nor any other governmental body attempts to control actual p0pulation growth in the areas surrounding nuclear plants. Thus the estimated cost-bene?t basis for approving a. preposed activity is not used as a planning tool for maintaining predicted costs and bene?ts once the activity is undertaken. The actual costs and bene- ?ts consequently may vary considerably from those projected in the analysis.? Additionally, the combination of fragmented regulatory jurisdic- tion over pervasive problems and increased agency reliance on cost? bene?t analysis ultimately leads to increased societal risk. For exam- ple, a trace metal such as mercury constitutes a health and environmen- tal quality hazard. It is regulated by several agencies, including the Environmental Protection Agency (EPA), Occupational Safety and Health Administration (OSHA), Consumer Product Safety Commis- sion (CPSC), and Food and Drug Administration (FDA). Each agency may permit some activity introducing an additional incremental amount of the pollutant into the environment because the minor amount ofcalculable human exposure or environmental harm in each instance is offset by a broad range of postulated societal bene?ts. Even though each agency may be making careful and objective decisions, without overall interagency accounting for the increasing risk to the general population and the environment from these many small deci? sions, the total societal risk will continue to aggregate.?5 The above taxonomy of methodological problems reveals the need for a ?best efforts" approach, fostered by Congress and the President, and administered by the agencies and the courts, to exclude the use of cost-bene?t analysis under certain conditions and to resolve rational and humanistic concerns. This best efforts approach'should focus on: (1) improving the technical and objective quality of cost-bene?t analy- sis; (2) establishing the limits and societal implications of cost-bene?t 62. Muskie letter to GAO. supra note Assessment ofrire Use of 051- Barry?! Armchairs r'n chrdatocy Agency De- cr'srbn Making in RETROSPECTIVE TECHNOLOGY at 20 (J. Tarr ed. I977). This article is based in part on an analysis of various NRC enforcement deficiencies and practical problems discussed in RADIATION REPORT. supra note 65. See Baram, Raga/aria? of Em't?mnmermr/ (drainage/rs: CoshBene?! Andrews Ma} Be Hernia! to Your Ileafm. 78 TECH. REV. 41 (I976). . .. nwm?wuh . . . - .- -.v.v-m..n-Mwm.rm.mmwmuim 492 ECOLOGY QUARTERL 8:473 analysis; (3) improving public participation; and (4) designing more ef- fective measures for congressional and executive oversight of agency practices. AGENCY USES OF COST-BENEFIT ANALYSIS UNDER STATUTORY MANDATE Congress and the Of?ce of the President have fostered the use of cost-bene?t analysis in regulatory decisionmaking through statutes?56 and Executive ordersm that either expressly require it or call for bal- ancing of competing considerations. This section reviews these man- dates and agency experience with cost-bene?t analysis. NEPA is discussed initially because it is a general source of authority for all fed- eral agencies to perform balancing analyses, and because it has gener- ated extensive litigation on the cost-bene?t issue. Although Congress frequently requires regulatory agencies to bal- ance multiple societal objectives in their decisionmaking, it has not provided guidance for structuring agency discretion on these substan- tive matters. At the most basic level, Congress should address the rela- tive importance of factors in the balancing process, including the classic problems of valuation, discount rates, distribution of costs and bene?ts, and the analytical framework to be used in reaching decisions. By fail- ing to provide this legislative guidance, Congress has exposed the agen- cies to unnecessary litigation.? 66. The Congressional Of?ce of Technology Assessment has determined that cost-ben- e?t analysis is required or permitted in agency decisionmaking under many ofthe regulatory provisions of the following statutes: Federal Insecticide, Fungicide, and Rodenticide Act. 7 U.S.C.A. 135-136y (West 1964 Supp. 1979); Federal Hazardous Substances Act. 15 U.S.C.A. [261-1275 (West [974 Supp. 1979); Consumer Product Safety Act, 15 U.S.C.A. 205l-2082 (West [974 Supp. 1979): Toxic Substances Control Act. 15 U.S.C. 2601-2629 (19% Supp. 1 Federal Food. Drug, and Cosmetic Act. 21 U.S.C.A 301-392 (West 1972 Supp. 1979); Occupational Safety and Health Act of [970, 29 U.S.C.A. 651-678 (West 1915 Supp. 1979); Clean Water Act. 33 U.S.C.A. l251-l376 (West [978 Supp. Clean Air Act. 42 U.S.C.A. MOI-7642 (West Supp. [978). See Of?ce of Technology Assessment, US. Congress, Cancer Testing Technology and Saccharin I6 (Oct. 1977). 67. See note 2! supra. 68. For example, the court in Portland Cement Ass'n v. Ruckelshaus, 486 F.2d 375 (DC. Cir. [973). cert. denied. US. 92! (1974). ruling on the scope of balancing required by 111 ofthe Clean Air Act. held that EPA need not carry out a quanti?ed cost-bene?t analysis in support ofits performance standards for new sources. In Union Electric v. EPA, 427 U.S. 246 (1976). the Supreme Court interpreted llO(a)(2) of the Act as barring the consideration of economic and technological infeasibility when the EPA Administrator re- views and approves a State Implementation Plan. .. . . V--. Wavv?"r 8:473 11g more ef- of agency the use of 1 statutes? all for bal- mese man- NEPA is for all fed- has gener- 3ies to bai- it has not :e substan- ss the rela- the classic bene?ts, 5. By fail- I the agen? that cost-ben- lte regulatory nticide Act. 7 races Act. 15 tfety Act. 15 LCL l5 U.S.C. . 2i U.S.C.A. of 1970. 29 l25l-l376 p. 1978). See .nd Saceharin 486 F.2d 375 cing required 1 cost-bene?t :ctric v. EPA. barring the tinistrator re- WW-tn-mw'? ?s .11 1. llh.? I A ?1 1980] cosztagNar/mma YSIS 493 A. The National Environmental Policy Act and Corr?Bene?t Anabel: The National Environmental Policy Act of 1969 re- quires federal agencies to consider environmental quality as an integral part of their decisionmaking. The ?action-forcing" requirement of sec? tion provides that each agency must prepare an environmen? tal impact statement for all ?major Federal actions signi?cantly affecting the quality of the human environment.?70 The EIS must pro? vide a detailed account of the expected bene?cial and adverse impacts of the proposed action on the environment and evaluate possible alter- natives to the action. Sections and (B) also play a major role in the deve10p- ment of cost-bene?t analysis under NEPA, although unlike section they contain no enforceable mandate. These two provisions require all federal agencies to: (A) utilize a systematic. interdisciplinary approach which will insure the integrated use of the natural and social sciences and the environ- mental design arts in planning and in decisionmaking which may have an impact on man? 8 environment; (B) identify and develop methods and procedures in consultation with the Council on Environmental Quality,. . .which will msure that presently unquanti?ed environmental amenities and values may be given appropriate consideration in decisionmaking along with eco- nomic and technical considerations. 7' In Calvert Cly?? Coordinating Committee v. the District of Columbia Circuit construed these provisions to require balancing of environmental bene?ts in relation to economic and technical factors. Interpreting requirement that these factors be weighed in a ?detailed statement.?73 the court stated: mandates a case-by- case balancing judgment on the part of the federal agencies. In each individual case, the particular economic and technical bene?ts of planned action must be assessed and then weighed against the environ? mental costs; alternatives must be considered which would affect the balance of values ?74 The court did not, however, prescribe any particular methodology such as fully quanti?ed cost- bene?t analysis, for carrying out this bal- ancing analysis. Later Opinions concerning prepared pursuant to NEPA have adhered to the balancing requirement without insisting on quanti?cation or monetization of environmentalvalues.? 69. 42 U.S.CA. 4321-4369 (West [977 Supp. 1979). 70. NEPA 42 U.S.C. (I976). Id (B). 42 U.S.C. (B). 72. 449 F.2d ?09 (DC. Cir. I971). 73. NEPA 42 U.S.C. (1976). 74. 449 F.2d at [123. 75. See Leventhal. supra note ID. at 529. Wm?. - .wvw A?m 2 . . . A x-?hh?hl?w mph?.4 - guy?Wm. .031lem mmg~4umu LA . lupin-.2? 494 ECOLOGY LAIV QUARTERLY 8:473 The Council on Environmental Quality (CEQ), established to as- sist in the implementation of has failed to provide useful gui- dance on the balancing requirement. An Executive order77 authorized CEQ to issue regulations, rather than mere guidelines, concerning preparation of and the resolution of interagency con?icts, but CEQ has not used these extended powers to guide the development of cost-bene?t analysis methodology under NEPA. Further, ?nal regulations for NEPA, promulgated in response to Executive Order 12044,713 fail to set guidelines on critical methodological issues.79 Meaningful CEQ guidelines would provide agencies with a more rational, consistent framework for addressing methodological problems posed by NEPA. But CEQ alone cannot resolve these thorny ques- tions. Congress eventually must address problems of ?valuing? in- tangibles such as human health and environmental amenities. Moreover, Congress could improve the NEPA balancing process by de- ?ning the weight to be afforded EIS results. Congress, for example, could amend NEPA to con?rm interpretation that an agency may select any alternative with a positive EIS cost-bene?t ratio unless an ?obviously superior? alternative exists,80 or Congress could require 76. Council on Environmental Quality Act, Pub. L. No. 9l?190, 83 Stat. 854 (codi?ed at 42 U.S.C. ?4342 (1976)). 77. Exec. Order No. 11.991. 42 Fed. Reg. 26,967 (1977). 78. See test accompanying notes 172-79 173m. 79. See 40 C.F.R. 1502.23 (1979). If a cost-bene?t analysis relevant to the choice among environmentally different alternatives is being corsidered for the proposed action. it shall be incorporated by reference or appended to the statement as an aid in evaluating the environmental consequences. To assess the adequacy ofcompliance with sec. ofthe Act the statement shall, when a cost-bene?t analysis is prepared. discuss the relation? ship between that analysis and any analyses of unquanti?ed environmental im- pacts, values. and amenities. For purposes ol'complying viith the Act, the weighing ofthe merits and drawbacks ofthe various alternatives need not be displayed in a monetary cost-bene?t analysis and should not be when there are important qualita- tive considerations. in any event. an environmental impact statement should at least indicate these considerations, including factors not related to environmental quality, which are likely to be relevant and important to a decision. la! 80. After completion of cost-bene?t analysis in evaluating power plant sites. a further issue inevitably arises: whether NRC should select the proposed site if it is reasonably ac- ceptable or only if it is the best site. NRC. under its own regulations requin?ng cost?bene?t analysis under NEPA. has determined that the best site need not be chosen, but that the proposed site can be chosen it" the results of the cost-bene?t analysis are favorable and no ?obviously superior site" is an alternative. Brookhaven Report. .mpra note 17. at 105-06. In its decision on Seabmok Station. the Commission determined that: [llt would be unreasonable to say that environmental advantages automatically take precedence. . . . the (?when (?1556' decision noted. ?Congress did not establish envi- ronmental protection as an exclusive goal." . . . Two signi?cant realities ot?the NEPA process support the use ofthe Stan- dard of obvious superiority?the inherent imprecision of cost/bene?t analysis and the probability that more adverse information has been developed respecting the closely examined proposed site than any alternatives. The imprecision springs new ?arm . . mm.- ?wwmw.wu m-m x-gpv_-v v.1, . .41.. . .Y?qtn.? .. agile. . A. 8:473 shed to as- useful gui- authorized :oncerning a?icts, but opment of ?nal tive Order res.? ith a more [problems may ques- luing? in- amenities. :ess by de- example, an agency ttio unless 1d require 854 (codi?ed different rated by nmental 'the Act elation- Ital im- reighing yed in a qualita- tould at lmental es, 3 further tsonably ac- cost-bene?t but that the able and no at 105-06. .atically ah envi- ae stan- (sis and ting the Springs ?Axum. -mmaa - ?th-i . - I I 1980] ANAL 72573 495 selection of the most favorable alternative. Absent clari?cation from Congress, CEQ, or the courts, agencies conducting a balancing analysis under NEPA retain considerable discretion on methodological and re- lated procedural issues. Lack of Congressional guidance also allows agencies to make the initial decision about which actions are subject to the EIS requirement. Although NEPA expressly provides for environmental impact assess- ment of ?major federal actions,"El it does not distinguish between rulemaking, licensing, and other federal agency actions. Agencies take sharply different positions on the applicability of NEPA's balancing re- quirements to rulemaking. For example, NRC construes NEPA, to- gether with its own enabling legislation, to authorize a quanti?ed cost- bene?t analysis as part of its environmental impact assessment in its rulemaking.32 On the other hand, EPA does not consider its rulemak- ing legally subject to NEPA and prepares only a limited number of on rulemaking actions.83 Between these two extremes stand agencies such as OSHA, which recognize the applicability of NEPA to its promulgation of health and safety standards,?4 butprovides that a qualitative balancing of costs and bene?ts is suf?cient for such ac- tions.85 As a result of these uncertainties under NEPA, much of the eco- nomic analysis of rulemaking actions is made under the Executive or- ders discussed in Part IV. These analyses, however, need not meet the from the nature ofcost/bene?t analysis . . . the factors to be compared range from broad concerns of system planning safety. engineering. economic and institutional factors to environmental concerns. including ecological. biological. aesthetic. socio- logical, recreational. and so forth. Much of lhe underlying cost-bene?t data is dif?- cult of articulation. much less quanti?cation. Given these dif?culties. any evaluation of a particular site must inevitably have a wide margin of uncer- tainty. . . . [W]herc the data to be compared necessarily present a wide margin of uncertainty, one site must appear to be substantially ?better.? In re Public Service Co.. 5 NRC 527-28 Recognizing the limitations inherent in its use of cost-bene?t analysis. NRC has estab- lished that cost-bene?t analysis provides a rough method for attempting to structure as ra- tional a decision process as possible. NEPA l02(2)(C). 42 U.S.C. (1976). 82. See note [26 infra and accompanying text. 83. Based on its mandate to protect the environment and speci?c exemptions in its enabling statutes, EPA claims to be exempt from the EIS requirements of NEPA in many of its rulemaking activities. See [1979] 10 ENVIR. REP. (BNA) ??Monounams No. 28. at 44. EPA announced that it was not required by law to prepare ElS's for any ofits regulatory actions. 39 Fed. Reg. [6.186 (1974). The agency did. however. voluntarily agree to carry out environmental impact analyses in connection with some of its major regulatory decisions on air pollution, noise. radiation, ocean pollution. and pesticide control. 39 Fed. Reg. 37,419 (1974). The District Court rejected a similar NEPA exemption claim made by the Food and Drug Administration in EDF v. Mathews. F. Supp. 336 (D.D.C. I976). 84. 29 C.F.R. 1999.2(3) (I979). 85. Id! {2m (3/3 American Petroleum Institute v. OSHA, 58! F.2d 493 (5th Cir. 1978). cert. granted sub nom. Marshall v. American Petroleum institute. 440 US. 906 (1979) benzene standard set aside because nofac'rtml basis for estimating bene?ts). .- nature-w ruler-Ic- ..-: 1-.., . .. 4 496 ECOLOGY QUARTERLY 8:473 1 public participation and judicial review requirements for cost-bene?t analyses prepared under NEPA. B. Enab/mg Statutes and art-Bene?t I 1. En w'mnmenml Protection Agency Statutory vagueness has caused considerable uncertainty as to whether EPA must perform cost-bene?t analysis or any other form of balancing when regulating air, water, and radiation. Ordinarily, this uncertainty is resolved under particular statutory provisions only after EPA has acted, when regulated industries bring lawsuits contending that the agency should have relied on a more formal cost-bene?t analy- sis approach. In such cases, earlier clari?cation of congressional intent would improve ability to meet its statutory obligations within mandated time periods. The Clean Air Act,86 for example, precludes consideration of eco- nomic cost in setting standards for hazardous air pollutants,87 regulat- ing most fuel additives,88 and establishing national primary and secondary ambient air standards.89 In other areas of decisionmaking, however, the statute allows consideration of economic costs?" Authority to use cost-bene?t analysis in regulating pesticides is more clearly de?ned. The Federal Environmental Pesticide Control Act of 197291 requires the registration of pesticides.92 Before approving a registration request, EPA must determine that the pesticide ?will per- form its intended function without unreasonable adverse effects on the environment.?93 These are cost-bene?t based determinations because ?unreasonable adverse effects on the environment? is de?ned as ?any unreasonable risk to man or the environment, taking into account the economic, social, and environmental costs and bene?ts of the use of any pesticide.?94 The Toxic Substances Control Act95 permits EPA to take a balanc- ing approach to the regulation of toxic chemical substances and mix- tures by authorizing regulation when there is a reasonable basis to LL 86. 42 us ..CA 7401 7-642 (West Supp 1979). Sec Clean Air Act 42 U. S. C. ?74l2(b)(l)(B) (Supp I l977?754S(c)( I 89. Id 109(b)(l), (2), 42 U. S. 7409 (2). 90. Id ?3l7 42 U. S. C. ?7617. The bases for decisionmaking. however are not al- tered by consideration of economic costs. See note 68 supra. 92. Id. 3, U.S.C. 136(a). 93. M. 7 U.S.C. l36a(c)(5)(C). '94. Id. 2(bb), 7 U.S.C. [36(bb). EPA's implementing regulations. 40 C.F.R. 162.! (1979). de?ne the ?costs" associated with a pesticide largely in terms of its toxicity. 4 Fed. Reg. 2 ,402 (I976) provides additional methodological guidance. 95. 15 U.S.C.A. loot-2629 (West Supp. 1979yY-?r - W4 8:473 ast-bene?t nty as to :r form of .arily, this only after ontending e?t analy- rnal intent IDS within on of eco? ?7 regulat- nary and inmaking, 90 sticides is 0 Control approving ?will per- on the 5 because cl as ?any :count the he use of a balanc- and mix- basis to 1977C.F.R. if its toxicity. ?~54 J. 1. a ?Ann L.- Aumwk 497 conclude that unregulated manufacturing, distribution. or other activ- ity involving a chemical may ?present an unreasonable risk of injury to health or the In promulgating a rule under this sec- tion, EPA must develop ?ndings on four factors: (A) the effects of such substance or mixture on health and the magni- tude of the exposure of human beings to such substance or mixture. (B) the effects of such substance or mixture on the environment and the magnitude of the exposure of the environment to such substance or lelUFC, (C) the bene?ts of such substance or mixture for various uses and the availability of substitutes for such uses, and (D) the reasonably ascertainable economic consequences of the rule. after consideration of the effect on the national economy. small busi- ness, technological innovation. the environment. and public health.97 Based on this analysis of costs and bene?ts. EPA must adopt the ?least burdensome" requirements necessary to protect against the risk of in- jury from the regulated substance.98 Under the Noise Control Act of 1972,99 EPA may establish noise emission standards ?requisite to protect the public health and wel- from major sources of noise for which such standards are ?fea- The standard itself is to be based on best available technology, but additional factors may be considered, including the cost of compliance and the extent and conditions of the product?s use.?2 EPA possesses broad authority to deal with water pollution under the Clean Water Act.?03 Sections of the Act establishing the construc- tion grants program for publicly owned waste treatment works man- date the use of Judicial decisions interpreting section l3l4(b)(l) uniformly have rejected industry con- tentions that EPA mustjustify the ?best practicable technology? (BPT) ef?uent limitations with a mathematically exact cost-bene?t analysis.I05 96. IS U.S.C. 2605(a) (Supp. I I977). For a general discussion of environmental risks presented by toxic chemicals. see Page. A Generic View cf Toxic Chemicals and SmirYar Risks. 7 ECOLOGY L0. 207 (I978). 97. I5 U.S.C. 2605(c)(l) (Supp. I I977). 98. la! 2605(a). 99. 42 U.S.C.A. 4901-4918 (West I977 Supp. I979). 100. Noise Control Act 42 U.S.C. ?4905(c)(l) (Supp. I I977). [01. la! (B). 42 U.S.C. (8) (I976). I02. Id. ~12 U.S.C. ?4905(c)(l) (Supp. I [977]. 103. 33 U.S.C. l25l-I376 (I976 Supp. I I977). 104. Clean Water Act 33 U.S.C. 1281(g)(5) (Supp. 1 1977). 105. See E.l. duPont de Nemours Co. v. Train. 54l F.2d IOIB. 1030 (4th Cir. I976). modi?ed on or/rer grourrdr. 430 US. ?2 (1977); American Petroleum Institute v. EPA. 540 F.2d [023. [037-38 (IOth Cir. 1976). Sec 0er Kalur. Judicial Error Affair Industrial Source: 10 Avoid BPY'mrr/ Per/mp: 19.4 Lazar: .4 Slurp Cum! Bird Dir- mm, and Ugfi' Consequence, 7 ECOLOGY L.Q. 955 (I979Wmsa .. .. -- n, 'm?w -J?a?-LM?su .. .x . 498 ECOLOGY LAW QUARTERLY 3:473 Courts instead have found that EPA's use of cost-c??ectiveness analysis to determine best practicable technology satis?ed the statute; EPA need not quantify bene?ts in monetary terms. Similar controversy has arisen over authority to control ef- ?uent discharges by I983 through the so-called best available technol- ogy (BAT) standards. In setting BAT standards, EPA is required to consider the cost of achieving the desired ef?uent reduction, but it is not required to balance costs against bene?ts as it is under the BPT provision. By expressly requiring cost-bene?t analysis under BPT but not under it appears that Congress intended to tolerate a greater diSparity between costs and apparent bene?ts under the BAT standards than under the EFT standards. In American Iron Steel Inst/rare v. EPA ,'07 the Third Circuit ap- proved this interpretation of the BAT standards, noting that costs need not explicitly be compared to bene?ts and that the Administrator may exercise considerable discretion in weighing costs for purposes of de?n- ing BAT. provided that his decisions are reasonable.'05 The Fourth Circuit adopted a signi?cantly different view of the BAT requirements in Appalachian Power Co. Train,'09 setting aside thermal back?t regulations for steam electric power plants. The court con- cluded that the BAT provisions require EPA to compare the bene?ts of thermal ef?uent limitation with costs'for alternative levels of heat re- duction in order tojustify standards based on best available technology economically achievable.? To date, however, no other circuit has fol- lowed Appa/ac/ukm Fewer. Moreover, the balancing analysis mandated by Appoint/rim: Power does not require any radical shift in ana- lytical technique. The court recognized that a quanti?ed analysis of costs and bene?ts would be unworkable.?' Accordingly. on remand, EPA was required only to state the bene?ts. especially those to aquatic life, associated with the various alternatives to be considered.?2 Wher- ever bene?ts cannot be stated. the court ruled that EPA must support that assertion with a scienti?c Opinion.? EPA is also subject to general mandate that agencies con- l06. Clean Water Act 33 U.S.C. I3l4tb)(l)(BI (I976), states that the factors to be used in evaluation ofthe BPT "shall include consideration ot?the total cost of application of technology in relation to the diluent reduction bene?ts to be achieved from such application." In contrast. assessment of factors in determining the BAT "shall take into account . . . the cost of achieving such ef?uent reduction." Id 304(b)(2)(l3), 33 U.S.C. 1314(b)(2)( B). I07. 526 F.2d 1027 (3d Cir. I975). [08. Id. at I09. 545 F.2d (4th Cir. I976). IIO. Id. at 1361. [at 112. Id! at I365. 113. In! at I364. vamp-r. -, an,? .. - ?rut- ?ma-MW, 8:473 :55 analysis EPA need control ef? le technol- equired BPT but tolerate a the BAT Circuit ap- costs need trator may as of de?n- 'he Fourth juirements ?8 thermal court con- bene?ts of of heat re- :echnology .lit has fol- mandated iPA?s ana- rnalysis of remand, to aquatic Wher- Ist support :ncies con- tates that the total cost of .chieved from shall take into 33 U.S.C. - M-?l??aln1.4.1 we .3. I . ?km. .4. "41? - ?5 1980] COST-BENEFIT ANALYSIS 499 sider the environmental impact of proposed major actions and evaluate alternatives to such actions. In one of its rare applications Of EIS provisions. EPA prepared a ?voluntary? ?15 in connection with its radiation standard for the uranium fuel cycle.?4 This document illus- trates in detail application of cost-bene?t techniques to the regu? lation of environmental radiation. Congressional silence about the applicability of NEPA to EPA regulatory activities, coupled with failure to establish a standard policy concerning its use of quan- ti?ed balancing analyses, has led to varied cost-bene?t analysis ap- proaches to its rulemaking?some required by statute, others voluntarily undertaken, and all without meaningful congressional or agency guidance on critical methodological issues.1 ?5 This brief review of EPA authority to use cost-bene?t analysis in its regulatory decision- making process demonstrates the substantial confusion resulting from various statutory mandates. 2. Nuclear Regulatory Commission The major statutory sources of NRC authority, The Atomic En? ergy Act of 1954?" and the Energy Reorganization Act of 1974,"7 do not expressly require NRC to use cost-bene?t analysis in setting stan- dards for nuclear power activities or licensing reactors. Nevertheless. NRC extensively uses cost~benef1t analysis in its rulemaking, licensing, and other nuclear power plant control activities. This raises two un- resolved questions: (1) whether NRC has statutory authority and dis? cretion to balance competing considerations in establishing standards for radiation emission controls; and (2) whether NRC should use cost- e?'ectiveness analysis instead of cost-benefit analysis. The predecessor, the Atomic Energy Commission (AEC), used cost-bene?t analysis in setting standards and issuing licenses under the implied authority of the 1954 Act and the recommendations of expert advisory groups. The purpose of the 1954 Act was to foster research and development of atomic energy to promote national secur? ity and industrial progress, subject to appropriate safeguards to protect public health and safety.Ila Given these multiple objectives, AEC 114. See OFFICE OF RADIATION PROGRAMS. U.S. ENVIRONMENTAL AGENCY, ENVIRONMENTAL RADIATION PROTECTION REQUIREMENTS FOR NORMAL OPERA- TIONS or: ACTIVITIES IN THE URANIUM FUEL CYCLE. FINAL ENVIRONMENTAL STATEMENT (Nov. 1. 1976) (EPA Rep. No. 115. See text accompanying notes 232-37 in for further discussion of EPA's use Of cost-bene?t analysis. 116. Ch. [073, 68 Stat. 919 (1954) (current version at 42 U.S.C.A. 20ll-2296 (West 1973 Supp. [979?. 117. 42 U.S.C.A. 580l-589l (West [977 Supp. 1979). See ch. 1073. 3. 68 Stat. .922 (1954) (current version at 42 U.S.C. 20l3 (1976)). ww'w? -. W, "w . ??4th 4 500 ECOLOGY LAW QUARTERL 8:473 could imply a duty to balance developmental interests against health and safety in making decisions. The ABC adopted the recommendations of several independent advisory groups that cost-bene?t methods be employed for setting stan- dards to control exposure to ionizing radiation. The Federal Radiation Council'? recommended that licensees reduce exposures and releases of radioactive materials ?as low as is reasonably achievable," taking into account ?the state of technology, and the economics of improve- ments in relation to bene?ts to the public health and safety, and other societal and socioeconomic The ABC adopted this recommendation. In CrowMer v. Seaborg?zz a federal court considered the validity of ABC radiation standards and reviewed its standard-setting process, which ?requires the weighing of . . . risks and bene?ts??3 The court noted: [W]eighing requires a valuejudgment as well as a measuring, and thus the standards are not scientific numbers below which no danger exists. The value judgment embodies complex social and political considera- tions, for atomic energy has a potential that suggests unlimited bene?ts to entire nations and presents a risk to entire populations . . . and per- haps their progeny.?M The court upheld the AEC standards and standard-setting practices, relying on the ?strong presumption ofthe validity and regularity of the standards when administrative of?cials decide weighty issues within the specific area of their authority and the burden is on the plaintiffs to overcome this 119. The Federal Radiation Councrl. a presidential advisory group, was terminated in 1970 and its functions transferred to EPA. Reorg. Plan No. 3 of [970, 3 C.F.R. 1075 (1966- 1970 Compilation), 5 U.S.C. app.. at 828 (1976) and/1v: 84 Stat. 2088 (1970-1971). 120. 10 C.F.R. (I979). Id l2l. 122. 312 F. Supp. 1205 (D. Colo. I970). 123. Id! at 1231. 124. Id 125. [at at 1234. Following this judicial af?rmation of ABC practices. the National Academy ofSciences' Committee on the Biological Effects oflonizing Radiations (the Committee), offered several recommendations for the control 'of ionizing radiation. includ- ing that ?[nlo exposure to ionizing radiation should be permitted without the expectation of a commensurate bene?t.? NATIONAL ACADEMY or SCIENCES. THE EFFECTS ON POPULA- TIONS or EXPOSURE TO Low LLVELs or Iomzmo RADIATION 2 (1972). in 1973. the International Commission of Radiological Protection (ICRP) similarly rec? ommended that regulation ofdoses of radiation be ?low enough to satisfy both of two inter? related conditions: the doses should be as low as is reasonably achievable. economic and social considerations being taken into account; and the doses should bejusti?ablc by the expected bene?ts of the procedures." International Commission on Radiological Protection. Pub. No. 22. implications of Commission Recommendations that Doses Be Kept as Low as Readily Achievable 5 (1973). The recommendations of 1973 further provided that ?[tlhe acceptability of levels of exposure to radiation for a given activity should be deter- mined by a process of cost-bene?t analysis." v- a-y- vrw~mMW 1 w- w: .1 r' -71] v. . .1 8:473 tgamst health independent setting stan- ral Radiation and releases able,? taking . of improve- ty, and other adOpted this I the validity ting process, 33 The court and thus iger exists. considera- rd bene?ts . and per- tg practices, larity of the :5 within the plaintiffs to i terminated in .R. 1075 (1966- 88 (1970-1971). . the National Ions [the BEIR liation. includ- expectation of ?s as POPULA- 1 Similarly rec? of two inter- economic and sti?able by the cal Protection. .ept as Low as provided that Duld be deter? 1980] COSFBENEFIT ANAL YSIS 501 In the early 1970?s, the AEC initiated proceedings to enhance the use of cost-bene?t analysis in its radiation programs. These proceed- ings, incomplete at the time of abolition and creation of the NRC in 1974, were completed by the NRC in 1974 and resulted in the adoption of Appendix 1. Appendix I, included in NRC regulations!? remains the fundamental source on analytical approaches for NRC rulemaking and other regulatory activities applicable to radiation. There has not been any apparent NRC modi?cation of this analytical approach despite passage of the Energy Reorganization Act of 1974.127 It can be argued that the 1974 Act, which transferred many of functions to NRC, simply did not allow NRC to continue brand of decisionmaking as af?rmed in Cranmer v. Seaborg in 1970.?28 Moreover, the 1974 Act arguably impaired the ability to use cost-bene?t analysis in its health and safety regulatory practices. Because the new Energy Research and Development Administration (ERDA) fosters developmental activities. while NRC pursues the single objective of ensuring public health and safety. NRC should not use cost-benefit analyses to ensure development of nuclear power. Argua- bly, under the 1954 and 1974 Acts. NRC lacks clear statutory authority to develop standards through cost-bene?t based regulation. Further- more, the off-site maximum exposure standards for radiation?? ?regulate the by providing the ultimate limitations on nuclear power. It follows that the NRC role in setting ionizing radiation emis? sion and other standards is restricted to ensuring that the radiation cm? anating from any plant does not surpass the EPA limits. If this interpretation is correct, the use of cost-bene?t analysis and its valuation of broad societal and economic factors in establishing stan- dards is unwarranted. Under these EPA limits. however, NRC could use a cost-effectiveness approach to source regulation. This would be consistent with the requirements of and various Executive or- ders.?3 NRC also employs a balancing analysis in its review of nuclear power plant construction and operating permit applications. The bal- ancing analysis required by has been shaped by subsequent 126. 10 C.F.R. pt. 50 app. 1 (1979). 127. 42 U.S.C.A. 5801-589] (West 1977 Supp. 1979). The Act abolished and generally transferred its functions to ERDA. 42 U.S.C. 5814 1976). One exception to this general authorization was the transfer to NRC of the licensing and related regulatory functions of AEC. 1d. 128. 312 F. Supp. 1205 (D. Colo. 1970). See text accompanying notes l22-25 supra. 129. 10 C.F.R. pt. 50 app. 1 (I979). 130. See text accompanying notes 69-85 mpm. 131. See note 2! supra. See also text accompanying notes 136?206 fir/Ira. 132. NEPA (B). 42 U.S.C. (1976). See text necompanying notes rigor-a. Jon-Am. - a? .L. WW. 7 ?var?. .. 502 ECOLOGY LAW QUARTERLY 8:473 judicial'33 and NRC determinations.?M and various economic. social, environmental and institutional constraints!? NEPA requirements for considering the economic and technical implications as well as the en- vironmental effects of major federal actions can be construed as author- izing NRC use of cost-bene?t analysis in the licensing of reactors. However, NRC recognizes that such reviews essentially are now cost- e?ectiveness analyses, given that all these constraints must be built into their analyses. IV COST-BENEFIT ANALYSIS UNDER EXECUTIVE ORDERS Several Executive orders requiring economic analysis in agency rulemaking have promoted agency use of cost-bene?t analysis. Under these orders, the President?s Office of Management and Budget (OMB), Council of Economic Advisors (CEA). Council on Wage and Price Sta- bility (COWPS), Of?ce of Science and Technology Policy (OSTP), and several Presidential aides play increasingly signi?cant and controver- sial roles in forcing regulatory agencies to use cost-bene?t analysis to solve health, safety. and environmental problems. Thus regulatory agencies carrying out their congressional mandates must justify pro- posed rules on health. safety. and environmental protection by demon- strating to the President that the expected bene?ts will exceed the expected costs. A. Ford Administration ?In?anbnary Impact? Executive Orders President ord?s Executive Order 11821.'36 amended by Executive [33. Calven Cli?'s' Coordinating Comm. v. AEC. 449 F.2d [109 (DC Cir. I97l). See text accompanying notes 72-75 supra. [34. 10 C.F.R. SI (1979). See also U.S. Nuclear Regulatory Commission. Preparation of Environmental Reports for Nuclear Power Stations. Regulatory Guide 4.2. Revision 2. NUREG-OO99 (July 976). I35. U.S. Nuclear Regulatory Commission. Preparation of Environmental Reports for Nuclear Power Stations. Regulatory Guide 4.2. Revision-2. at (July I976). Many federal health. safety. and environmental regulatory agencies other than EPA and NRC use cost-bene?t analysis in their deeisionmaking process. Thus. the problems of a proper discount rate. valuation of human life and other unquantiftable factors. arbitrary manipulation of variables. and the distribution of costs and bene?ts across populations and over generations also affect the quality of regulatory action taken by such agencies as the Food and Drug Adminisrration. Consumer Product Safety Commission. Army Corps of En- gineers. Bureau of Reclamation. Federal Aviation Administration. and the Occupational Safety and Health Administration. For a thorough review of these agencies? experience with cost-bene?t analysis and the methodological limitations of the analytical technique. see M. Baram. Regulation of Health. Safety and Environmental Quality and the Use of Cost-Bene? ?t Analysis. (Mar. l. 1979) (?nal report to the Administrative Conference of the United States). l36. 3 C.F.R. 926 (l97l-l975 Compilation 0 8:473 imic, social, irements for ll as the en- :l as author- of reactors. now cost- )3 built into RS in agency sis. Under get (0MB), Price Sta- and controver? analysis to regulatory .tstify pro- )y demon- :xceed the Orders Executive See Preparation Revision 2. Reports for at (July :r than EPA roblems of a rs. arbitrary ilations and ncies as the Iorps of En- 'ccupational Brience with que. see M. Cost?Bene- the United 4? mine.? -"AgAza'L 05 ANAL YSIS 503 Order ll949,?37 directed federal regulatory agencies to consider the in- ?ationary impact of ?all major legislative proposals, regulations, and rules emanating from the executive branch of the OMB, which held general oversight responsibility for the In?ationary Impact Statement (118) programs,?39 guided the agencies in developing criteria for identifying ?major? actions and developing procedures for evaluating in?ationary impact. The OMB guidelines recommending that agencies use cost-beneift analysis to determine in?ationary impact?0 appear to have had limited effect on agency decisions.?4 Since agencies had to prepare impact statements only for ?major? rulemaking proposals, individual regula? tions frequently fell beyond the reach of the As a result, logi- cally uni?ed programs like the Standards Completion Project of the Occupational Safety and Health Administration (OSHA), involving over 300 individual regulations governing worker exposure to chemi- l37. 3 C-F.R. 16] (I977 Compilation). I38. 3 C.F.R. 926 (197l-l975 Compilation). I39. Executive Order H949, 3 C.F.R. 16! Compilation), amended the term ?in?a- tionary impact statement? to ?economic impact statement-" In this Article. however. the earlier term is used and abbreviated as MS. in order to avoid confusion with the term "envi- ronmental impact statement? (Elsi. which occurs throughout the Article. 140. Of?ce of Management and Budget. U.S. Executive O?ice of the President. Circular No. A407 re Evaluation of the In?ationary Impact of Major Proposals for Legislation and for the Promulgation of Regulations of Rules (Jan. 28, [975). Such evaluations include. where applicable; (I) an analysis of the principal cost or other in?ationary effects of the action on markets. consumers, businesses. etc.. and. where practical. an analysis of sec- ondary cost and price effects. These analyses should have as much quantita- tive precision as necessary and should focus on a time period sullicient to determine economic and in?ationary impacts. (2) a comparison of the bene?ts to be derived from the proposed action with the estimated costs and in?ationary impacts. These bene?ts should be quanti?ed to the extent practical. (3) a review of alternatives to the proposed action that were considered. their probable costs. bene?ts. risks. and in?ationary impacts compared with those of the pmposed action. Id. at 2. 141. This judgment was reached after numerous personal discussions with personnel in OMB and several agencies in Washington. 0.0 {1978). 142. Early review of the IIS program revealed inadequacies in agency procedures for identifying major and minor regulatory actions. OM proposed a measure to tighten up the identi?cation process: I. Agencies must state in the Federal Register at the time of publication that minor rules and regulations (that is. those whose impacts do not exceed the criteria) have been reviewed and do not require an 115. A similar statement should be made in correspondence to OMB for legislative proposals deemed to be minor. 2. Upon request from the Council on Wage and Price Stability (COWPS), an agency must provide a brief description of its reasons for concluding that a proposed action is minor. Of?ce of Management and Budget. U.S. Executive Office of the President, Memorandum re Changing HS Requirements (June ll. I976). . J, qv-Vn W, r7?. Iv J-vnq?v?w?uu- wu?y . . A. a- ,v?vrr a. -umM?? -4 tm-. .. a -n .- 504 ECOLOGY LAIV QUARTERLY 8:473 cals, escaped cost-bene?t analysis.?43 OMB eventually established a numerical threshold to de?ne ?ma- jor" action. Regulations with an expected economic impact of $100 million per year were classifed as majorJ?? and hence required an US. The agencies, however. proved adept at getting around this new re- quirement by spacing out the effect ofimportant regulations over sev- eral years and by dividing regulatory programs so that effects of individual components fell below the $100 million threshold.I45 NRC, already using cost?bene?t analysis,.chose not to implement the Executive orders and OMB guidelines. Its of?cials asserted that NRC was an independent commission not subject to these executive requirements, and that its sensitive task of controlling substantial radia- tion hazards should not be shaped by in?ationary impact considera- Agency expressed dif?culties in integrating IIS analysis and procedures with preexisting regulatory analyses derived from statutory mandates and administrative practices.?47 Agencies such as EPA and OSHA, which administer statutes that allow only limited consideration of economic factors, viewed the IIS procedure as an unnecessary requirement inhibiting implementation of their statutory mandates and adding to their already considerable ad- ministrative burdens.I48 Furthermore, OMB and the agencies did not require the IIS and background analytical documents to be included in the decision record. and therefore subject to public disclosure and eventual judicial review under the requirements of the Administrative Procedure Act?49 and Freedom of Information Act.?su Thus. the IIS procedure avoided the public participation and judicial review that could ensure accountable agency use of cost-bene?t analysis?? I43. Although an [318 was prepared for the entire project. 39 Fed. Reg. 33,843 (1974), economic analyses were only prepared for subgroups within the project. See, 9.3.. 41 Fed. Reg. 29,425 144. Of?ce of Management and Budget. U.S. Executive Ollice of the President. Memorandum re Uniform Criteria (June 3. I975). I45. Interviews with OMB and COWPS staff in Washington. D.C. (Fall l9'l8). I46. Id [47. [of I43. EPA, in particular, regarded the program with special skepticism because it was administered by 0M B. EPA had been the main focus of the Nixon Administration's "Qual- ity of Life" review. According to some observers. 0MB used this review process to diminish EPA achievements in protecting environmental quality and to delay important actions. See [1976] 7 ENVIR. REP. (BNA) 693. 149. 5 U.S.C. 500-703 (I976). 150. Id 552. I5l. Despite these shortcomings. the 113 program might have in?uenced agency deci- sionmaking considerably if courts enforced the requirements of Executive Order ?82! in private lawsuits. In Independent Meat Packers v. Butz. 526 F.2d 228 (8th Cir. W75). cert. denied. 424 U.S. 966 the coun held that private parties cannot enforce the require- ment to prepare an US because the IIS program ?was intended primarily as a managerial tool for implementing the President's personal economic policies and not as a legal frame- ,7 . . ?l-jiw- . . wl?v? "r r?wx?q ?Jul. 4.. ?a 8:473 de?ne ?ma- Iact of $100 tired an 113. his new re- as over sev- e??ects of ?1145 implement sserted that executive ntial radia- considera- grating IIS ses derived :atutes that red the IIS entation of lerable ad? ies did not ncluded in osure and tinistrative rs. the IIS :view that 3.843 (1974), eg. 4 Fed. President. 973). cause it was ion's "Qual- to diminish actions. See tgency deci- Ier 11821 in 1975). (err. the require? managerial legal frame- . - 1m .Agu?a Lu 1-, .4 1980] 05 Fl 7' ANAL 505 These inadequacies of the IIS process were signi?cant since OMB supervision guided the cost-bene?t analysis practices of many federal agencies. As a result. wide variation in agency practice developed. The Federal Energy Administration (FEA), for example. concluded that its procedures for economic analysis developed in response to the 113 EX- ecutive orders satis?ed its statutory obligations?: Other agencies pre- pared IIS pursuant to NEPA or other statutory authority, subject to various procedural safeguards. Moreover, OMB and COWPS personnel acknowledge that OMB did not develop satisfactory procedures for assuring that agencies ap- plied the IIS requirements and conducted cost-bene?t analyses in good faith.?53 In addition, placing the 118 program under the exclusivejuris- diction of OMB removed key decisions concerning the identi?cation of costs and bene?ts, discount rates, and valuation of intangible bene?ts from wider public control. For example, OMB established a ten per- cent discount rate for evaluating costs and bene?ts distributed over time, without congressional or public participation.?54 During this period, COWPS asserted its authority to monitor and analyze inflationary impacts throughout the economy.?55 re- views of proposed agency rulemaking under its own statutory author- ity'56 are ?led with the agency during the public comment period and therefore are available to the public.?57 COWPS reviews also occur off the agency record when CEA and various individual aides to the Presi- dent ask COWPS to provide staff and analyses on economic matters.?58 Given these opportunities, COWPS has actively participated in agency proceedings subject to US and subsequent Executive order requrre- work enforceable by private civil action." [at at 234-36. Sec also National Renderers Ass'n v. EPA. 541 F.2d l28l (8th Cir. 1976) (court refused to base private party?s successful chal- lenge of EPA new source standards on Executive Order [1821). By the same token. proce- dural or methodological de?ciencies in cost-bene?t analyses included in an agency [18 presumably could not be challenged in private lawsuits. 152. See Brookhaven Report, supra note at 171-92. 153. Interviews with staffof OMB. COWPS. and agencies subject to OMB memoranda in Washington. DC. (Fall 1978). 254. Of?ce of Management and Budget, U.S. Executive Of?ce of the President. Circular No. A-94 re Discount rates to be used in evaluating time-distributed costs and bene?ts (Mar. 27. 1972). [55. Council on Wage and Price Stability Act. Pub. L. No. 93-387. 88 Stat. 750 (l974) (codi?ed at 12 U.S.C. 1904 (I976 Supp. 1 Council authority was most recently extended to September 30. 1980, by Pub. L. No. 96-10. 93 Stat. 23 (codi?ed at 12 U.S.C.A. 1904 (West Pamphlet 2, 1979)). 156. COWPS is authorized to review and intervene in agency and department proceed- ings. 12 U.S.C.A. [904 note (8) (West Supp. 1979). 157. Editor's telephone interview with Roy Nierenberg. COWPS Deputy General Coun- sel (Jan. 21. 1930). 158. Interview with Roy Nierenberg. COWPS Deputy General Counsel and John Morallcs. COWPS Senior Economist, in Washington. DC. (Dec. 1973). . . ru?c- Q, 506 ECOLOGY QUARTERLY 8:473 ments.'59 While the Ford Executive orders were in effect, COWPS reviewed IlS?s prepared by agencies, assessing them independently and com- menting on their in?ationary impact. COWPS also began intervening aggressively in agency proceedings ?to present its views as to the in?a- tionary impact that might result from the possible outcomes of such 1 proceedings? although the Council has ?no legislative authority to im- pose mandatory controls nor . . . to prevent or delay any federal agency action."160 In a typical case, COWPS appeared before the Consumer Product Safety Commission in 1977 and presented extensive testimony on proposed power lawn mower safety standard. testi? mony stated several bases for its objection to the proposed standards? primarily that they were based on insuf?cient information and that estimates show costs exceeding bene?ts.?l COWPS presented estimates that the ?rst-year cost of the standard would be greater than $371 million, that sales would decrease, and that the dollar bene?ts of reducing the annual tolls of injury and death (56.000 injuries and twenty-five deaths in 1976) would probably fall below Sl63 mil- lion, thereby producing an unfavorable bene?t to cost ratio.?2 Earlier COWPS comments reveal its untested assumptions about social costs. For example, COWPS di5putcd estimates that the ?cost of a day incapacitated? was forty dollars and that an average wage rate of $225 per week be used in calculating the costs of permanent disabil- It assumed that any pain and suffering costs, as proposed by others appearing before CPSC were and that the value of life amounts proposed were probably overestimated to the ex- tent they exceeded the amount estimated by the National Highway Traf?c Safety Administration.I65 CPSC responded by internally disputing, in part, esti- mates and other aspects of its cost-benefit analysis methodology, and its primary reliance on cost-benefit in setting health and safety regulations A [59. In a quarterly report. for example. COWPS revealed its selective involvement in OSHA proceedings on machine guards and benzene exposure. CPSC proceedings or: power lawn mowers. and its ?ling of numerous reports on other health, safety. and environmental problems within the regulatoryjurisdiction of EPA. OSHA. CPSC. FDA and other agencies. COUNCIL ON Wane AND PRICE Snntu?rv. U.S. EXECUTIVE OFFICE or THE PRESIDENT, 1 QUARTERLY REPORT at iv (Oct. I977). i [60. Id at 9-H. 16!. Council on Wage and Price Stability. Comments before the Consumer Product 5 Safety Commission on Power Lawn Mowers under 16 C.F.R. 1205 (Aug. 12. 1977). I62. 10'. at 7-14. 163. Council on Wage and Price Stability. Comments before the Consumer Product 4? Safety Commission on Proposed Lawn Mower Safety Standard 9-10 (Oct. 14. 1975). [64. Id. at 9-13. [65. Id. at 12. memmw . --AA A - - n-um-wm-w?n- 8:473 reviewed and com- ntervening :i the in?a- es of such irity to im- ay federal er Product imony on testi- andards? and that COWPS would be the dollar )0 injuries $163 mil- 62 )ns about "cost of ge rate of disabil- posed by that the .o the ex- National esti- Y. and its gulations lvement in on power ironmental :r agencies. 9RESIDENT. er Product l9'l7). er Product 975It?wyrr-v -. YSIS 507 under its enabling act.?56 In February 1979 CPSC published a ?nal standard which is not effective until January 1982.?7 While in?uenc- ing balancing analysis and the ultimate standard, COWPS delayed the promulgation of the safety standard. COWPS repeatedly has demonstrated this disturbing ability to in- ?uence safety standards and delay agency action by using economic studies laden with arbitrary assumptions about health and other mat- ters that transcend economic expertise. The signi?cant roles played by COWPS and OMB under the Ford Executive orders reSted on no par- ticular expertise about, nor demonstrated concern for. the social. envi- ronmental, and other noneconomic issues involved. In 1976 COWPS and OMB solicited agency and public comments on the HS program'68 and received a wide variety of guarded criti- cisms, particularly from the health. safety, and environmental regula- tors!? Executive Order 11949'70 subsequently extended the 118 program until the end of 1977.17' B. Carter Administranbn ?Wegu/arog? Anab'm'? Erecun've Order 1. Executive Order 12044 The Carter administration, faced with the need to control in?ation and with increasing criticism of federal regulation, promulgated Execu- 166. Sec Internal Memorandum of Consumer Product Safety Commission. re Power Lawn Mower Comments (Feb. 6. I978). 167. 44 Fed. Reg- 9990 (1979) (to be codi?ed in to C.F.R. l205'). I68. 4 Fed. Reg. 32.463 (1976). I69. For example. the Department of Commerce called for ?speci?c guidelines" to as- sure ?uniform applications. similar to environmental impact statement guidelines of the US. Council on Environmental Quality." EPA recommended phasing out the 115 program and felt that ?there are de?nite lim.tations in the state of the art of bene?ts estimation in the environmental areas." HEW felt that ?the analyses should be public as a matter of princi- ple" and a staff analysis pointed out the ?many pitfalls in application" ofcost-bene?t analy- sis. The Food and Drug Administration recommended discontinuance. The Department of Laoor commented that the HS program had not clearly encouraged ?better planning and management within government." Letters on ?le with OMB in response to 41 Fed. Reg. 32.463 Nevertheless. summary report indicates little agency opposition to the ?5 program. See Council on Wage and Price Stability and O?ice of Management and Budget. An Evaluation of the In?ation Impact Statement Program (Dec. 7. I976). 170. 3 C.F-R. 161 (1977 Compilation). 171. [at at I62. The Carter administration indicated. however. that the evaluation of economic impact by regulatory agencies would be reconsidered. CEA then circulated drafts for new economic analyses. One of the most signi?cant CEA departures from Ford admin- istration practice was its proporsed modi?cation of the cost-bene?t approach being used in all economic analyses. CEA indicated that it would stress selection of the least costly regulatory alternativewa cost-effectiveness approachwand thal therefore CEA would address the methods of achieving regulatory goals without attempting to influence the establishment of the goals themselves. See [1977] 8 ENVIR. REP. (BNA) SSI. For response to the CEA draft guidelines. see id. at 699. This proposed approach was not followed. however. after enactment of President Carter's Executive Order [2044. . h- - . .. p?p?ua?v .. Audi503 ECOLOGY LAW QUAR TERI. 8:473 tive Order 12044 on March 23, 1978.172 The Order requires agencies to prepare a ?regulatory analysis? for all regulations having an annual impact of at least $100 million on the economy or causing a ?major? price increase for an industry, level of government, or geographic area.?73 Each analysis must state the problem addressed, describe the economic consequences of alternative solutions. and explain the selec- tion of one alternative over the others.'74 The Order provides for pub- lic notice of preliminary analyses and periodic review of existing regulations. It directs 0MB to ensure effective implementation.?5 The new Executive order affords OMB, CEA, and COWPS con- siderable discretion to shape agency use of regulatory analysis. OMB, CEA, and COWPS have used this freedom to reinstate the cost-bene?t analysis practices of the earlier Ford Executive orders that the Carter administration ostensibly sought to avoid.? OMB has issued a memo randum to implement Executive Order 12044 by providing the agencies with ?guidance on the contents of a regulatory analysis??7 The gui- dance. developed with CEA and COWPS, requires agencies to com- pare the economic consequences of each alternative regulation and explain the reasons for choosing one alternative over the other.'78 1'72. 3 C.F.R. 152 (1978 Compilation). The Order also calls on agencies to minimize paperwork. publish a semiannual agenda of proposed regulations and existing regulations under review, and improve public participation and the oversight role of agency admini- strators in regulatory proceedings. la! at 153. In addition. agencies are to use new criteria in developing ?nal regulations including the writing of regulations "in plain English." evalua- tion of altematives to regulation. and estimation of reporting burdens create by the pro- posed regulations. Id at 154. 173. [ii 174. la! 175. 10'. at 155-56. As of September 1978. virtually all agencies subject to Executive Order 12044 had published their proposed implementing regulations in the Federal Regis- ter. Regulatory were not required in pending rulemaking proceedings if an Eco? nomic Impact Statement had already been prepared in accordance with Executive Orders 11821 and 11949. Id at 155. 176. See J. Morall. Regulatory Reform in the Carter Administration 5 (paper presented at the Allied Social Science Associations Annual Meeting in New York. Dec. 28. 1977). 1'17. Memorandum from Wayne G. Granquist. Associate Director for Management and Regulatory Policy. Of?ce of Management and Budget. to the Heads of Departments and Agencies. entitled ?Regulatory Analysis" (Nov. 21, 1978) [hereinafter cited as OMB Memo- randum on Regulatory Analysis]. 178. Id The memorandum provides. inter able, that each agency analysis contain: (3) An analysis of the economic consequences?direct as well as indirect ef- fects. and their signi?cance?01' each of these alternatives (including the no action alternative); such consequences should be presented in comparative form to sharpen the issues and provide a clear basis for choice among alternatives; these consequences include: speci?c burdens imposed by each alternative what types of burdens (and how much) are placed on Speci?c groups as a result of compliance? 0 capital outlays 0 other costs of compliance including operating and mainte- nance costs Yw- w. wv'wvw?vm?y? . (M . -. - a . . ?h Ann-Jaw?: lie?"? 8:473 agencies to 1980] COSFBENEFIT ANAL 509 Executive Order 12044 and the OMB memorandum do not use the an annual terms cost, bene?t, or cost-bene?t analysis. Instead. they use the terms a major burdens, gains. and overall economic impact. Nevertheless, their prac- geographic tical e?'ect has been to authorize the continued use of cost-bene?t anal- the ysis.?9 1 the selec- es for .Pl?b' 2. Raga/moo! Armour: Conducted by the Regulatory ?412002913 Review e?l?flilmg Group and tire Council on Wage and Price Stability 11011. IWPS com The newly established Regulatory Analysis Review Group sis 0MB (RARG) charred by the CEA and staffed by conducts test-bene?t number of specral economic analyses 1n addition to those im- the Carter posed on the agencies under Executive orders and statutes enforced by :1 a memo- 0MB, COWPS and CEA. President Carter stated that role is [c agencies ?to revrew agency regulatory analyses and to consult with the agencres The gui- on the conduct of such analyses, and ?to conduct an rnteragency re- :5 F0 com- administrative burden (reporting requirements. delays. un- ation and certainty. etc.). 178 (ii) who bears those burdens? her. I what burden falls On what types of enterprises. levels ofgov- . . emment, major geographic regions. communities. and urban mm'm?zc areas? the impact on employment. ?scal condition. availability of public services. etc.) :ncy admmr- 0 how are consumers and various population groups bur- ew criteria in dened? income distribution. housing availability. etc). ish.? evalua- speci?c gains produced I by the pro- what types of speci?c gains (and how much) to society as a whole would each alternative producd? (ii) who would be helped. how. and by how much, by each alternative? - overall economic impacts of each alternative to Enemy: how would productivity and overall economic ef?ciency be deral Regis- affected" :5 if an Eco- (ii) how would prices and employment be affected? utivc Orders er presented 28. 1977). tgemcnt and quality or utility of products and thus on the demand for U.S. rtments and exports. extent to which foreign competitors are subject to sim- Merno? ilar regulations. effect on competition between U.S. and for- eign suppliers in third countries)? :ontain- (4) A detailed explanation of the reasons for choosing one?altemative over the others; questions to be answered: rectef- Will the selected alternative produce the intended results in the least 3 action burdensome manner possible? If not, why is this the preferred alter- native? 5. these Why isn't the action more stringent7?less stringent? What tradcoffs does the selected alternative re?ect? speci?c 10'. at 3-4. For other 0MB promulgations implementing Executive Order 12044. see 43 Fed. Reg. 21,997 (1978): 43 Fed. Reg. 24,219 (1978). [79. See J. Morall. supra note I76. nainte- [30. President Carter informally established RARG to consult with agencies and to re- view agency regulatory analyses prepared undcr Executive Order 120-44. 43 Fed. Reg. [2.668 (1978how would the U.S. foreign trade position be affected ef- fect of increased costs for domestic companies on the price of goods that compete with imports, effect of increased costs for domestic companies on the price of U.S. exports. effect on the -.. gnu- .m?at .. 510 ECOLOGY LAIV QUARTERLY 8:473 view of 10-20 regulatory analyses each CEA, however, di- rected RARG to use cost?bene?t analyses that are substantially similar to the regulatory analysis requirements that OMB imposes on the agen- cies.I32 Executive Committee selects certain agency proposals for detailed analysis on the basis of several criteria, including potential economic impacts and total cost, the precedential value of RARG ac- tion, regulatory overlap or con?icts between agencies, and the inade- quacy of the agency?s own regulatory analysis.I83 COWPS typically takes two to four weeks to produce a draft anal- ysis for RARG.I84 When RARG reaches a consensus on the draft, Presidential aides may also review the report before the COWPS Director ?les the report for the agency record. RARG members may ?le dissenting opinions. Although deliberations are closed to the public, its reports are ?led for the agency record, which is available to the public. The ultimate reconciliation of an agency?s regulatory analysis and the RARG report rests with the agency. But as a practical matter, RARG exerts considerable in?uence on the agency. This influence may result in part from new, convincing data, exposure of de?ciencies in the agency?s own analysis. or innovative regulatory ap- proach.'85 The primary reason for influence, however. is that its reports issue directly from the Of?ce of the President.?6 COWPS lacks a uniform policy for dealing with many method- ological limitations of cost-bene?t analysis"? that it encounters when l8l. Id. 182. Conware Memorandum front Regulatory Analysis Group. Council of Economic Advisers. US. Of?ce of the President. entitled ?Regulatory Analysis" (undated. but issued summer. 1978) aft/i OMB Memorandum on Regulatory Analysis. supra note I77. Given the narrow economic course set for the agencies and RARG by OMB and CEA. pressures developed to create yet another regulatory oversight organization to deal more readily with the societal benefits of health. safety. and environmental programs and to be more favorably disposed to their implementation in the face of economic analyses. This led to Carter?s creation of the Regulatory Conucil. following the suggestions of EPA of?cials. See Memorandum from President Caner to Executive Departments and Agencies. entitled ?Strengthening Regulatory Management? (Oct. [978}. For some preliminary indications as to the Council's agenda. see 5 EPA J. 29 (1979). The Council intends to establish a regulatory calendar providing an overview of all agency activities and to improve bene?t calculations. The OMB staff. however. believes that trying to place a conclusive value on bene?ts will only lead to further controversy. Interviews with Peter Petkas, Executive Direc- tor of the Regulatory Council. and OMB and COWPS staff, in Washington, D.C. (Fall 1978). 183. Interview with John Moralles. COWPS Senior Economist. in Washington. D.C. (Dec. I978). 184. Discussion procedure based on interviews with COWPS stall" economists and attorneys in Washington. D.C. (Fall l978). . 185. The RARG process has been characterized by OMB and COWPS sta??as a reason- able approach to increased agency awareness of the excessive regulation problem. [of I86. Id 187. See text accompanying notes 2?-65 myira. w??v~~m~umm ru-HW 8:473 however, di? atially similar a on the agen- ncy pr0posals ling potential )f RARG ac- 1d the inade- a draft anal- on the draft, the COWPS iembers may are closed to '3 is available analysis and itical matter, tis in?uence ?dc?ciencies gulatory ap- vever, is that 86 my method~ unters when i! of Economic ated. but issued te 177. and CEA. to deal more rams and to be tlyses. This led l' EPA of?cials. :encies. entitled tary indications . to establish a rnprove bene?t usive value on Direc- on. DC. (Fall shington, D.C. tall" economists all as a reason- iblem. Id COST-BENEFIT ANAL YSIS 5Il preparing regulatory analyses for RARG or under its own independent statutory authority.?is Each analyst selects a discount rate and esti- mates critical factors, such as the economic valuation of health and en- vironmental bene?ts and the allocation of costs and bene?ts to different societal sectors, without any meaningful COWPS staff contend that this ad hoc approach results from the different styles of and the differences between proposed regulations.?90 In addi? tion, RARG analyses incorporate technical positions and studies'done by the even though these reports are much less thorough and sophisticated than the original agency study.?2 Despite the absence of a consistent approach to methodological problems, RARG reports ?led in 1978'93 reveal its preferences for performance standards over design standards, incremental economic incentives over standards enforced by ?xed penalties, and individual choice over government-dictated out- comes. These preferences, which occasionally lead to recommended innovative regulatory approaches, challenge the justi?cations for agency action. An additional assumption consistently injected into analyses is the necessity for maintaining the economic status quo. COWPS does not encourage either redistributing income or impairing the economic status of regulated ?rms to solve a health. safety, or envi- ronmental problem. COWPS believes that agencies share this assump- 188. Council on Wage and Price Stability Act. 12 U.S.C.A. [904 note (West Supp. 1979). I89. Interview with COWPS staff in Washington. DC. (Fall 1978). I90. 1a! l9l. Congress created OSTP by the Presidential Science and Technology Advisory 0r- ganization Act of I976. Pub. L. No. 94-282, 90 Stat. 463 (codi?ed at 42 U.S.C. 6611 (I976ll. following the recommendations of President Ford. Executive Order [2039. 43 Fed. Reg. 8095 (1978). transferred various advisory functions to it. OSTP has become a consulting service organization providing technical support for the analyses and recommendations COWPS provides RARG. See Report of Dr. Frank Press. Director. OSTP. to the House Committee on Science and Technology (Oct. 31. I978). which describes in some detail nu- merous OSTP functions. but nowhere describes its role ofserving COWPS and RARG other than alluding to ?numerous other areas where eo-ial attention is given to contempo- rary issues. usually with action-oriented policy or management decisions in mind.? 192. See, for example. the KARO report for EPA's proposed revision of the national ambient air quality standards for photochemical oxidants (the ozone standard). 43 Fed. Reg. 26.962 (1978). The report criticizes EPA reliance on the consensus of expert panels. existing research and literature. and monitoring systems in establishing its proposed rule. but presents little evidence to support its own preferences. I93. In 1978. RARG ?led reports with agencies on four pr0posed agency actions: EPA's national ambient air quality standards for photochemical oxidants (?led Oct. 16. 1978); OSHA's rules on worker exposure to acrylonitrile (?led May I9. 1978): Department of Transportation?s rules on nondiscrimination against the handicapped (?led Oct. 24. and rules on toxic substances posing a potential occupational carcinogenic risk (?led Oct. 24. I978). ?wi?W?I? - . -. [w gnu..- -. .Lm?.h L. I?m-su- mama512 ECOLOGY LAW QUARTERLY 8:473 tion.'9" COWPS usually ?les its own analysis of a proposed rule for the agency record during the public comment period.?5 Frequently. how- ever, it conducts a second review of the ?nal regulation after the close of the comment period and before publication?) The CEA and other Presidential aides initiate these additional COWPS reviews. which are then used off the record and in ways beyond formal con- trol.?7 COWPS analyses so used wield additional in?uence, regardless of any arbitrary assumptions and inadequate technical arguments they might contain. Because of such ex parte in?uence and record de?cien- cies, subsequent judicial review of the ?nal agency action cannot en- sure that the agency acted properly on the basis of available evidence. '93 Several agencies and interest groups have expressed opposition to RARG activities. EPA, for example. disagreed strongly with the RARG report on proposed photochemical oxidants regula- tion.'99 EPA considered the approach illegal because it calls for a con- sideration of cost prohibited by the Clean Air Act, inadequate because it fails to provide for full review of all available medical evidence, and inaccurate because it overstates control cost estimates.200 De5pite the apparent weaknesses of the technical criticisms expressed by COWPS 194. Interview with John Morailes. COWPS Senior Economist. and Roy Nlerenberg. COWPS Deputy General Counsel. in Washington. DC. (Dec. l978). 195. [at 196. In! 197. Id. 198. See the discussion of agency contacts with interested persons under Executive Or- der 12044. 43 Fed. Reg. 36.412 (1978): The agency should address the question of how it handles contacts with per- sons intcrested in a developing rule. Such frequent and informal contacts between agency decisionmaking personnel and interested outsiders at this stage of the proc- ess are unavoidable and usually desirable. Yet they may give rise to suspicions of improper in?uence, particularly where the pattern of contacts seems disproportion? ately to favor particular requirements. preparation of memoranda of significant contacts for inclusion in the rulemaking ?le. open meetings. and conscious efforts to balance contacts. [at at 36.417. See also. Putting Ex Pane Communications in the Record. fat at 36.419. A Justice Department memorandum concludes that there is neither a constitutional nor a statutory bar to contacts between presidential aides and agency rulemakcrs if procedural safeguards of this type are observed. Memorandum from Larry A. Hammond. Acting Assis- tant Attorney General. Of?ce of Legal Counsel. to Cecil D. Andrus. Secretary of the Inte- rior. entitled. ?Consultation with Council of Economic Advisers Concerning Rulemaking under Surface Mining Control and Reclamation Act." (Jan. 17. 1979). See alto Nathanson, Report to the Select ommr'rree an Ex Pane llforma/ Pra- ceedrings?. 30 AD. L. REV. 377 Wright. Rulelrrakr'ng and Judicial Review. id. at 461. 199. See note I92 supra. 200. Memorandum from Walter Barber. Director. Of?ce of Air Quality Planning and Standards. to David G. Hawkins. Assistant Administrator for Air. Noise. and Radiation. n: Council on Wage and Price Stability/Regulatory Analysis Review Group Critique of the Proposed Ozone Ambient Air Quality Standard (Nov. 8. I978). 'r'vw-Fv .Pw w. ., r?F-pe?q i fVol. 8:473 :1 rule for the quently, how- ifter the close EA and other ws, which are formal con- tce, regardless ?guments they cord de?cien- cannot en- of available Opposition to gly with the :lants regula- 1115 for a con- luate because evidence, and Despite the I by COWPS Roy Nierertberg. er Executive 0r- :ts with per- between of the proc- uspicionis of :propomon- signi?cant cious efforts at 36.419. onstitutional nor ers if procedural 1d, Acting Assis- tary of the Inte- ing Rulemaking also Nathanson. Rut/(making Pro- tiew, id. at 461. ity Planning and ad Radiation. re Critique of the . 1980] ANAL YSIS 513 and OSTP, they strongly in?uenced the outcome; ?nal standards were signi?cantly less stringent and less protective of health than its proposed The ?nal standards, however. presumably will ?cost? less than the proposed standards. The Environmental Defense Fund (EDF) considers RARG a threat to ?important commitments . . . to the health and welfare of the American people, with little or no effect on in?ation or government ef?ciency.?202 EDF has sought (1) to con?ne activities to the public comment period; (2) to have RARG ?le a summary of its meet- ings with agency of?cials for the agency record; (3) to have RARG Open all its meetings to the public; and (4) to prevent RARG from de- laying the regulatory process, particularly prior to proposed rulemak~ ing. EDF, RARG, and other Presidential advisors have discussed these issues, but no changes have resulted in RARG policy to date.203 The controversy continues in the media204 and in Congress. In February 1979 Senator Muskie conducted hearings of the Senate Sub- committee on Environmental Pollution ?to assess the merit, legality and political rami?cations of the White House economists? roles in environmental regulations.?205 The chairmen of COWPS and CEA testi?ed, along with representatives of various environmental organiza- tions?o" 201. 44 Fed. Reg. 8202 (1979) (to be codi?ed in 40 C.F.R. pt. 50). In its summary of the ?nal rulemaking. EPA outlined the extent to which it changed its position: On June 22. 1928. EPA proposed changes in the standard (43 FR 26962) based on the ?ndings of the revised criteria. The proposed changes included (1) raising the primary standard to 0.10 ppm. (2) retaining the 0.08 secondary standard. changing the chemical designation ofthc standard from photochemical oxidants to ozone. and (4) changing to a standard with a statistical rather than deterministic form. The ?nal rulemaking will make three further changes in the standard: (1) Raising the primary standard to 0.12 ppm. (2) raising the secondary standard to 0.12 ppm. and (3) changing the de?nition of the point at which the standard is attained to ?when the expected number of days per calender year with maximum hourly average concentrations above 0.12 is equal to or less than one." Id. EPA asserted that the changes. deemed harmful by many. were not the result of a trade- between health and economic considerations or a RARG type of economic analysis. Id. at 8213. 202. See letter from Robert J. Rauch. Staff Attorney. Environmental Defense Fund. to Charles Schultze. Chairman. Council of Economic Advisors (July I978). 203. The Center for Law and Social Policy. the Natural Resources Defense Council. the Appalachian Coalition. the Council of the Southern Mountains. Inc.. the Northern Plains Resources Council. Illinois South, and the Texas Committee on Naturai Resources have ?led a consolidated action challenging ex parte contacts between members of CEA and the Department ofthe Interior in connection with prOposed permanent strip mining regulations. COWPS prepared a report on behalf of RARG concerning the proposals in early 1979. which CEA members allegedly passed on to the Department of the Interior after the public comment period had closed. In re Permanent Surface Mining Regulations Litigation. No. 79-1144 (D.D.C.. ?led June 6. 1979). 204. See. cg, Should President: Bend (lie Rrrler.?. NY. Times, Feb. 14. 1979. A. at 24. col. l. 205. [1979} 9 ENVIR. (BNA) I993. 206. See Eternity: Brandt Review of Environmental Regu/anbnr Before (Ire E) 1 L- 4.4.. mm-N.wm . .. won?p- .. . c?ngm . 514 ECOLOGY LAIV QUARTERLY 8:473 3. Regulatory Reform: oz??cfr and Opportunities Regulatory reform is in a state of flux, as COWPS. CEA, OMB, RARG, OSTP, the new Regulatory Council (R0307 agencies, and Congress208 respond to Executive Order 12044. Controversy grows over the use of regulatory analyses. the adequacy of the methodologies employed, and the prOper degree of Presidential involvement in agency decisionmaking. Regulatory reviews conducted under President Carter's Order provide new Opportunities to in?uence agency actions on economic grounds under the aegis of the Of?ce of the President, regardless ofthe merit ofthe analytical approaches used. Without uni- form guidance on the critical methodological limitations of cost-bene?t analysis, important public policy issues raised by these limitations are left to staff economists, consultants. and Presidential advisors?o" Regu- latory cost-bene?t analysis has become a numbers game that eludes ac- countability. Arguably, ?exibility may be justi?ed while agencies learn to ana~ lyze costs, bene?ts and alternative regulatory actions. OMB sta?" ac- knowledge the need for formalization, but not until they gain ?ve or six years of experience with Executive Order 12044 and the regulatory cal- .S'ubromm. on En w'rorrmenm/ Pollution of Senate Comm. on ?irt-trauma! and Pub/rt? Wad-r. 96th Cong. Sess. (I979). 207. See note 1822 supra on the creation of the Regulatory Council. 208. Congress is now assessing the President?s efforts and considering its own initiatives. Senators Ribicoff. Kennedy. and others introduced a bill ?to provide for the regulatory anal- ysis of proposed rules and the review of existing rules by the agencies." S. 262. 96th Cong. Sess. 602 (1979). The bill carefully provides that the agency draft and ?nal regulatory analyses for proposed major rules include estimates of ?projected economic. and projected health, safety and other noneconomic etl'ects . . . which the agency is permitted by law to take into account." [of 603. The bill. however, provides no intelligible principle for agency consideration of both quanti?able economic factors and unquanti?able noneconomic factors such as health. safety. and environmental effects. Nor does the bill provide any guidance for valuing un- quanti?ables, for using discount rates. or for detemining appropriate distributions of the e?'ects across societal sectors. The bill, if enacted. may well dissuade agencies from under- taking purely economic analyses of the type fostered by Executive Order 12044. Conversely. however, it may provide the necessary authority for agencies to incorporate all these consid- erations into a cost-bene?t analysis or regulatory analysis type of framework. with predict- able problematic results. Furthermore. the bill provides that ?[a]ny regulatory analysis prepared . . . under . . . this title, including any procedure involved therein . . . shall not be subject to any judicial review in any court." ?607. Without the accountability provided by judicial review. and without consistent and vigorous oversight by Congress of agency regulatory analyses. the agencies will have considerable discretion to use and abuse regulatory analysis. It should be noted that in most respects relevant to this Article. 8. 262 is substantially similar to S. 755. the ?President?s bill" tiled in 1979 to promote legislative enactment to Executive Order l2044 requirements. As of publication date, the Senate has not acted on either bill. 209. OMB and CEA guidelines are couched in general terms and are silent on key meth- odological problems. See text accompanying notes 176-79 raw-a. )1 MWW - ?ve. - .ir. \x rypw? '1 .gw?v Ia 8:473 CEA, 0MB, tgencies, and aversy grows tethodologies ent in agency er President gency actions be President, Without uni- cost-bene?t :nitations are )rs.2?9 Regu- tat eludes ac- .eam to ana- MB staff ac- tin ?ve or six gulatory cal- m'm' and Public own initiatives. regulatory anal? !62. 96th Cong. ?nal regulatory and projected titted by law to eration of both such as health. for valuing un? ?ibutions of the ies from under- 44. Conversely. these consid- k, with predict? . . under. . . to any judicial iudicial review. latory analyses. malysis. is subsrantially enactment to as not acted on at on key meth- l980] ANAL 515 endar.?0 They believe that formalization now would force agencies and Presidential of?ces to misallocate their resources by directing agency personnel to focus on trivial aspects of their decisions?" In addition, OMB staff fear that articulation of assumptions could lead to litigation, with decisions on controlling costs being made in the courts. similar to the NEPA experience. This desire to maintain ?exibility explains failure to pro- mote its ten percent discount rate memorandum?2 or to promulgate standardized approaches to the valuation or distribution of effects is? sues. OMB thus preserves the executive branch stafl?s discretion for dealing with precisely those persistent methodological problems that transcend analyst expertise. Finally, the roles of RARG, RC, COWPS. OMB, CEA. OSTP. special Presidential advisors, and the agencies themselves in the regula- tory reform process are overlapping and unclear. Guidelines have been issued in an inconsistent and uncoordinated manner. while earlier memoranda. such as 1972 circular on the ten percent discount rate2l3 are ignored. but remain unrevoked, creating confusion among regulated ?rms, interest groups, and the public. Cost-benefit analysis has been acclaimed as a panacea for many perceived ills of the regula- tory decisionmaking process; however. a clear need exists to reform this reform program through coordination of review functions and generic treatment of persistent methodological problems. AGENCY STRUCTURING OF 1N COST-BENEFIT ANALYSIS Congress, CEQ. COWPS, RARG and 0MB all have failed to ad- dress fully the significant methodological limitations and high potential for abuse of cost-bene?t analysis. One solution. in the absence of meaningful legislative oversight or guidance to agency decisionrnakers, is agency self-regulation. Courts expect agencies to structure their decisionmaking discretion through rulemaking. thereby promoting agency reliability. predictabil- ity, and accountability.2M Professor Davis is the leading proponent of this view: ?When agencies have inadequately provided guides for their exercise of discretion, courts . . . should require clarification through Interview with OMB staffin Washington. DC. (Dec. 1978). 2! I. la! 2l2. Of?ce of Management and Budget. U.S. Executive Office of the President. Circular No. A-94 re Discount Rates to be Applied in Evaluating Time-Distributed Costs and Bene- ?ts (Mar. 27, 1972). 213. 1:22 214. K. DAVIS, ADMINISTRATIVE Law TEXT I43. 148 (1972}. .wr- vv.l~v- ?r u-P-xsvu-pm . _r,u.r .. . 4? ?w a?Ia? .mmu?_1 ammunr ?mm-Mk? 516 ECOLOGY QUARTERLY 8:473 rules or standards. The combination of such clari?cation with required statement of ?ndings and reasons in individual cases is one of the most important arrangements for protecting against arbitrary exercise of dis- cretionary power?? Davis believes that administrators ?are clearly in the best position? to con?ne administrative power because they have the most direct knowledge of practical needs with respect to [that] power. . . . The improvement in the quality of justice may stem from three interlocked items?Abe guides for discretion, the control of discre- tion through the requirement that ?ndings and reasons . . . be related to the guides, and the increased effectiveness of the judicial check?? Explaining the procedures and assumptions of agency decision- making will improve agency accountability and foster an adequate rec- ord for judicial review, particularly review of informal rulemaking. Judge Wright has stated: [Ilf courts are going to make a searching and careful review of the facts in an informal rulemaking proceeding, they will need a proper record. How will a court determine whether the agency?s action is arbitrary or capricious or supported by substantial evidence without a record? In spite of continuing exhortations and admonitions from many courts, including our own, today?s informal rulemaking proceedings often do not provide a preper record. Some government agencies and departments seem to be operating under the old assumption that agency expertise is a proper blanket with which to insulate themselves from searching judicial review. But the insulation is occuring at a time when lower courts are being required by the Supreme Court to pierce the blanket and get to the facts and the underlying policy considerations~not to weigh them but to consider them to determine whether the agency action under review is ra- tional.?7 This review of legal, methodological, and institutional issues asso- ciated with the extended use of cost-bene?t analysis suggests several 215. Id. at 156. Agency articulation on a case-by-case basis of how discretion is used also can improve agency accountability. COWPS itself. in its major study of the in?ationary impact statement program. called for agency explicitness on a case-by-case basis: The cost-bene?t analyses of the proposed regulations that have been performed on OSHA regulations have been done by other Federal agencies such as CWPS and EPA. If [the Department of Labor's] llS?s were structured so as to reveal explicitly the costs and bene?ts ofalternative proposals it would be stronger evidence than is presently available that OSHA views its MS analysis as a management tool for improving regulatory decision-making rather than as a hurdle to overcome in promulgating regulations. U.S. Council on Wage and Price Stability and U.S. Ol?cc of Management and Budget. An Evaluation ofthe In?ation Impact Statement Program 68 (Dec. 7, 1976). Furthermore, the OMB guidelines also call for agency articulation on a case-by?case basis in rulemaking. OMB Memorandum on Regulatory Analysis, supra note 17?. 2l6. K. DAVIS. mpra note 214, at 144, I48. 2l7'. Wright, supra note [98. at 464. -. r-ru -.1 't?r - .- . ., ?-vv - .. 8:473 with required of the most :ercise of dis- are clearly in needs with stem from 1 of discre- be related check.2 '6 icy decision- .dequate rec- rulemaking. if the facts >er record. rbitrary or ecord? In ny courts. 5 often do operating inket with But the :quired by Ls and the consider cw is ra- issues asso- 1gests several seretion is used the in?ationary basis: rformed on CWPS and 11 explicitly nce than is 11! tool for rereome in 1nd Budget, An urthermore. the in rulemaking. Ihholulmc?1980] OSYZBEMEFI 7' ANAL YSIS 517 criteria to measure agency self?regulation of discretion: (1) statutory authority should clearly guide agency choice of analytical methods; (2) an agency should develop appropriate methods for dealing with meth- odological limitations; (3) an agency should promulgate generic rules to limit ad hoc arbitrary assumptions; and (4) an agency should con- duct its cost-bene?t analysis in good faith, as indicated by the timing and weight it accords cost-benefit analysis in its decisions. These crite~ ria are considered below in the context of two agencies that use cost- bene?t analysis in decidedly different ways, NRC and EPA. A. Staturory Author/?02 and Guidance for Use cf Cost-Bene?t Anafw?rlr Federal agencies draw support for using cost-bene?t analysis in their decisionmaking process from a variety of sources: NEPA. Execu- tive orders, enabling statutes, and agency discretion. At present, agen- cies do not consistently identify the source of authority for using cost- bene?t analysis although important legal issues, such as the degree of public participation required, often depend upon the particular author- ity relied upon.?8 Judicial review of cost-bene?t analysis decisions also depends upon the legal authority that determined the agency?s an- alytical method. For example, an NRC cost?benefit analysis in a reac- tor licensing proceeding carried out under NEPA must meet the Act's detailed statement requirement?? including additional requirements developed by the judiciary in construing NEPA.220 0n the other hand, an NRC cost-bene?t analysis carried out under other authority, such as the Atomic Energy Act, must provide reasonable assurance that public health will be protected.221 Furthermore, if agencies stated the implica- tions of using various cost?bene?t analysis authority and identi?ed the authority actually relied upon, the agency?s legal basis for adopting a particular methodological approach would be open to congressional, judicial, and public scrutiny. 2I8. For example. an agency performing cost?bene?t analysis pursuant to NEPA is re- quired to provide for public notice and comment. and may permit public hearings. in the preparation of environmental impact statements. NEPA 42 U.S.C. See also City of Romulus v. County of Wayne, 392 F. Supp. 573, 585 (ED. Mich. 1975). On the other hand, it may be dif?cult to secure a similar degree of public participa- tion in cost?bene?t analysis conducted pursuant to Executive Order 12044. particularly since the Order has been construed not to provide a private cause of action permitting citizens and regulated interests to intervene in the "Regulatory Analysis" process. See note [51 supra. 219. NEPA 42 U.S.C. (1976). See text accompanying notes supra. 220. Calvert Cli?'s' Coordinating Comrn'n v. ABC, 449 F.2d 1109 (DC. Cir. I971). See text accompanying notes 72-75 .mpra. 221. See Citizens for Safe Power v. NRC. 524 F.2d 129 (DC. Cir. 1975), for possible distinctions between NEPA and Atomic Energy Act cost-bene?t analyses. See also York Comm. for a Safe Environment v. NRC. 527 F.2d 812 (DC. Cir. 1975). -. MwM?m-msaauuw 5l8 ECOLOGY LAIV QUARTERLY 8:473 15'. Ackno utiedgemem of Cost-Benefit Analysis Limitations Agencies frequently fail to discuss important methodological is- sues of cost-bene?t analysis in their published decisionmaking record either because the full background of their cost?bene?t analyses is not part of the record, or because key assumptions are made without public comment or congressional oversight hearings?? After Crow/tar V. Sea- borg323 NRC developed its cost-bene?t analysis approach more fully than any other regulatory body. For example. the valuation of human life set by NRC for use in its cost-bene?t analyses to establish reactor radiation emission controls requirements is $1000 per whole-body rem and $1000 per thyroid remm Originally, this monetization of human life was set forth as an interim standard with the promise of subsequent hearings. Nevertheless. NRC recently announced its decision ?not to conduct a hearing to re?ne or reduce the health cost ?gures previously adopted.?225 The use of an ?interim? valuation for a highly critical variable, without public hearing, is inconsistent with the politically re- sponsive criteria for setting agency standards required by Crowr/zer v. Seaborg?? Under current licensing regulations?? NRC requires an applicant for a reactor permit to demonstrate I) that the plant is cost-effective in light of governing economic, social, and environmental factors. and (2) that overall bene?ts outweigh aggregated costs.228 This review of alter- natives seldom involves only commensurable factors. E5pecially prob- lematic is the evaluation of alternative sites since it is unclear how NRC should value and compare unquanti?able environmental assets such as wetlands and unique ecosystems that differ from site to site. Evaluation is further complicated because changes in pOpulation density around a plant during its operational life may affect its ?cost? 222. Most agencies subject to Executive Order 12044 published proposed regulations for conducting ?Regulatory Analyses.? See note I72 supra. Review of the prop05ed regulations reveals that often the agencies did little more than restate the general requirements of the Order iLsell?. .S'ee. 2.3.. the proposed regulations of CPSC. 43 Fed. Reg. 32,392 (1978) and the Department of Energy. 43 Fed. Reg. 18,634 (1978). But see proposed regulations. 43 Fed. Reg. 29.891 (1978). 223. 312 F. Supp. [205 (D. Colo. 1970). See text accompanying notes 122-25 supra. 224. ID C-F.R. pt. 50 app. I (1979). 225. 43 Fed. Reg. 22,253 (1978). 226. 312 F. Supp. 1205 (D. Colo. [970). See text accompanying notes 122-25 supra. Other features of cost-bene?t analyses may be called into question as well. For ex- ample, Appendix I ofthe regulation. 10 C.F.R. pl. 50 app. I (1979). provides no guidance on evaluating human mutagenic effects and other impacts on the lives of future generations and their environments. 22?. 10 CPR. pt. 5] (1979). An applicant's environmental report must include a cost- bene?t analysis which quanti?es factors ?to the fullest extent practicable." Id The NRC draft environmental impact statement likewise must contain a preliminary cost? bene?t analysis. See in! 228. Interview with NRC staff in Washington, D.C. (Fall 1978). MW - ,v-vzr. i with" 8:473 Frauen: idological is- aking record ralyses is not ithout public umber v. Sea- more fully on of human blish reactor ale-body rem )n of human subsequent sion ?not to :5 previously .ghly critical olitically re- Crowt/zer v. an applicant t-effective in tors, and (2) iew of alter- :cially prob? tnclear how rental assets ite to site. population ct its ?cost? regulations for sed regulations .rernents of the (1978) and the regulations. 43 22-25 mpm. [22?25 supra. well. For ex? 10 guidance on cnerations and include a cost? ld :liminary cost- I i?dw-L??hhul- . .14. m- . . OS 7 ANAL 5 l9 in terms of radiation exposure and attendant health effects. dis? cretion in considering population growth when approving a plant site has been con?rmed by the Supreme Court, provided the agency devel- ops a ?reasonable, consistently applied administrative interpretation? on this issue?? Nevertheless, NRC lacks standards for incorporating distributional considerations into cost-bene?t based licensing determi- nations deSpite radiation?s greater impact on persons living near the plant or those particularly susceptible to radiation, such as children and pregnant women. In addition, NRC use of cost-benefit analysis is inconsistent. Plant safety features, such as the emergency core cooling system, are not sub- ject to cost-bene?t analysis in the rulemaking and plant permit review processes because NRC believes costs cannot be considered a hen safety is an issue?? There is no rational distinction. however, between safety features designed to prevent accidents and Operational features intended to minimize the leakage of radioactive e?luents. Since both ?safety" and ?operational" constraints reduce the possibility of radia- tion damage to humans and the environment, it is unclear why the lat- ter should be regularly subject to cost-bene?t based rulemaking, while the former are not. Perhaps this dichotomy reflects a reluctance to con- sider high?cost, low probability events; structural failures and resulting large-scale catastrophes could tilt the cost-bene?t analysis against the intended agency action.231 By comparison, EPA engages in cost-bene?t analysis to some ex- tent under several statutes and programs involving air, water, radiation, pesticides, and toxic chemicals, but without the methodological coher- ence or thoroughness of NRC.232 For example, EPA analysis leading 229. Northern 1nd. Pub. Serv. Co. v. Porter County Chapter of Isaak Walton League of America. lnc., 423 US. l2. 14 (I975). 230. Interview with Robert Minogue. NRC Standards Division. in Washington. DC. (Aug. 1977). 23]. Regulation of licensee activities is subject to "Value Impact Guidelines." This approach calls for sequential consideration of four questions: (I) the problem to be addressed by new regulation; (2) upper level Constraints already established or to be estab- lished by NRC or other agencies; (3) alternative methods of reaching such objectives; and (4) the value and impact of each alternative. These guidelines rccornmeud no particular analytical technique for the fourth step. but permit the use of cost-bene?t analysis or. where goals are already established, analysis. as a method of choosing among alternative regulatory constraints. .S'ee Of?ce of Standards DeveloPment. US. Nuclear Reg? ulatory Comm'n. Memorandum entitled Staff Guidance for Preparation of Value/Impact Statements" (Apr. II, 1977). Although the guidelines supply a valuable framework for structuring NRC decisions, they do not address the quanti?cation issue, the discount rate, or other particular problems of using cost-bene?t analysis in setting standards. Moreover. their precise scope and appli- cability are dillicull to determine because it is unclear how to draw the line between reactor licensee activities that relate to safety and those that do not. 232. See discussion of NRC and EPA in Brookhaven Report, .mpra note 17, at 30-134. 520 - ECOLOGY LAW QUARTERLY 8:473 to its environmental radiation standards for the uranium fuel cycle?!33 involved two critical ?ndings, one technical, the other decidedly non- technical. First, EPA compared the costs of radiation control to the number of adverse health effects avoided at each level of control. They found that beyond the point where potential adverse health ef- fects would be reduced at the rate of one life per $500,000, further life saving bene?ts would require large additional expenditures.234 Second, EPA justi?ed selecting a standard based on this breakpoint in the cost- bene?t curve because it felt the acceptable cost of saving an unspeci?ed human life should not exceed $500,000.235 Cynics might claim that EPA based its standard on NRC determi- nations of what controls the nuclear power industry could a??ord. In other words, EPA set a generous environmental standard to accommo- date the maximum releases tolerable under site-speci?c reactor emission standards and to accommodate the potential number of reac- tors planned at any single siteF-?O Improving the quality of an agency?s cost-bene?t analyses cannot directly control the impact of this prodevelopmental bias. More responsible cost-bene?t analyses. how- ever, would allow the public to see that such factors do a??ect agency decisionmaking. The question remains whether a federal administrative agency alone should make these decisions about critical methodological problems. Although analysis carried out under NEPA is open to public scrutiny, the potentially controversial valuation of human lifejustifying the ambient radiation standard did not attract public or congressional comment, perhaps because the EIS did not clearly distinguish objective measurement of risk from its subjective determination of a socially acceptable risk based on life-saving cost estimates. Yet an agency's obligation to articulate its assumptions should be greatest when its cost-bene?t analysis includes such politically sensitive ele- ments as a monetary value for human lil'e.m 233. OFFICE OF RADIATION PROGRAMS. U.S. ENVIRONMENTAL ECTION AGENCY. ENVIRONMENTAL RADIATION PROTECTION REQUIREMENTS FOR NORMAL OPERATIONS 0F ACTIVITIES IN THE URANIUM FUEI. CYCLE. FINAI. ENVIRONMENTAL IMPACT STATEMENT (Nov. l. l976) (EPA Rep. No. 234. Id at 48. 235. [at at interview with Dr. William Rowe. Director of the Of?ce of Radiation Programs, EPA. in Washington. D.C. (Fall l9?8). 236. NRC believes up to five reaCIors can be sited together, provided each operates elli- its o??site emissions to ?ve millirents per reactor, or a 25 millirems total for the cluster of reactors. Interviews with NRC staff in Washington, D.C. (Fall I973). The EPA ambient standard established in its separate regulatory proceeding is also 25 millirems. either a remarkable coincidence or a planned harmonization of results. 237. For several EPA proposals addressing these problems. see 43 Fed. Reg. 47.00l (I978). The planned initiatives include publication of regulatory analyses. promotion of citizen participation, and reimbursement for public participation. \vmu- c, u- .M?rv" vn??r? yvm-u-nuvw-u 8:473 fuel cycle233 iecidedly non- liation control :vel of control. :rse health cf- further life e593" Second, nt in the cost- unspeci?ed JRC determi- aii?ord. In to accommo- )eci?c reactor mber of reac- if an agency's pact of this nalyses, how- a?ect agency alive agency :thodological pen to public Lifejustifying :ongressional [guish iination of a ites. Yet an be greatest :ensitive ele- CTION Aoencv. OPERATIONS or STATEMENT :e of Radiation :h operates ef?- llirems total for rail l978). The so 25 millirems. Reg. 47,00! promotion of 1930] COSYZBENEFIT ANAL YSIS 521 Deveiopmem of Public Access ?Wegufalocv Ana/Janis? Under Executive Order It is uncertain whether cost-bene?t analyses and related docu- ments prepared in response to Executive orders are subject to timely public disclosure under the Freedom of Information Act The courts could conclude that OMB, COWPS, or RARG is an ?agency" and therefore subject to the Act under the Soucr'e v. David test.239 In that case, the District of Columbia Circuit held that the Pres- ident?s Of?ce of Science and Technology was an ?agency." and not merely part of the President?s sta??, because it independently evaluated the scienti?c research programs of several federal agencies and pub- lished notices in the Federal Register.240 Even if OMB, for example, is an agency within the meaning of the Administrative Procedure Act, and hence FOIA, speci?c exemp- tions may prevent public disclosure of ?Regulatory Analysis" docu- ments. One exemption prevents disclosure of ?inter-agency. or intra- agency memoranda or letters which would not be available by law to a party other than an agency in litigation with the agency.?34' This ex- emption protects internal communication re?ecting deliberative or policymaking processes, but not purely factual material. Agency cost- bene?t analyses, background documents, and related OMB, COWPS, and RARG evaluations may fall within this exemption.242 Congress and the public may ?nd other means of gaining access to Regulatory Analysis materials. Administrative Procedure Act provi- sions restricting an agency?s right to take ?official notice? of matters outside the decisionmaking record}13 and prohibiting ex parte commu- nication during formal rulemaking and adjudicatory proceedings244 may force disclosure of some documents. Furthermore, new legislation could require greater openness in presidential management of federal regulation through the Regulatory Analysis device.245 An example of this kind of congressional intervention is the Congressional Budget and 238. 5 U.S.C. 552 (1976). 239. 448 F.2d [067 (DC. Cir. 1971). 240. Id at l075. These are among the major distinguishing characteristics of OSTP considered by the court. During consideration of the executive reorganization plan creating OSTP. its status was specifically likened to that of the Budget Bureau. the predecessor of OMB. Id. at [074. 24]. 5 U.S.C. 552(b)(5) (l976). 242. The Sunshine Act. 5 U.S.C.A. 5521) (West 1977). presents similar issues concern? ing publicly held deliberative meetings. availability oftranscripts. and judicial review. See Administrative Conference of the United States. An Interpretive Guide to the Government in the Sunshine Act RARG meetings are closed to the public. 243. U.S.C. 556(c) 244. Id 557(d)(l)(C) (I976). See note 303 nipm. 245. See S. 262, 96th Cong. Sess. (1919}, which provides for agency publication of and public comment on initial regulatory analyses. as well as publication of ?nal regulatory . "1-?me '4 ?Ad HA a I 'h q?v?yw WW 522 ECOLOGY LAW 8:473 Impoundment Control Act of 1974,246 which restricted the President?s right to impound funds and thereby curtail the sc0pe of programs au- thorized by Congress. Similarly, Congress might not tolerate the modi~ ?cation of legislatively mandated regulatory programs through or imposition of additional nonstatutory criteria relat- ing to in?ationary impact and other ?costs" of regulation.247 Finally, Executive Order [2044 requires agencies to publish pro- posed regulations for implementing the Order in the Federal Register and to give the public an early and meaningful opportunity to partici- pate in the development of subsequent agency regulations.248 The Or- der, however, permits each agency ?exibility in choosing the most e??ective method for increasing public participation.Mg To transform these vague directives into meaningful public participation, OMB and RARG should review agency practice and formulate more detailed guidelines. In addition, agencies should take independent steps to open their activities to timely public review under Executive Order 12044.250 D. Tinting of arr-Bang?! Arml?ir in Agencies frequently conduct cost-bene?t analysis after making regulatory decisions on other grounds. Agencies can take administra- tive action subject to NEPA only after publishing the ?nal EIS, which may include cost-bene?t analysis, and allowing a suitable time period for public comment. Cost-bene?t analysis under enabling statutes or other authority, however, generally is not subject to similar timing pro- visions. at several agencies believe that their agencies often analyses. Regulatory analysis itself. however, is excluded from judicial review. See note 208 at to. 11:46. Pub. L. No. 93-344, 88 Stat. 332 (codi?ed at 3 U.S.C. 14004407 (1976)). 247. See text accompanying notes 177-83 J'Npra. 248. 3 C.F.R. [1.3 (1978 Compilation). The order requires publishing an advance notice of proposed rulemaking. holding open conferences or public meetings, and providing the public at least 60 days to comment on proposed signi?cant regulations. Id in giving notice of proposed mics. each agency is directed to inform the public on how to obtain any draft regulatory analyses that may have been developed. at 155. 249. Id at 153. 250. Under Executive Order 12044. agencies now publish proposed and ?nal regulations and issue regulatory reform agendas providing general assurances as to the timely availabil- ity of regulatory analyses and public participation. See. eg. 43 Fed. Reg. 47,005 (I978). Furthermore. published guidelines from OMB to the agencies and from CEA to RARG. require ?ling regulatory analyses for public availability and prior notice of public availabil- ity ofdraft regulatory analyses when the proposed rule is published in the Federal Register. These general assurances. however. are ineffective in practice. For example, ?nal standard for power lawn mowers. 44 Fed. Reg. 9990 U979). mentions the balancing that CPSC conducted between the need to reduce risks and possible adverse economic ef- fects, but refers the reader to a Battelle Institute analysis ofthe economic costs. not included in the Federal Register entry. The Battelle report is an ad hoe analysis. Such references to ad hoe economic analyses. without provision of generic guidelines and justifications for the arbitrary elements of such analyses, do not adequately inform interested parties. n-w-uwv, . tar-w? . 41?7. 8:473 he President?s programs au- 'ate the modi- 1ms through criteria relat- 1.247 publish pro? leral Register ity to partici- The Dr- ing the most transform in, OMB and tore detailed steps to open der 120445250 rkr'ng .fter making administra- EIS. which time period 3 statutes or timing pro? encies often we. See note 208 (1976)). advance notice I providing the .n giving notice btain any draft rial regulations mely availabil- 47.005 (I978). EA to RARG. ublie availabil- ieral Register. imple. CPSC's the balancing economic cf- 5. not included references to cations for the flies. 1980] ANALYSIS 523 use cost-bene?t analysis to ?document" decisions already reached?? Such post hoc uses of cost-bene?t analysis raise questions about the good faith objectivity of agencies in reaching regulatory decisions. The timing of cost-bene?t analysis often determines whether the technique is con?ned to its proper role in the decisionmaking process. In dealing with a regulatory problem involving technical uncertainty, risks, and control options based on scanty information. agencies nor- mally undertake three tasks: (1) measurement ofthe risk: (2) identi?ca- tion of control options; and (3) determination of the level of risk acceptable to alfected interests. The ?rst and second tasks are pri- marily objective determinations that should not be ?contaminated" by the technical expert's assumptions about the proper level of costs to impose on a regulated industry or the proper distribution of costs across different sectors of society. The third task, on the other hand. involves consideration of legal. economic, and social factors tradeofl?s. Subjective valuation of costs and bene?ts through cost-bene?t analysis may be apprOpriate here because the third task is carried out in the ?sunshine,? as required by administrative law. Agencies frequently fail to keep these functions distinct. polluting technical objectivity with unarticulated cost and other nontechnical factors. New regulatory pro? cedures could prevent confusion of these functions by prohibiting the use of cost-bene?t analyses until after technical measurement of risks and identi?cation of control options have taken place??- VI CONCLUSION Three broad conclusions can be drawn from this study. First, cost- bene?t analysis is an inappropriate tool for regulatory decisionmaking on health, safety, and environmental problems. It should be replaced by the judicious use of cost-effectiveness analysis. Second, if cost-bene- ?t analysis is to be used, and indeed increasingly used because of Exec- utive pressures, several constitutional and public policy issues should be aired in order to ensure that the public and Congress approve ofthe transformation of regulatory decisionmaking from judgmental and qualitative balancing to economic and ntonetized balancing. Third, if neither the ?rst nor second conclusion and the concerns they reflect are 25!. Conclusion based on interviews with NRC. EPA. ERDA. and FEA staffs in Wash- ington, D.C. (Fall 1978). in preparation of the Brookhaven Report. note 17 supra. 252. Timing alone does not determine the weight of cost-bene?t analysis in the decision- making process. When several different regulatory alternatives have favorable benefit-to- cost ratios. the agency must decide whether to follow the most favorable course of action. For example. NRC may select any site with a favorable cost-bene?t ratio as long as no "obviously superior site" exists. In re Public Serv. Co, NRC 503. 52?-30 As a practical matter, NRC's use of cost?bene?t analysis enables it to affirm the licensee's pro? posed site in virtually every case. A.- A ?,me mevwr . - uml?uw?. J-.. 1.. v: .. LL uu?e- a? 524 ECOLOGY LAW QUARTERL 3:473 likely to be acted upon, society will have to ?make do? with a set of incremental reforms in congressional, executive, and agency proce- dures. .4. Cost-Bene?t Anmfm?s v. Corr-Ejectivenesr And} 31's Cost-benefit analysis is an unacceptable basis for governmental decisionmaking on persistent health, safety, and environmental problems. It is a simplistic tool that reduces concern for the individual to a monetized balancing. Worse, it has become a self-serving numbers game obscuring arbitrary and subjective values and assumptions, while impeding real progress toward our espoused health, safety, and envi- ronmental objectives. Solutions to societal problems, such as nuclear reactor safety and human exposure to chemical carcinogens, require consideration of hu- manistic and environmental principles. Consideration of these princi- ples is incompatible with a regulatory decisionmaking process in which economic factors play a dominant role. At present, the Clean Air and Clean Water Acts promote health and welfare considerations over industrial costs in setting standards and requiring regulatory decisions to be based on the ?best available technology.? By acknowledging that these principles are primary in most health, safety, and environmental areas, regulatory agencies could (I) establish health and safety goals on the basis of objective estimates and acceptable levels of risk arrived at in Open proceedings; (2) identify the best available methods for achieving these goals; and (3) choose among alternative methods of achieving these objectives through cost- e?ectiveness analysis, the traditional analytical method of ?nding the least costly path to a goal. This approach con?nes economic concerns to their proper role as one of several criteria for choosing a method for solving a societal problem. Cost-effectiveness analysis helps to determine the means, in contrast to cost-bene?t analysis. which uses a quantitative approach to determine both the ends and means. Most significantly. the executive branch and agencies can adOpt the cost-effectiveness alternative under most existing statutory schemes. 8. omnrunbna/ and Eritrea! Issues The use of cost-bene?t analysis in the regulatory decisionmaking process also presents issues that transcend administrative law and pro- cedure. For example. maintenance of the proper separation of powers in light of the ambitious regulatory reforms pr0posed by the Of?ce of the President raises a signi?cant constitutional issue. If the balancing function, now delegated to the agencies, is conducted by the Of?ce of 'V-r-vnz?v .- w? rw-v . wr? 'w (Vol. 8:473 with a set of agency proce? 700513 govemmental :nvironmental the individual 'ving numbers nptions, while :ty, and envi- .or safety and :ration of hu- ?these princi- ucess in which emote health ng standards test available primary in gencies could ive estimates (2) identify :1 (3) choose hrough cost- ?nding the '0per role as a societal ie means, in approach to he executive iative under .sionmaking 1w and pro- of powers he Of?ce of balancing he Of?ce of I .. .4 i 1980] ANAL YSIS 525 the President. off the record and insulated fromjudicial review. power shifts from Congress to the Executive. This and other constitutional isues, which are beyond the scope of this Article. require vigorous dis- cussron. The use of cost-bene?t analysis also raises important questions of professional ethics and responsibility for the economists and other ana- involved. It is irresponsible for such to make arbitrary assumptions on issues which lie beyond their or anyone else?s expertise. Decisions on the valuation of human life or environmental quality. the discount rate, and distribution of costs and bene?ts across society, are not prOperly dealt with by unaccountable but should be made by those vested with the responsibility to make these subjective choices. Congress and other publicly accountable of?cials must make these crit- ical choices if cost-benefit analysis is to be employed responsibly. The use of cost-bene?t analysis also raises larger ethical questions. Our constitutional framework for governmental decisionmaking in- volves balancing many factors. It does not mandate the use of an eco- nomic framework, and indeed establishes a framework for decisionmaking which ensures that no single factor such as economics will dominate. The varied and often con?icting needs and desires of many segments of our society must be weighed against fundamental individual rights in order to establish ultimate societal values and reach an optimal governmental choice. This process is subverted when cost- bene?t analysis is the basis of decisionmaking. An economic frame- work for making societal choices stresses only factors that are monetiz- able over a short period of time. Therefore, the use of cost-bene?t analysis to determine our policies on such issues as radioactive waste disposal or access for the handicapped to public transportation systems inevitably leads to different results than those obtained by an analysis emphasizing long-term needs or individual welfare. Public recognition of the ethical implications of governmental adoption of an economic framework for decisionmaking has been woe- fully insuf?eient. Responsibility for articulating public values lies with Congress. In light ofthe critical long-term consequences of cost-bene?t analysis decisionmaking. meaningful and decisive congressional action is a necessity. C. Ra?/Ming Present Ana/Jim? Pracn'cer to Promote Accountab?iry Rejection of cost-bene?t analysis as a primary basis for regulatory decisionmaking and recognition of its functional, constitutional, and ethical limitations must occur eventually. Our political institutions. however, may not be ready to take these steps. Until meaningful change in the structural framework for deeisionmaking occurs, some . My? a enm? .- -. -7 - - u. 5? ?Am A 4? CAL.- *?h?l'iv?nmmb?- mm?L?u-?n-Mm?ECOLOGY LAIV QUARTERLY 8:473 pragmatic, if limited steps can now be taken to promote greater ae- countability and reduce critical problems presented by agency uses of cost?bene?t analysis. When properly applied. cost-bene?t analysis can be a useful tool in the regulatory decisionmaking process. When used objectively, in good faith, and with requisite analytical rigor, cost-bene?t analysis pro- vides a framework for the rational organization of multiple considera- tions. Determinations made from properly organized opinions and information can represent a logical process, which in turn promotes agency credibility and acceptance of agency decisions. Furthermore, cost-bene?t analysis promotes the use of a consistent and predictable analytical structure for organizing data and Opinions on the numerous issues involved in a proposed regulatory action. Clear articulation of each element of the decisionmaking process enhances fairness and in- creases agency accountability. Cost-bene?t analysis also offers deci- sionmakers a simple method for reaching decisions in the multiobjective, pluralistic value context in which most agencies oper- ate. Despite its potential values. however, actual cost-bene?t analysis practices demonstrate signi?cant methodological, substantive, and in- stitutional limitations. Methodological problems, including valuation of attributes, choice of discount rates, and distribution of e??ects. have always beset cost-bene?t analysis. The substantive issues stern, in part. from the methodological limitations. Monetization of environmental and health amenities constitutes an inappropriate treatment of factors that transcend economics. Moreover, cost-bene?t analysis often is in- sensitive to Speci?c distributional implications of alternative decisions, thereby con?icting with constitutional concepts of equal protection. Critical elements of cost-bene?t decisionmaking. such as the selection of data on measurements of risks and bene?ts. the development and application of discount rates, and the choice of analytical methods to read the data, are subjectively based determinations. The source ofthe data is often the clearly self-interested company or technocrat. These subjective determinations must be publicly tested and openly veri? before their adoption in cost-bene?t analysis. Agency use of cost-bene?t analysis also raises a number of major institutional issues. Agencies such as NRC and EPA have failed to coordinate analytical approaches to shared problems. such as radiation, and to adopt common values for health effects and environmental at- tributes. Nor have EIS and regulatory analyses been coordinated. CEQ has been silent on how agencies should conduct NEPA balancing analyses while COWPS and OMB have played increasingly signi?cant but unde?ned roles in regulatory decisionmaking. Practical dif?culties make meaningful public participation and timely access to information and deliberative meetings a problem. Furthermore, the timing of a 1 0?"va . In? . ?.7r'w nx-V. rv ., . mn- 8:473 greater ac- ncy uses of useful tool ectively, in ialysis pro- considera- inions and 1 promotes trthermore, predictable :numcrous culation of ess and in- )ffers deci- 15 in the ncies oper- ?t analysis ve, and in? valuation Elects, have in part, ironmental of factors often is in- decisions, protection. .e selection pment and nethods to urce of the rat. These tly verified :r of major failed to mediation, tmental at- )ordinatcd. .balancing signi?cant dif?culties aformation iming of a 1 1980] COS 7' ANAL 527 cost-bene?t analysis often determines its actual in?uence on decision~ making: if done late in the game, it may do no more than provide a post hoc rationale for a decision reached on other grounds. Appropriate use of cost?benefit analysis in decisionmaking lies at the heart of new regulatory programs for protecting health, safety, and environmental quality. This is because each agency usually must rec- oncile multiple, frequently conflicung, statutory objectives and must follow Speci?c statutory and Presidential requirements to conduct eco- nomic analyses. The increasing use of cost-benefit analysis re?ects the administrative response to this growing need for a balancing or tradeo?? process as the analytical foundation for agency decisions. Given the conflicting demands of the escalating public outcry to render administrative agencies more accountable, statutorily or pres- identially mandated balancing analyses, and the inherent problems presented by cost-bene?t analysis, Congress, the Executive, and the agencies each must take steps to promote more responsible use of cost- bene?t analysis in regulatory decisionmaking. The intent of the re? forms discussed below is neither to foster nor exclude the use of cost- benefit analysis and other balancing analyses, nor to provide guidance as to when cost-bene?t analysis should be used. Their purpose is to ensure that cost-bene?t analysis be reSponsibly employed whenever it is used, and that (2) the proposed reforms are implemented whenever regulatory agency balancing analyses are mandated. 1. Sfrategles for Congressional Reforms Congress should conduct a comprehensive review of agency im- plementation of major health, safety, and environmental legislation to determine the extent to which agency uses of cost-bene?t analysis or other balancing techniques are consistent with statutory objectives and sound administrative practice. The review should also identify con- ?icts bewteen Executive Order 12044 as implemented and statutory re- quirements that prevent the agencies from acting consistently with congressional objectives. Congress should also conduct a special review of agency imple- mentation of requirements for ?balancing analysis? and other methodological requirements of section 102(2). Congress should then provide clearer guidance to the agencies by amending NEPA to achieve the following: mClari?cation of applicability to agency rulemaking; Coordination of NEPA implementation procedures with the proce- dural requirements of Executive Order 12044; Clari?cation of the extent to which NEPA's impact assessment man? date requires quanti?cation of the elements of a subsequent balanc- ing analysis, the methodology for such quanti?cation, and the .o I gum-?arm n. . ?4 . r- . n-Vl?q . Jr's,? 528 . ECOLOGY LAW QUARTERL [Vot 8:473 discount rate to be used for estimating the future impacts of agency action subject to and Clari?cation as to whether agencies are required by NEPA to choose the best alternative resulting from the balancing analysis. Congress, in future health, safety, and environmental legislation. should articulate more precisely the factors that federal agencies should consider in reaching decisions and furnish the ?intelligible principles? necessary for agencies to meet the multiple objectives required by such legislation. Congress should state expressly when an agency should and should not use a cost-bene?t approach and provide guidance meaningfully integrated with Executive Order 12044 requirements. If Congress decides to promote a cost~bene?t or other balancing analysis approach to regulatory decisionmaking, it should oversee the critical methodological issues such as valuation of intangi- ble costs and bene?ts, use of discount rates. and distribution of effects. Whether Congress provides guidelines on each of these issues or delegates that authority with guidance to an appropriate interagency body for resolution, the essentially nontechnical, subjective nature of these methodological issues must be recognized. 2 Strategies/or Ra?/rm: {/18 O?ce of Me President The Of?ce of the President should issue an Executive order amending Executive Order 12044 to provide further guidance to RARG, COWPS, OMB, and CEA in order to ensure that they imple- ment Executive Order 12044 consistently with legislative requirements on health, safety, and environmental quality. The amended Order should enlarge the membership of RARG to include agency and non- governmental personnel representing the legally protected health. safety, and environmental interests at stake in the Regulatory Analysis process. The ne .v Order should require RARG and the other Presiden- tial of?ces to function in open proceedings, provide full public access to the information they use. and, in conjunction with the agencies under review, follow all requirements of the Administrative Procedure Act. Furthermore, the Order should provide that all RARG proceedings and materials germane to any agency?s ?nal regulatory action be incor- porated in the agency record of decision, available for public, congres- sional and judicial review. Finally, the Order should direct RARG to make public findings on several key considerations in its review of any proposed agency action under Executive Order l2044: ??Authority for agency use of cost-bene?t analysis or other balancing analyses; I??Particular methods of analysis selected by RARG or the agency. and attributes of such methods that conflict with governing legislation; 8:473 . of agency I to choose .I legislation, encies should 5 principles? ired by such ency should tidance as to )rder 12044 e?t or other g, it should 1 of intangi- in of e??ects. :se issues or interagency 'e nature of Jtive order uidance to they imple- quirements .ded Order and non? .ed health. Ty Analysis Presiden- ic access to tcies under edure Act. roceedings be incor- e, congres- ind'mgs on my action dancing icy. and lation; 1980] COSFBENEFIT ANAL 529 and agency methods for considering unquanti?able elements of the analyses. discounting future costs and bene?ts, evaluating dis- tributional considerations. and other methodological problems: -?Timing of cost-bene?t or other analysis vis-a-vis actual agency deci- sionmaking; ?Weight accorded to cost-benefit or other analysis in actual agency decisionmaking: ?Due process and Administrative Procedure Act safeguards developed by agencies in cost-bene?t or other balancing analysis proceedings, including articulation of procedures through regulations. public no- tices. opportunities for affected interests to contest agency and RARG analyses before agency action, and restricrions on ex parte communications; and ?Public participation in agency cost-bene?t analysis or other analyses and opportunity for review. 3. Slrategies?r Reforms in A 1/ Raga/0100' Agencies Each regulatory agency using cost-bene?t or other balancing anal? yses in making decisions should promulgate a generic regulation describing its use of these analytical tools in order to promote clear and consistent regulatory policy furthering the legislative and executive re- quirements under which the agency operates. The regulation should address the sources of agency authority to conduct balancing analyses. the particular analytical method selected by the agency and any con- flicts with the applicable governing legislation. methodological limita- tions of the selected analytical approach and how they are addressed. the timing and weight afforded the analyses. due process safeguards. and public participation and opportunity for review.253 253. The author included these suggestions in a report to the Administrative Conference of the United States note I35 supra. which formed the basis of this Article. The ACUS adopted a recommendation based in part on this report for improvement of agency cost-bene?t practices at its semi-annual plenary session in June [979. See 44 Fed. Reg. 38311260979) (to be codi?ed in C.F.R. pt. 305): ?305.79-4 Public disclosure concerning the use ofcost-beneftt and similar analyses in regulation (recommendation No. 79-4). (3) Federal agencies must frequently weigh competing health. safety. re- source management. environmental. economic. and other societal interests when seeking to achieve a prescribed statutory objective. Wise decisionmaking presup- oses that the otential bene?ts and costs of the actions under consideration will be identi?ed. wil be quantified if feasible. and will be appraised in relation to each other. To give structure to the exercise of this responsibility. agencies sometimes use ?cost-bene?t" or similar analytic approaches to organize available information to determine the consequences of possible courses of action in terms of their costs, risks and bene?ts. Such techniques seek to display the projected net etlects of al- ternative courses of action and. when properly used. can assist the decisionntaker in deciding which of the alternatives is most likely to produce a desired result. The following recommendation seeks to promote openness in the deci- sion-making process. to ensure that agencies' analytic methods are sound and that their assumptions are known. so as to enhance public con?dence in the soundness ofconclusions finally reached. The recommendation is not intended to promote or to discourage the use of any single kind of analysis as a framework for agency 1w. .w?w ?r?v "v . A 'mu. 530 COL 06' LAIV QUART 5R1. 8:473 In addition, for decisionmaking conducted pursuant to the promulgated regulation, each agency should: ?At the time of public notice of proposed rulemaking or the initiation of licensing or other regulatory proceedings, make publicly available its preliminary ?ndings on such key considerations relating to the intended regulatory action and describe fully any actual balancing conducted; and ?-At the time of ?nal regulatory action, and thereafter. include in the decision record any revised ?ndings on these key considerations. The public must be fully informed about the information and assump- decision?making, since this choice is normally a matter of agency discretion. The choice ofanalylic technique may depend on several factors. including the technical complexity of the problem. the magnitude of the impacts. the time frame for agency action. and the extent to which quanti?cation is possible for the speci?c costs and bene?ts to be considered. Any analysis. of course. should be viewed as an aid to rational decision-makingitself. The intent of the recommendation will be served by giving the public adequate advance notice of the agency?s proposed methodologies. either generically or by means of special no- tice in a particular proceeding. - Recommendation 1. Agencies. as general policy though not necessarily by binding rule should adopt the practice of addressing. in their public notices of particular proceedings in which cost-bene?t or similar analyses are to be used. the following points: a. Any statutory or other legal requirements penaining to or affecting the agency's conduct of cost-bene?t or similar analyses in the proceeding. b. The particular analytic technique to be followed by the agency cost- bene?t analysis. cost?effectiveness analysis. qualitative or non-numerative balanc- ing). with a description of the method. including an identi?cation of any analytic models preliminarily det -:mined to be used. c. Any factual assumptions or preliminary ?ndings of the agency to be uti- lized in the analyses. d. The agency?s techniques for assessing and revealing uncertainties in its quantitative estimates. and making explicit the range of error associated with par- ticular quantitative estimates. e. The agency?s methods for evaluating intangible costs and benefits. for dis- counting future costs and bene?ts. and for taking account of distributional e?'ects arising under the selected methodology. to the extent such issues are involved in the analyses. f. The stages of the proceeding at which the cost-bene?t or similar analyses will be conducted and the results considered. g. The extent and nature of public participation in the design. conduct. and evaluation of the cost-bene?t or similar analyses. h. The extent and manner in which the public is to be accorded access to assumptions and information used in the analyses. A statement of the weight given the cost-bene?t or similar analyses. and a descrip- tion of any revisions of assumptions or preliminary ?ndings. should be included in the ?nal agency determination and made available to the public. 2. Where a pattern of recurring decisional problems exists for which a partic? ular analytic technique is appropriate. the agency should consider adopting a ge- neric regulation or policy statement descri ing the use of that technique with respect to those problems. Agencies that have varied statutory functions may suit- ably formulate separate regulations or policy statements for ditTerent areas of statu- tory re5ponsibility. Generic regulations or policy statements so adopted may permit the use of different techniques on an ad hoc basis where the agency deter- mines that to be necessary. Any such regulations or policy statements should ad- dress points listed in paragraph I. at 38.826. r" wv-sr . T?z?w? . .117- Wis?IvWin-wr- 7? 8:473 suant to the it: initiation ly available tting to the balancing :iude in the nations. and assump- netion. The die technical frame for the speci?c te viewed as ntent of the ce notice of fspecial no- rule should )ceedings in tints: ?'ecting the r_ .. cost- tve alanc- ny analytic .1 to be uti- nties in its 1 with par- its. for dis- mal effects nvolved in analyses nduct. and 1 access to a descrip- 1cluded in a panic- Iting a ge- tque may suit- .s of statu- pted may ncy deter- hould ad- 1.. an: A -. . 1930] - COSTBENEFIT ANAL YSIS 531 tions that form the basis of agency action, their sources, and reasons for departing from the provisions of the generic regulation. D. A Final Perspective The cost-bene?t techniques used today are the analytical descend- ants of Jeremy Bentham?s proposals for reforming legal dccisionmak- ing through the use of?felici?c calculus."254 Much of the philosophical and humanistic criticism of the Bentham approach remains valid today and is reinforced by constitutional principles that re?ect a more holistic approach to governance in a pluralistic society and limit the uses of economic analysis in decisionmaking. In essence, the Constitution does not require that governmental decisionmaking be premised on simplis- tic economic analyses. Nevertheless, a strong can be made that providing the greatest good for the greatest number remains one of the essential pur- poses of government, and that cost?bene?t analysis represents a poten- tially workable method to reach this objective. The Executive and its agencies have the responsibility to manage the federal enterprise ra- tionally in order to achieve optimal use of our limited resources and optimal protection of our diverse interests. If cost-benefit analysis con- tinues as a basis for regulatory agency decisionmaking, it must be ac- companied by meaningful public participation, diligent congressional. executive, and judicial supervision, and agency ?best efforts? to struc- ture their discretion to meet the issues presented by this economic ap- proach to the problems of health, safety, and environmental protection. 254. See genmwi- POLITICAL THOUGHT (B. Parekh ed. 1973). See in panic- ular ch. 5. ?Of the Principle of Utility." ?A-ml'wq .. A REPORT ON ENVIRONMENTAL ISSUES Clean-Up and Fix-Up Costs Rise Relentlessly IN THIS ISSUE: A salient ques- tion for society is whether the steadily mounting costs of dealing belatedly with environmental and other critical systemic problems are a serious drag on the nation?s physical and economic health. March 1983 When the XYZ Chemical Co. surreptitiously unloads 500 drums of hazardous waste into an uncontrolled lagoon in Upper Boswash, various social and economic effects ripple outward. C05ts and benefits are redistributed dramatically. The company, by avoiding legitimate but expensive disposal methods, saves money for its current stockholders or customers. It externalizes greatly magnified costs to others?health costs to peOple in the community who might suffer illness or injury, and clean-up costs and liability damages to some combination of present or future residents, federal taxpayers, and company stockholders or customers. Residual benefits will flow to companies and workers paid to clean up the mess and lawyers who pocket money from court awards and settlements. Similar externalities and redistributive effects occur when asbestos products cause disease and must be cleaned up; when nuclear wastes must be disposed of and nuclear plants decommissioned; when humans must be isolated from dangerous chemicals like and dioxin; and when lands are strip-mined and later reclaimed. In all such cases, there is an anxious scramble to duck as much of the heavy financial liability as possible and shift it to others. Thus we have legislative and legal battles among companies and their insurers, their workers, their customers, and taxpayers in general. Johns-Manville, saddled with thousands of lawsuits over asbestos damage, files for bankruptcy and legislation is introduced that would limit the liability of asbestos manufacturers. Utilities seek regulatory decisions that would require their customers, rather than their investors, to cover the cost of dismantling a nuclear plant. The company owning Three Mile Island ob- tains congressional approval for federal funds to cover part of the accident damage costs. The hazardous waste Super- fund and the new Nuclear Waste Fund are established to impose fees on chemical companies and nuclear power utilities so that disposal costs are spread among all their stockholders or customers. Since the Workers? Compensation system and its ad- ministration have proved totally inadequate for dealing with disease-related occupational disabilities, large disability costs are transferred from that employer?funded program to pro? grams funded by' the taxpayers, like Social Security, Medicare, Medicaid, and veterans? compensation. ?Social Security is now doing something it was never intended to do,? says Congressman George Miller (D., Calif.). ?It has (9 The Conservation Foundaliun I933 primary source of com- ation for occupational disease victims. . . The cost is billions of dollars a year. Joseph T. Hughes, of the Institute for Southern Studies. testified that the Social Security sys- tem is ?operating as a subsidy to sup- port industries which prematurely disabled their employees. . . . Bear- ing the ?nancial burden of the human disability caused by occupational dis- cases has been successfully shifted onto the federal government, onto the nation?s taxpayers and, ulti- mately, onto disabled workers them- selves, who never recover their wage- earning capacity or their dignity of employment . In the midst of the understandable preoccupation with constant tugs-of? war over responsibility for specific remedial costs, two important con- siderations tend to be ignored. The first is simply the need to avoid cost- ly after-effects through better pre- ventive measures. (See box on page 3-) The second is: What is the aggr?e- gate economic burden of our un? wanted legacies? For many problems, finding solutions is not really a mat- ter of choice. That is certainly true for nuclear and hazardous waste disposal and medical care for occupa? tional disease victims. William K. Reilly. President Rice Odell. Editor Published by The Conservation Foundation. 17!? Massachusetts Atenue. 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Are we piling up such a backlog of unavoidable costs as to be slowly sap- ping the nation?s economic vitality? Or will the nation be able, without undue dif?culty, to afford present and possible future costs of remedial actions as well as maintain a strong economy? While no clear answers to such questions are at present possi- ble, a start can be made by trying to grasp the magnitude of remedial costs. It is possible, with a certain degree of arbitrariness and overlapping, to identify three broad categories of ex- penditures that are critical to the functioning of society but that don?t fall within traditional definitions of ?uncontrollable? spending. From a practical standpoint, that is, any society that wishes to survive with a self-respecting degree of public health and welfare (including some environ- mental quality) would judge most of these costs to be essential: 1. Protection of health and the en- vironment. This category, broadly defined, can include control and dis- posal of all pollutants and wastes that invade the workplace and the general environment?air and water pollut- ants, toxic chemicals, solid wastes, nuclear wastes, hazardous wastes? as well as associated medical costs. 2. Maintenance of resource sup- plies. This category can include main- tenance and safety of water supply dams and reservoirs; conservation of land resources (including soil erosion control); timber management; and the provision or safeguarding of energy supplies. 3. Maintenance of infrastructure. This includes the basic apparatus of society about which so much has been written in alarm recently be? cause of its state of disrepair. In- frastructure includes transportation systems (highways, bridges, rail- roads, mass transit, aviation, water- ways); sewage treatment plants; and water distribution systems. The importance of all these activ- ities is easily appreciated. Medical and social costs caused by chemical pollution are enormous, some of them incalculable. It also is widely held that an unhealthy workforce costs the economy clearly in lost work-days, lowered productivity, and employee benefits. One measure of general health costs is the Medicare program. Out- lays in ?scal 1978 were $25.2 billion. but by 1983 had climbed to an esti- mated $53.0 billion. The Reagan Ad? ministration?s budget projections for 1988 put the ?gure at $93.1 billion.2 ?Private life?including private enterprise?depends on a publicly provided physical infrastructure,? writes columnist George F. Will. ?-It is not optional.?1 Seymour Melman, professor of industrial engineering at Columbia University, says that ?vital services such as clean water, reliable transportation, efficient ports, and competent waste disposal are indis? pensable underpinnings for an indus- trial system.?? And Pat Choate, a policy analyst with TRW and expert on infrastructure problems, says: ?The deteriorated condition of essen- tial public facilities that undergird the economy threatens the Administra- tion?s program for national economic renewal.? He has noted among other things that half the nation?s com- munities cannot permit new plants or major expansions because their wastewater treatment facilities are operating'at or near capacity.? There is no feasible way to measure the full social and economic costs of inadequate controls on hazardous waste, deferred maintenance on rail- roads, and so forth. Many costs? such as those associated with a cancer death caused by asbestos?are un- quantifiable. Costs, as well as some secondary benefits, are disrributed in complex ways among various groups of citizens. But some sense of the eco- nomic problem can be gleaned from estimated remedial costs and from federal Spending patterns. Here is a sampling of remedial programs and costs: . Hazardous waste disposal. One can make only an educated guess of how much it will cost to lance all the hazardous waste boils that keep sur- facing on the landscape. The Envi- ronmental Protection Agency (EPA) currently lists more than 15,000 un- controlled sites. The cost to clean up - of the worst is estimated at $22.7 million, but the average cost has been calculated at between $3 and $5 mil- lion. The figures may turn out to be far too low; a new study by the Of- fice of Technology Assessment (0TA)suggests that the usual method of disposal in land?lls is far from safe in the long run.? This view is con- curred in by other experts.7 In any case, to reach for a rough idea of the burden ofthis inheritance, one could assume that 13,000 of the sites are cleaned up and that the average cost is $4 million per site. The total comes to $52 billion. The OTA study says that to clean up a ?sub- stantial fraction? of the 15,000 sites is likely to cost $10 to $40 billion. Yet there are tens of thousands of contaminated sites?~?dumps, pits, and lagoons?that may be dangerous, particularly to ground water supplies. Some people have estimated that overall costs could reach a staggering $260 billion.I The OTA study says that in 1980 and 1981, total spending for commer- cial hazardous waste management, both on-site and of f-site, was prob- ably more than $4 to $5 billion an- nually. Projections for 1990 go up to $12.5 billion (in 1981 dollars). These costs represent about 1 to 2% of total annual sales for the chemical and allied products industry (assuming that this industry generates about half of all hazardous wastes).? Hazardous wastes generated by the military are another matter alto- gether. Two years ago it was esti- mated that diSposing of the Defense MOST FUNDAMENTAL The nation?s failure to em- phasize the ounce of prevention is responsible for the pound of social and economic flesh being exacted from society to correct its many environmental and other prob- lems. Prevention can include more effective regulation and pollution control in the workplace and else- where; substitution of less deleteri- ous products; altered manufac- turing processes; and increased capture and use of wastes. Early, effective regulation could have substantially alleviatedthe hazardous waste problem. Or, as Joanna L'nderwood, executive director of INFORM, says: "In the long run. the most reliable way to prevent hazardous waste prob- lems is to produce less. . . . to modify production so as to reduce waste generation at the ?front end' of industrial processes."? Better regulation?or disin- centives?might have enabled the nation to avoid the worst of the asbestos disaster. There is-concern that efforts to deal with asbestos and other problems after the dam- age is done are creating the wrong incentives, discouraging rather than encouraging prevention. Speaking of the shift in asbestos- related compensation cases from a reliance on the Workers? Compen- sation system to Social Security, a study of the Environmental Sci- ences Laboratory at Mount Sinai School of Medicine observes that ?economic incentives for the use of substitute materials or reduc- tion of worker exposure are di- luted to the degree that the costs of asbestos-associated disability and death are allocated to society as a whole.?? This shift is ?an especially counterproductive development," says Victor W. Sidel, of the Montefiore HOSpital and Medical Center, "because Workers? Com- pensation had as one of its goals the placing of the burden of the cost of occupational diseases on the industries that cause them and thereby encouraging prevention of occupational disease. The dis- placement of costs away from the private sector removes the incen- tive for industries to reduce their hazards and places an intolerable burden of costs on individual and group health insurance premiums and on taxation rather than on the responsible industries.?l Frederick M. Baron, a trustee of the Asbestos Litigation Group. makes the same point: ?Wouldn?t it be more if the as- bestos experience served as an in- centive to American industry to prevent similar job-related disease epidemics? If the Congress acts to bail Manville out, or if the bank- ruptcy court creates a gigantic loophole for Manville to walk through, then we have failed to learn the most fundamental lesson that asbestos could teach The current legislative approach to hazardous wastes (the Super- fund), nuclear wastes (the Nuclear Waste Fund), and asbestos (a pro- posed bill to provide compensa- tion to victims) is to collect industry-wide levies on the offend- ing materials. But this approach also has serious drawbacks as far as incentives are concerned. Costs are spread thinly and can be easi- ly incorporated in the price of products; each firm in an industry is affected so there is no particular incentive for one firm to remedy the problem; impacts are diluted as they are under an insurance policy; and such legislation some- times precludes claimants from seeking compensation in liability suits. Critics have said that an asbes- tos compensation bill would ?in- stitutionalize cancer" because, as James F. Fite, of the White Lung Association, puts it, the bill ?merely attempts to design a sys- tem to catch some of the victims of the industrial process while stat- ing nothing about the process it- self. Should this bill pass we could expect an increase in asbestos use, an acceptance of thousands of pre- ventable deaths each year, a re- striction of the number of workers who could obtain benefits, and a continued coverup of the gravity of this problem."? Among the arguments in favor of such legisla- tion is that, under current com- pensation and legal procedures, victims face long delays, uncertain results, and heavy legal fees. Department?s huge stockpile of chemical weapons?some of which were already leaking?would cost $3.7 billion. But a safe method for such disposal had not even been de- termined.9 Experts have estimated that complete decontamination of the Rocky Mountain Arsenal of chemical and other weapons would alone cost $6 billion.?0 Abandoned strip-mined lands. In addition to being and useless, such lands may also be haz- ardous or potentially hazardous and require costly remedial measures. Dangers may be caused by subsi- dence, continued burning, acid mine drainage, and other residual prob- lems. The lnterior Department has what one staffer calls a ?guess? of the total cost of cleaning up areas that are Priority 1 (extremely hazard- ous to health or safety) and Priority ll (dangerous but not of an emergen- cy nature)?S3 billion. These include at least 1,300 problem areas, within which there could be numerous sites. And the process of taking inventory is not yet complete. Nuclear waste disposal. This problem includes high-level and low- level radioactive wastes, both civilian and military. ranging from uranium mill tailings to spent fuel rods to ob- solete nuclear submarines (which the Navy wants to sink in the ocean). It includes entire nuclear power plants that need to be decommissioned. And it includes associated costs for trans- porting and safeguarding nuclear wastes. (The economic burdens imposed by unfinished and unneeded nuclear power plants?such as the Washing- ton Public Power Supply System plants that have brought mushrooming electricity rates to the Northwest and threaten the system with default on its bonds?also could be included in the total. nuclear units 4 and 5 were cancelled last year, after $2.25 billion had been spent on them, and the system is left with a bill of $8 billion in principal and interest." A total of 18 new nuclear plants were cancelled in 1982. Acrimonious battles are being fought around the country over whether util- ities or their customers should pay for the sunk costs of unfinished nuclear plants, for decommissioning, and for similar large and unplanned expendi- tures. Says the Environmental Action Foundation: ?As the current genera- tion of nuclear plants deteriorates, and repair and replacement power costs mount into the billion dollar range, consumers are staging in- creased resistance to footing the A rail-mounted vehicle, at the Nevada Test Site, puts canisters of nuclear spent fuel in storage holes to test the effects of intense radiation on the behavior of the granite. 4 Atomic Indus-mat f-?rmtm. In: Estimates for dealing with the pres- ent commercial nuclear waste prob? lem start at around $20 billion. The costs of transporting nuclear wastes to interim or final repositories will alone run into unknown billions of dollars, so the figure may be quite conservative." It also has been estimated that it will cost from $50 to $100 million to decommission a 1,200-megawatt nu- clear power reactor.? Taking the midpoint and applying it to the 83 commercial reactors with operating licenses results in a total of more than $6 billion. (Estimates for cleaning up the ill-fated Three Mile Island unit alone are larger than $1 billion.) In only a few cases have the utilities made provisions to pay for decom- missioning. In addition, more than 400 obso- lete federal nuclear facilities are under the aegis of the Energy Depart- ment, with projected decommission? ing costs of several billion dollars. Disposal of military nuclear waste is another costly problem. In 1978, the House Government Operations Committee cited estimates running from $2 to $20 billion. The commit- tee pointed out that the appraisals had increased by 1,0009% in six years, only 200% of which was due to in? flation. With such a range of es- timates, the committee said it believed that ?the cost of disposal and perpetual care of commercial radioactive waste is subject to similar speculation.?" The Congressional Budget Office said that ?the history of the radioac- tive waste program suggests that the cost uncertainty normally associated with large and untried technological ventures is compounded by difficult social and political In terms of current federal appro- priations for nuclear waste manage- ment, the Energy Department request for fiscal 1984 for civilian wastes is $423 million?a leap from the current year?s $324 million and almost four times the amount in fiscal 1977. (With the Nuclear Waste Fund, most costs of disposal are to be shifted from federal appropriations to fees levied on the nuclear power industry?) The Energy Department?s military clear waste management activities are budgeted $612 million for fiscal 1984?up more than 63% in only two years. In addition, appropriations for the Nuclear Regulatory Commission, which regulates waste disposal and decommissioning as well as other nuclear activities, are running $466 million per year. A decade ago they were $82 million. 0 Occupational disease. No one knows the true dimensions of the na~ tion?s sad and costly legacy of pollution-related occupational dis? ease. But the problem clearly is enor- mous, and the long latency periods often associated with such disease continue to run. For example, deaths resulting from asbestos exposure- which causes asbestosis and the usually fatal cancer mesothelioma and which also is believed linked to lung and other forms of cancer? already are high and are expected to keep increasing until near the turn of the century. In addition, asbestos still in place can continue to cause illness. Aside from the anguish involved, society must cope with the costs of compensation and cleanup. It is estimated that 27 million workers may have been exposed to asbestos between 1940 and 1980. Their families and others also are at risk from the microscopic fibers. Dr. lrving J. Selikoif, of the Mount Sinai Medical Center. testified: ?For the rest of this century, in the specific asbestos-exposure trades analyzed, ?The most important and urgent problems of the technology of today are no longer the satisfac- tions of the primary needs or of archetypal wishes, but the repara~ tion of evils and damages wrought by the technology of yesterday." ?Dennis Gabor, Nobel Peace Prize winner and professor emeritus, Imperial College of Science and Technology, London, in Innovations: Scienti?c, Technological and Social.? Workers tear out asbestos insulation that must be disposed of. we expect to see approximately 10,000 excess deaths of cancer each year; excess, that is, beyond those which would ordinarily occur. Two hundred excess deaths of cancer will occur each week for the next 20 years, as a result of our mistakes of the past, in this country. This does not include deaths of asbestosis, nor does it in- clude cancer deaths which will occur in less welLdefined occupational ex- posures or among family contacts of asbestos Of course, the problem will continue into the next century. The Asbestos Litigation Reporter says that an estimated 18,000 asbestos-related claims have been filed so far?, and, according to an in- surance group, ?11 is not incon- ceivable that several million claims will ultimately be Picking two arbitrary figures that seem to have a basis in reality?? 400,000 settlements or jury awards, at $50,000 apiece?gives a total of $20 billion. Some estimates are con- siderably higher than that. Yale economist Paul W. MacAvoy says that ?the total liability equal to the present value of future claims can be expected to come to $40 billion based on cautious estimates of death rates, caseload, and court award)? Calcu? lations of lost output are similarly enormous. As to the residual problem of as- bestos, Selikoff noted that almost 30 million tons have been put in place and that ?this material is another legacy. It has to be maintained, re- paired, remodeled, and the waste dis- posed of . Exposure continues among those who have to do this.?? A good deal of this asbestos already has been removed or encap- sulated in place, but thejob will con- tinue for a long time, especially in schools. Costs include the work per- formed, the materials substituted for the asbestos, and disposal. Some ma- terials with asbestos are considered relatively safe, but not the troweled or sprayed acou51ical plaster that is easily crumbled. ?I?ve seen several estimates that there are up to 800 million square feet of this in the country,? says Gene Erwin, technical director of the Association of Wall and Ceiling industries International. ?Nobody really knows. The manu- facturers are not voluntarily giving a lot of assistance." At an estimated removal cost of $5 to $8 per square foot, this, too, is a heavy financial burden. Beyond that, says Erwin, millions of miles of pipes and ducts are covered with asbestos material. (Millions of students, teachers, and staff are subject to potential exposure in the nation?s schools. EPA has an inspection and notification program but remedial actions are left to local school authorities?). 0 infrastructure. The much~ publicized ?infrastructure" problem needs little elaboration.? A steadily declining commitment to public capi- 5 nvestment has left a fiscal night- mare for federal, state, and local gov- ernments. Says Congressman Norman Y. Mineta (D., Calif), ?Many economists estimate the outstanding bill for deferred capital investment at over $1 trillion, a sum as incompre- hensible as it is unaffordable."? Using very broad definitions of in- frastructure, Choate said that costs to 1995 could total $2.5 trillion or more.? The new Surface Transportation Assistance Act of 1982" is designed to begin addressing the transporta- tion infrastructure repair problem but critics have questioned its real pri- orities. ?The most significant aspect of this measure, almost completely obscured from the public, is that it will insure as wild and wasteful a spree of unneeded and unwanted new highway construction, at steadily es- calating costs, as this country has ever experienced,? said John B. Oakes, former senior editor of the New York Times. ?The several billion dollars designated for ?repair and reconstruc- tionspongily defined that much ofthis money could be ap- plied to new construction.?" As noted, this is only a sampling. Other problems involving heavy so? cial and economic costs include com- pensation claims by veterans and others for exposure to Agent Orange and radiation from nuclear weapons testing; liability for many other oc- cupational diseases; pollution control expenditures by government and business; maintenance of dams and repair of unsafe dams; soil erosion control; management of ?oodplain, coastal erosion. and similar losses. example, in its inspection pro- gram, the Corps of Engineers has found thousands of the nation's nonfederal dams to be unsafe. The Interior Department?s Water and Power Resources Service estimates that the current cost of meeting dam safety requirements just at the federal reclamation dams in 12 western states to be some $500 million. In 1978, it was estimated that $100 million would be enough.? The problem of ?keeping up? with infrastructure needs is illustrated by the Corps of Engineers' budget for general new construction compared with its budget for general operations and maintenance. In fiscal 1974, Corps spending for construction was $987 million, and the Reagan Ad- ministration projection for fiscal 1988 is about the same, $1,013 million. But in the same Span of years, outlays for operations and maintenance would climb from $452 million to $1,510 million. Trevor O?Neill, a consultant, says that the most flagrant abuses of the National Flood Insurance Program have been checked, but ?the program is saddled with $15 billion worth of structures built on barrier islands, mainland beaches, and other low- lying, high-hazard areas. Sooner or A workman removes hazardous asbestos from a ceiling. 6 Photos courtesy of Association of Wall and Ceiling Indus-Imu-Inn-manna"! later, hurricanes are going to destroy these Another point of reference in gauging the economic burden imposed by these kinds of remedial measures is to see how readily federal liabilities can be covered by the federal budget. That is, how much money is available in the budget for such purposes after other essential needs are taken care of. It is assumed here that, by and large, the remedial measures in ques? tion are themselves essential because they are critical to the healthy func- tioning of society. In fact, it seems appropriate to redefine the entire concept of essential or nondiscre- tionary expenditures in order to get a better picture of the potentially seri- ous impact of mushrooming correc- tive needs. In the traditional language of bud- get officials and economists, a large portion of federal spending is ?rela- tively uncontrollable.? This is de- ?ned as spending that is mandated by statutory commitments or is due under prior-year contracts and obli- gations. It depends on factors that are ?beyond administrative control under existing law at the start of the fiscal year." Stanley E. Collender, a former congressional staff member and publisher of Federal Budget Report, says, ?Controllable spending will occur only if Congress takes some action to cause it. Uncontrolla- ble spending will occur only if Con- gress takes no action to stop Principal examples of uncontrolla- ble spending are Social Security, Medicare, and other programs of en- titlements or payments to individuals; interest on the national debt; general revenue sharing; and farm price supports. ?Of the $848.5 billion in outlays in the fiscal year 1984 budget submitted by the President,? notes Collender, ?over $654.6 billion or 77.1% can be classified as relatively uncontrolla- ble." (This is substantially higher than the percentage 10 years earlier, when it was 70.8%, not to mention 1967, when it was But there are ways of expanding the definition of uncontrollable to in- '1 de a good deal more than statutory commitments and carryover obliga- tions. One is to include spending that might be called ?relatively un- touchable"?untouchable, that is, from a practical political standpoint. To some extent this is true of all pro- grams, because all programs have constituencies with at least some clout. But it is clear that most na- tional defense spending, a huge cate- gory, is basically untouchable. Other examples include highways, airports, and water resource projects?pork barrel items which clearly involve controllable or discretionary spending but which remain firmly embedded in the budget. (To be sure, an increasingly large portion of these expenditures will be allocated to maintenance, rehabilitation, and re- placement. It also should be noted that, despite their ?uncontrollable" nature, payments to individuals and to other social programs have been controlled to some extent under pres- sure from the Reagan Administra- tion. Of course, this has created great resistance to further cuts, increasing the uncontrollability.) If one combines the relatively un? controllable and the relatively un- touchable expenditures, there re- mains a much smaller discretionary pot for dealing with other needs, in- cluding essential remedial measures, as the ?other? category in the table shows. And it is a pot that, while it grew at roughly the same pace as other spending from 1974 to 1983, would actually shrink over the next five years, according to projections in the current Reagan Administration budget. It would shrink while the un- controllabies and untouchables con- tinued to expand. Hence, it appears that a squeeze is on when it comes to coping with the previously discussed problems of resource scarcity, pollution control, soil erosion, infrastructure repair, and the like. To put it another way, these high priorities compete with other programs like park land acqui- sition, resource management, foreign aid, research and development, and new transportation facilities. The Congressional Budget Office (CBO) has analyzed the Reagan bud- get projections to 1988, comparing them with baseline" projec- tions which generally assume, for discretionary spending, that the 1983 program levels will be maintained, with future apprOpriation increases to keep pace with inflation only. CBO used a somewhat different frame- FEDERAL BUDGET OUTLAYS (fiscal years, in billions) National defense Payments for individuals Veterans benefits services Interest on debt General government administration Other international affairs General science technology Energy Natural resources environment Agriculture Commerce 8; housing credit Transportation Community 8: regional development 1974 1983 1988 (currently (actual) (estimated) projected) 78 $215 $386 118 392 505 NOTE: Veterans benefits and services are somewhat arbitrarily included as uncontrollable items (on the theory that they have a strong constituency and are akin to the payments to individuals category) as are outlays for general government administration, which includes the Internal Revenue Service, Federal Bureau of investigation, State Department, revenue sharing. and so forth (on the theory that these are indispensable operations without much fiscal leeway). Figures for 1988 are estimates projected in the Reagan Administration?s fisul 1984 budget plan. Several minor items are excluded, as are offsetting receipts. ALTERNATIVES ?Encouraging one kind of development over another is not ?antigrowth?; rather, it is a state- ment of priorities and goals. Dif? ferent growth patterns reflect dif- ferent values. Some investment strategies create more jobs than others. Some create better jobs. Some produce more pollutants, disease, and environmental destruction. Some development and growth is of primary benefit to wage-earners; some yields the greatest benefit to stockholders and investors. What mix of indus- tries and business enterprises is preferable? Who should decide? These are important questions for any society to consider. Any they are questions answered daily, in- tentionally or not, in the choices made by government and business planners. . . ?Richard Kazis and Richard L. Grossman, Fear at Work.? work of categories, including one for "nondefense discretionary spending" which excludes the traditional uncon- trollable expenditures as well as na- tional defense spending. It concluded that, relative to the CBO baseline of increases limited to in?ation, the Ad- ministration?s budget plan would cut the projected growth of nondefense discretionary outlays by 50% over the next five years.? Within the nondefense discretion- ary category is a subcategory for ?transportation, natural resources, and other infrastructure," account- ing for about 30% of discretionary spending. It includes ?construction, operation, management, or mainten- ance of the physical resources that make up the nation?s infrastructure-? including the major transportation systems, pollution control facilities, forests, parks, public lands, water, mineral and other natural resources, and community development proj- ects.? Between 1981 and 1983, CEO says, there was a real reduction of 15% in these programs. Between 1983 and 7 1988. President Reagan proposes to increase this aggregate infrastructure spending by about 2% per year. CBO says. but the increase would be fo- cused almost entirely on the federal- aid highway program and on Federal Aviation Administration Operations and facilities. ?All other infrastructure Spending would decline from $29.7 billion in 1983. . . . to $26.4 billion by 1988. These spending levels represent a re- duction in spending of 15% by 1988. relative to the CBO baseline projec- tion.? Economists are quite unclear about the broad implications of cost figures such as those presented. At least the United States, perhaps uniquely. is beginning to try to understand the long-term social and economic effects of accumulated waste and disease and other problems. Finding the money to ?nance these seemingly essential remedial measures may require some shifting priorities and sacrifices in other areas. Other- wise, remedial action will have to be Microcosm of a hazardous waste dump. partially deferred to future genera? tions and that, too. would involve sacrifices as well as increased total costs. Future generations certainly would then wish that we had paid more attention to prevention and to pay-as?you-go custodianship of our environment. Footnoles: 'Hearing of House Education and Labor subcommittee on labor standards. October 6. 1981. "'Major Themes and Additional Budget Details Fiscal Year Of?ce of Manage- ment and Budget. ?Ii?ashington Post. April 18. 1982. ?New York Times. July 26. 1981. ?Hearing of House Banking subcommittee on economic stabilization. September 10. I981. ?Technoiogies and Management Strategies for Hazardous Waste Controi. Office of Technology Assessment. March 1983. ?New York Times. March 16. I983. 'Newsweek. March 7. I983. ?Washington Post. March 15. 198]. ??Time. December 1982. ?New York Times. December 27. I982. "Hearings of House Education and Labor subcommittee on labor standards. March 4. April 21 and 22. 1982. ?Washington Post. March 5. 1983. ?See Wall Street Journal. March 4. 1983 and Pacr?c Northwest. July/August 1982. ?Power Line. February 1983. ?For example. see ?Financing Radioactive Waste Disposal,? Congressional Budget Of- fice. September I982. ?Science. January 22. 1982. ""Nuclear Power Costs." report of House Government Operations Committee. April 26. 1978. "The Fund was established by the Nuclear Waste Policy Act of 1982. Public Law 97?425. "Oxford University Press. 1970. ?Asbestos Litigation Reporter. March 11. 1983. ?New York Times. February 14. 1982 ?See Federa! Register. May 27. 1982. "See CF Letter. October 1981. ?Congressional Record. December 6. 1982. ?National Journai. November 27. I982. "Public Law 97?424. "New York Times. December 16. 1982. "Congressional Record. March 9. 1983. "New York Times. September 13. I981. "The Guide to the Federal Budget. Fiscal 1984 Edition. Urban Institute Press. I983. ?Pilgrim Press. 1982. ?"An Analysis of the President's Budgetary Proposals for Fiscal Year Congres- sional Budget Office. February 1983. NEW PUBLICATION Managing Oregon's Growth: The Politics of Development Planning, by H. Jeffrey Leonard. examines how Oregonians have fought. cooperated. and compromised to make their state?s far-reaching land-use planning pro- gram work by accommodating needed new housing and other development with minimal sacrifices to the state?s natural resources upon which the economy depends. February 1983. 159 pp. Paperbound. $10. Soil Erosion: Crisis in America?s Croplands?. by agricultural economist Sandra S. Batie, an associate professor at Virginia Polytechnic Institute and State University, presents a compre- hensive account of the soil erosion problem in America. its nature. its ex- tent. and its effects on cropland and agricultural production. February 1983. 130 pp. Paperbound. $8.50. When ordering copies through The Conservation Foundation. please add $2.00 per shipment to cover shipping and handling costs. Prepayment is re- quired. Subscribers to the CF Letter are entitled to a 20 discount. (Over- seas Sales Representatives: Bowker Publishing Co. Ltd.. Epping. Essex CM16 4BU1. England.) 1717 Massachusetts Ave., N.W. Washington, D.C. 20036 43 Links 5 rink Ills?'I'Qu 2nd Class Postage Paid at Washington, D.C. March 1983 ALERT Cost?bene?t analysis and environmental regulations Michael R. Deland ER T. Concord. .4 In a recent executive order, Presi- dent Reagan required that, ?to the ex- tent permitted by law,? no regulatory action should be taken unless the po- tential societal bene?ts outweigh po- tential societal costs. This raises two questions concerning regulations in- tended to protect health and environ- mental values: Are there instances in which a cost?bene?t analysis has been prohibited by Congress? and, are there cases in which a cost-bene?t analysis should be prohibited? in recent litigation challenging the Occupational Safety and Health Ad- ministration?s regulation of toxic substances and EPA's standards for 1983 best available technology (BAT) under the Clean Water Act, the Supreme Court and federal ap- pellate courts concluded that OSHA and EPA were not required to balance costs and benefits under these pro- grams. Whether the legislation would allow the agencies to balance costs and bene?ts, as now mandated by the President?s order. was an issue that went unanswered. However, the Opinions infer that the courts likely would hold that cost?bene?t analysis could not be considered- The Clean Air Act currently pro- hibits cost?bene?t analysis in standard setting; but as debate continues on its reauthorization, strong argument is being made to add a cost?benefit di- mension to setting of air quality standards. This debate raises the pos- sibility that Congress will reexamine cost?bene?t analysis as it applies to toxic substances and BAT limitations, ifcourts specifically hold that OSHA and EPA cannot consider costs in set- ting standards for these two pro? grams- Toxic materials in the work place In the OSHA case, the Supreme Court, in holding that the agency is not required to use cost?bene?t analysis, found that OSHA must issue the standard ?that most adequately as- sures that no employee will suffer im- pairment of health, limited only by the extent to which this is ?capable of being done.? Thus, Congress already had determined the proper balance of costs and bene?ts when it required that the ?bene?t? of worker health be fur- thered as long as it is achievable. Jus? tice Rehnquist, in dissenting, argued that the majority opinion would permit OSHA to consider cost?benefit anal- ysis of toxic material standards under the President?s order. The majority opinion does not resolve this question, although it infers an opposite conclu- sron. Clean Water Act Whether EPA can consider cost and bene?t comparisons in issuing its 1983 BAT limitations is also unresolved. When deciding whether EPA must consider these comparisons, federal appellate courts have relied on the legislative history of the Clean Water Act to hold that EPA is not required to do so. The conference report for the I972 act indicates that, regardless of cost, BAT limitations must move US. industry closer to the goal of elimi- nating all discharge of pollutants. Further, while the language of the statute clearly requires a comparison of costs and bene?ts in setting 1977 best practicable technology (BPT) limitations, this language is conspic- uously absent from the requirements 1981 American Chemical Society Volume 15. Number 9, September 1981 for setting BAT limitations. While this supports the courts? conclusion that cost?bene?t analysis is not required, it also leads to the conclusion that cost?bene?t analysis would not be permitted. in a 1980 decision, the Supreme Court noted that BPT required a costebene?t comparison and then went on to say, ?in assessing BAT, total cost is no longer to be considered in com- parison to effluent reduction bene?ts." Thus it appears likely that the Clean Water Act would prohibit EPA from balancing costs and benefits when as- sessing BAT. Clean Air Act Some industrial and government spokesmen recently have recom- mended that both the health bene?ts and the costs of cleanup and control be considered in air quality standards set by EPA under the Clean Air Act. They question whether standards should be set to protect even the most sensitive persons, given the enormous additional expense to do so. Nonetheless, Congress cannot ig- nore the concept implicit in the legis- lation governing regulation of toxic pollutants and BAT standards. The premise holds that since it is so dif?cult to balance health bene?ts against dollars, any such bal- ancing must be a ?policy" rather than ?technical? decision. Therefore, it is appropriate for Congress to ?set the balance" by determining that the bene?ts of clean air, clean water, or safe working environments outweigh the costs of achieving those bene?ts. The President?s order for cost?bene?t analysis is a clear signal to Congress of the administration?s conflicting view of the question. The degree to which Congress heeds this message in de?n? ing the relationship between costs and bene?ts will set the tone for all envi- ronmental regulation for years to come. 99? pne court of appeals is likely to be more receptive than another to their clients? arguments in an agency review proceeding." the conference said. ?The choice of the review- ing court has therefore assumed large importance in the review of some actions of some agencies." The conference further explained that when challenges to agency actions are filed in two or more courts. the ad? ministrative record of the agency action is to be filed with the court first petitioned. that court then assuming jurisdic- tion. The conference added that this provision is "less and less useful as the choice of forum has become more signifi? cant in lawyers? minds and races . . . have proliferated and methods of conducting the races have become more refined." Fl oration Among Courts The conference's committee on judicial review prepared the draft recommendations on the basis of a report by Thomas 0. McGarity of the University of Texas at Austin. The major recommendation. directed at Congress, calls for an amendment to 28 U.S-C. 2112lai to permit the Ad- ministrative Office of the United States Courts to determine in which circuit a challenge would be heard, when two or more circuits are petitioned within ten days of an agency ac- tion. The Administrative Office would select from among the courts petitioned according to a ?scheme of non-periodic rotation." so that no party could predict what court would hear a particular challenge- The existing power of the courts to transfer the case for the convenience of the parties would not be changed. the con- ference said. The draft recommendations further state that if the chosen court determines that it lacks jurisdirtion or venue. it would notify the Administrative Office which then would choose from among the remaining petitioned courts accor- ding to the same non-periodic rotation. Complex proceedings involving more than one agency order also could be divided and transferred by the Administrative Office to another court. Agency Action Urged The conference drafted two reconunendations for agen- cies to adopt in the absence of legislation. One recommenda? tion calls for agencies to ?specify in advance a time at which their orders are deemed issued or their actions are otherwise ripe for judicial review,? either through writing generic regulations or on a case-by-case basis. Agencies also should c'Jine carefully the scope of their ac- tions, particularly when two or more simultaneous rules or orders are issued at the end of a single proceeding, the con- ference said. An agency should state whether it considers those rules the same order for purposes of judicial review. The conference also recommended that the Judicial Conference take action. if Congress fails to remedy the situation with legislation. by promulgating a rule to permit the Administrative Office to choose the reviewing court by lot when petitions are filed within one minute of each other in two or more courts. Comments Requested The conference requested that comments be submitted by Oct. 10 to Linda A. Sedivec. Administrative Conference of the United States. 2120 St. 5.91.. Suite 500. Washington. DC. 20037. (202) 254-7061 829 General Policy PRODUCTIVITY REDUCED T012 PERCENT BY ENVIRONMENTAL. HEALTH, SAFETY RULES Environmental. health. and safety regulations may ac- count for 8 to 12 percent of the slowdown in U.S. productivity growth, according to a joint congressional committee report released Sept. 17. "It seems clear that environmental and regulations bear some responsibility for poor productivity performance. but little evidence exists to suggest that as much as 15 percent of the slowdown can be attributed to them." as some studies have claimed, the report said. The report was prepared at the request of the Senate Commerce. Science. and Transportation Committee and the Joint Economic Committee as part of an assessment of the effects of regulations on industrial innovation by the Office of Technology Assessment. The ?macroeconomic performance of the U.S. economy" during the past decade has been poor. with output. inflation, unemployment. capital formation, and productivity growth rates all ?disappointing." according to the report. This poor economic performance has occurred at a time when govern- ment has intervened more than ever before with regulations. the report said. ?In many cases these regulations have imposed large costs on business enterprises." it added. The report stated that mandatory installation of pollution control equipment diverts capital and labor from the produc- tion of conventional outputs to activities with benefits "that are difficult to assess." It said environmental and regulations have tended to be engineering rather than performance standards. ?inducing a level of capital investment and capital intensity in excess of that re- quired to efficiently achieve regulatory goals." According to the committee report, the regulations tend to be enforced more strictly in new firms and industries using new technology than in more established enterprises. Moreover. it added. the rules have imposed large legal and administrative burdens. Findings of Report The case studies examined in the report indicate that en- vironmental regulations may have reduced the annual rate of productivity growth by as much as 0.25 percent during the mid-19703. However, "This must be considered an upper? bound estimate in light of biases associated with the studies in question." the report said. It added that macro- econometric simulations indicate a smaller impact of about 0.1 percent on productivity growth. Most of the studies of capital investment attributed a "minor role" to environmental regulations. according to the report. It said a few recent studies suggest a stronger role for environmental regulations. butthese studies are "highly tentative and limited in scope." The effect of environmental regulations on the unemploy- ment rate is probably less than 0.25 percent during the 19705. the document noted. adding that the impact is likely to be positive in periods when there is substantial investment in pollution abatement equipment. Copies of the report. ?Environmental and Health/Safety Regulations. Productivity Growth. and Economic Perfor- mance: An Assessment." are available from the Senate Committee on Commerce, Science. and Transportation, U.S. Senate, Washington. DC. 20515. 9-26-80 Copyright 1980 by The Bureau of National Affairs. Inc. 014379731?805500 50 ll 1931 chemical sen spending will leap 17% Both industry in general, and the chemi- cal and allied products sector in particu~ lar, are boosting spending for research and development by an impressive 17% this year. Even when adjustments are made for in?ation. the increase is a respectable In the case of industry, that increase typifies an acceleration in the pace of spending that hogan to quicken two years ago; in the case of chemicals and allied products, it contin- ues a quickenimz pace that began in the mid-19703 (C W, Apr. 29. p. The McGraw-Hill Economics Dept, which compiled the ?gures in its 26th annual survey of spending plans, points out that the increase is ?far greater than in previous years.? Indus- Chemlcal allocate a relatively low share of to new products try expenditures increased at a ?relatively rapid rate until the middle 19603, but since then they have remained practically constant in real terms. Indus- try, says the survey, may be about to push off on another growth cycle. The chemical industry has already reversed the trend over the past six years. But the increases have been small compared to the one projected for this year. For example, the 16% gain from 1979 to 1980 was equivalent to less than once inflation was taken into account. A big spender. Only four U.S. indus- tries will spend as much or more on than the chemicals sector this year: elec- trical machinery, $11.6 billion; aero- space, $9.1 billion; machinery, $6.4 bil? lion; and automobiles, trucks and parts, $5.5 billion. (The "electrical machinery" category includes electrical household appliances, electronics devices, and equipment for the generation. storage and transfer of electricity; ?machinery" includes general industrial equipment as well as farm, construction and mining machines.) And chemicals spending?- $5.5 billion?is considerably higher than that of any of the other chemical process industry sectors profiled in the survey. Petroleum is second, with $2.3 billion. Although the chemicals and allied products segment of the CPI ranks high in overall 11311) spending, it spends sub- stantially less than many industries in the fraction of research outlays devoted 33 Chemical Week/Juno 3, 1981 CPI research and development spending The biggest Rail.) boosts are in nonlerrous metals and petroleum 1912 19131 Chemicals 2.89% 2.92% Petroleum 1.1-. 1.11 Rubber 1.44 . 1.45 Pulp and paper 1.08 1.08 Nonferrous metals 0.62 0.72 Stone, clay and glass 0.50 0.49 Food and beverages 0.21 0.22 Textile 0.15 0.15 ?Nntianal Science Four-clarion. 1879 1980 1981 1980-1981 1934 (Millions of dollarsl actual estimated planned change planned Chemicals $4,010 84,587 85,465 17% $7,281 Petroleum 1,224 - 1,848 2,259 23 2,593 Ruhher 551 635 776 22 975 Pulp and paper 454 764 855 12 1,076 Nonferrousmetals 320 380 '25 546 Stone, clay and glass 3411 246 273 14 '_339 Food and beverages 475 542 816 14 755 Textiles 92 145 '162 11 133 Half of the chemicals tab goes for existing products 1980 1931 Improving Improving New New existing New New existing products processes products products processes products Chemicals 31% 19% 50% 31% 18% 51% Petroleum Rubber 28 29 43 28 30 42 ruipandpaper? 61 a 1.131 . a '1..121 Nonferrous metals Stone, clay and glass 32 311 33 31 31 -'33 1 Food and beverages 29 28 43 ??29 27 . 1 44 . Textiles 39 5 4 911 6 Chemicals R810 loads as a share of sales and capital spending Share of sales ?Share of capital spending-~? 1911 1910 19.81 ?31 2.60% 37.2% 39.3% 43.4% 0.93 3.9 32 7.6 1.40 36.7 33.3 34.3 11.32 11.2 12.6 16.7 0.54 12.2 12.7 7 11.5 11713 3.4 72 as 11.26 7.3 6.6 3.1 11.12 6.1 5.9 7.11 Deuc, McGr-aw-Hill Publications. - to new products. If innovation is gauged by the portion of an Hall) budget geared to new products, then the instruments sector ranks as the most innovative among the 113 industries proliled: 73% of its 115:1) budget this year will go for new products, whereas chemicals will put only 31 of its 11810 dollars into new products. And three CPI sectors?non- ferrous metals, 15%; petroleum, and textile products, 4% ware the lowest spenders for research on new products. As a percentage of sales and of capital spending, budgets seldom change much from one year to the next. This year, the chemicals sector leads other portions of the CPI in as a percent- age of both sales and capital spending. But chemicals trails four non?CPI indus- tries?aerospace; electrical machinery: automobiles, trucks and parts; and instruments. The biggest spender for as a percentage of sales is aero- space, with 15.7% . However, R611) spend- ing by both the electrical machinery and aerospace industries is heavily funded by the government. The chemicals figure of 39.9% for as a percentage of capital spending in 1981 stands seventh, behind non-CPI industries. And three industries?aero- Space, instruments, and electrical ma? chinery?have research budgets that actually exceed their capital spending. . The, top honors in the category of Rail) spending as a percent of capital spending go to the aerospace industry, which will spend 154% of its capital budget on this year. i -. More for energy. While much of the current budgets are earmarked for product and process development, some of the funds are also aimed at energy 1 ?nding new sources or using less in manufacturing. Not surprisingly, the biggest spender for energy-related re~ search is the petroleum industry, with $1.46 billion in outlays for 1981. rl?he next biggest CPI spender for energy research will be chemicals, with $449 million. The smallest outlays for energy in the CPI, $10 million, will be by the nonferrous metals industrv. Yet, the 1981 petroleum ?gure represents a drop of 2% in spending from last year while less government presents, firms plan to scale down pollution the modest ?gure for nont?errous metals is actually a 150% increase from 1980. As for chemicals and allied products, I that sector will spend 26% more. in ener- gy research in 1981 than last year. Another important area of not directed at new products or processes is pollution control. Chemical companies 1 will rank ?rst among pollution control spenders, with $414 million ear- marked for this purpose in 1981, fol- lowed by petroleum companies with $266 million. The textile sector will set aside a relatively paltry $2 million for pollution research?the lowest amount by a CPI sector. The biggest boost in this Ran category will be by petroleum?up 102% ., over 1980. Among the various CPI seg- 5 ments, most plan 198-1 pollution control 1 research expenditures that are the same or less than their 1981 outlavs. One possible reason for this trend,s says the "Industry expects the Reagan Administration to scale. back the 15- --y1 ar growth in pollution regulations" that have boosted pollution outlayskin-?w g? PJ?s-r2 l, W. .. 44?m?h.m. . . 544?! -44.. -x "wry-,1 - - vm -Wwwrww_'uimi -. mw?-?Lun??h?- Mum-ohm mm- 1mare 110:? Mm: ..- ?Ski-u. J. a 'Ji? . 3 5 - - I'm. - 1' Lyl?I" i?ll- Sudan} anat - lit; sizliv . burnout-.q annulus-hmWednesday, March it, 1981 Problems continue at Boriin 81 Forro plant site Me 8} GREG BRAKNIS Jot. rnaI Staff ?1 rifer Because of a drop in property values and :?f?SlanIS' distress titer pm 111-. environmental problems "d by the old ficrlin Fart-o 11111:: .11: incmeratnr plant. the (311111-35 To? 11.41511 Board of Review Tuesday reduced assessments on homes near the plant The hnlh?d decided lo (111 by 10 pr?f?t'ii 1.194995111] 0! till Til-11' properly on both sides of i'ui'lfl t'wt-vcen W. 111.111." and (look reds. Willch trim norm and smut-1 of the plant sun at him There are ahnut homes along that one-nine The concession was not an- plauded by about in that cred however. They vowed to appeal their cases to the state T: 1\ 1 'nmmis'sion to seelt further re- SEVERAL the ill petcen! rt-dticti 111 does not .cflt?ct the total to: :s of property 1.111.134. to a recent profes- smnal appraisal of a home near the plant that showed a Ill-percent dip in market value because of the Diane's location. ht;111}' homeowners conceded that they don?t' want to sell their properties. but that the stigma of in the area of Berlin Farro would prevent them from domg so, even if they wanted to. They said they could not. in good consmence. sell their homes without telling buy- ers about the plant and its history. That courtesy has turned away more than a few prospective buy- ers from residents who have at- tempted to sell in the past few years. they said. Even if the board?s reduction had been sufficient. they said it should have been applied to their land. as well as their homes. be- cause of the potential toxic con- from Berlin at Farro's plant. The objections were not consid- ered by the board, however. be- cause it had decided before con- fronting homeowners how it would handle their appeals. TOWNSHIP SUPERVISOR Rodney May said he discussed low- er assessments for the area with Genesee County equalization offi- before the Board of Review convened. The officials. he satd. agreed that a ill-percent reduction would be warranted for 1981 and 1982. May told the homeowners: ?If you don't agree with us. the an ap- peal with the Michigan Tax Com- mission. tn fact. I'd recommend it. I think you should all stick together as a group and petition the state." He said it may take eight months or more to get a hearing be- fore the commission. but that any favorable ruling would be made retroactive. Verna Courternanchc of 8189 S. Morrish. one of the leaders in the residents' fight to get the Berlin 81 Farro site cleaned up. labeled the board's decision ?ridicolous? be- cause 01? the appraisal tut was sub- mitted. THE APPRAISAL was made about two months ago by Harry Post of Post and (20.. Flint. on Ja- nice llolmes? property at 5251 S. Morrish. it showed that the home she had about four years ago has a market value of 5-1-1 415. which includes a 15 percent mark- down of 571100 because of its prox- imity to the plant. She claims her home actually has been devalued about 311 percent. because it was ap- praised at 364.1100 by her bank at the time it was rebuilt. Post. contacted in 'his office Tuesday. said [118 :1ppraisnl"was an estimate of what I feel the market would be for that home because of the proximity of the dump site." Taken into account in the appraisal was the unknown effect of the toxic wastes on well water and land, he Post said he would similarly dis? count the market values of other homes in the area of Berlin 81 Farm. although the size of the re- duction would depend on a home's assessments reduce distance from the plant. Mrs. llolmcs? house is the nearest one news: the road from the plant. Not only was the assessment re- duction by the Gaines Township Board of Renew unprecedented. the volume of or pea' by Berlin Farro neighbors also was a rewcord IN THE past. a few homeown- ers had appealed their assess- ments.~without success. But a group of homeowners in that one-mile area turned out this year because of Mrs. Holmes? appraisal and re- newed fears of contamination prompted by recent state health hazard tests. Results of blood tests taken for area residents by the state Depart- ment of Public Health are expected to be released before Tuesday. when a meeting is scheduled at the Gaines Township hall to explain the results. Results of soil sample tests on property itLlj'lCt?ni to Berlin ti; Farro were released last week showing evidence of contamination at non-dangerous levels. Berlin Farro. which was closed several years ago. has been sued by the state Department of Natural Resources and the state at- torney general to force cleanup of the site once used to burn and store highly toxic pesticides and other chemicals. Nothing has been done to remove chemical wastes still buried there. 0 ?mm,?I a- -o . Section taro if? No jog These late-winter ioggers had be right turn or they will be violcth claimed by the sign. it is on the E. the parking romp that series that Flint. Group moves owl 5m! hearth:1 former Berlin lt:?:tt' ?usft' plant at 8332 l.l:trrt.:h. (Limes Tia n-h:p. have turned up some low tin? not dance-runs levels of ccnrarnination. according to 1a]; of the state Department of Ann-vulture". St clue-low! samples lilk' en in the January from the privile- l_v hum-it l.'Ir..l (latest to the Berlin Farm St?? the iftl'gt'f?lf? Woos- tet's property at 3212 S. an the Janice Holmes property at 825! S. The tests are. air: of the state's effort to (it"?ff??ll?tl? possible health hazards that may have evolved from Berlin lt- l'arru's toxic waste incineration and stmage oper- .Itions. State agencies are financing the tests. According to Dr. Burton Card- wsll. acting ("hill of the depart- n?vn'B tn\i-' substance and emer- gent-j. services division, which did he tc'stme. all of the soil samples shows-d evidence of the pesticide chemicals (-66 and DDT and some had evidence of heavy metals. Both chemicals are considered highly toxic end Cat?cirtinu-ttic. DDT level. at l2 parts per ?as "extremely low." com- pared with acceptable standards of 35') parts per million. Cardwell Fiberglass $2895 . Sq. .. an? ?Hon-w.? ?w The Flint Journal A Wednesday. March 11, 1981 nniinua at Berlin Farro plant Site evels of toxicit shirt. The out; lev Township Su May said last we nounce the resul at a special meet uled information Berlin Farm 5 7:30 pm. March Creek reside from the Winchester ave organized el. at 11 parts per "really not a tot." he said. but there is no data available on acceptable or tolerable levels of levels of lead discovered in he said. The tests ace of other toxic Various minimal and copper also wer the tested soil. found no et'itlc Woods suhdiv that meeting at Swa School. Several offici state Health Dep ment of Natural Re Toxic Substance Cont sion are expected to if any. potential dun by city residents cats disposed at Legal pressur the state Attorne has resulted in Farro. but so ic chemicals the site which dr nces were found of venison and by a neighbor No toxic substa in tested samples goat's nulk supplie living south of the The dt-partme 9 sets of grain sample is near the plant tests should be to four weeks. The prelimina . he said. Those oncluded in three gers are faced because of chemi- ry test results will 13 by the DNR and General's Office the closing of Berlin me of the highly tox- ain in storage at ains into the Slo- tion." (?ardwelt said. has no pl soil samples from I ate Vicinity of th ans to regularly mon- plant. But if high are found in the grain said. department plans CITY RESIDEN at the taste che stored at the plant soul the Slocum Drain into Creek and eventually th or when heavy T5 are con- GMNES TOWNSHIP re are awaiting the results tests taken by the state Department In January to toxic chemical ople living near ose test results released soon. spring rains come. ity has a municipal rather than individ- some residents have what toxic contamina- check for possible contamination of pa Berlin Farm. Th are expected to be water system .. . foun pervisor Rodney ek he wants to an- Ls of the blood tests ing before a sched- at meeting on the ituution is held at 24 in Swartz Creek. tion dangers their children may en- counter playing in or near the creek or eating fish caught in the stream. The Swartz Creek City Council has adopted a resolution urging state and federal agencies to immediately remove or have re- moved all toxic waste deposds at the site. "With the adoption of the reso- lution unless it brings inquiries from state or federal agencies the city has done about all it can (regarding Berlin Farrel." said City Attorney Edward P. Joseph. Some residents asked the coun- cil last week to have danger signs posted along the creek because of the potential contamination. Joseph said the city has the authority to post the signs if an appropriate county or state agency determines that a danger exists. The council also received and referred to the city manager a re- quest on behalf of two organiza- tions. Greenpeace and Citizens Against a Polluted Enwronment. to stage a protest parade from down- town Swartz Creek to the Berlin Farm site on April 4 to dramatize what they believe is a potential con- tamination problem involving the site. BRAKNIS Cor hits pole; area man dead A 72-year-old Holly Township man died Tuesday night When his car crashed backwards into a tele- phone pole in Grand Blanc Town- ship. Section mun - on plans for By RON KRUEGER Journal Staff Writer The investment group that last considered pi; ays it has start- ancing a multimil- ation of the 60- it ed-u'orkingtm fin pin rm; ?In lion-dollar renot year-old structurt Chicago architect and former Mott loge President ('11 mtnurnty Col- ;irles N. Hippos, the group. met with intend to carry . terms of the pp. .1 of the project. Iy is for three r. only that the con- "exptoratory in nu? nancing and dcsip Fitch would say versations were ture and very co let first with William director at the Flint Ftit?h nor Pink I of the Unreal. print of thi? lint lievt?tl to be him. and later with James W. Ruth Whitney and Ruthe the group apparently project privately. Fitch l: he hoped that no fed- ould be needed. said. "They (Fitch past indicated the which is good be- that we see no lA'hitney and Mayor eaten they Will he pm i batll lithe Fifrh-l it. Two tleveicpr'r the last wee ity publicly asken redevelop thtu btu A Pick officin tion would not pr vetoper from hid away from the Hi .. . .. ?9 mm- Ill EFFECTIVE 3-14-51 VEltliir YARD 2x4 -CEll.ll?tG the 168 EA. cause we told the CORN. your choice Economist ioins? howl over rules ANN ARBOR (AP) A University of Michigan business professor is joining the outcry against gov- L/f, ernment regulation. especially environmental laws which he claims ?are not improving the world's air <3 and water." (Corp.) is not alone among the firms we being driven out of business and many jobs are being lost because of our govemment?s environmen- tal, safety and other regulations," Ross Wilhelm of the U-M's Graduate School of Business Administra- tion said. ?We are unemploying our own peo le. de- . stroying our own companies and increasing jobs El and production overseas. environmental regulations are the worst culprits and they are not improving the world's air and waters. The regulations simply are destroying American jobs and companies. while increasing employment and production abroad where re lation is less severe." The usiness economist cited drOpping produc- tion levels and rising imports in the steel. coal, alu- minum. zinc, lead and capper industries as indica- tive of the harmful impact of government decrees. EXCESSIVE regulations are at the 1. heart of the well-publicized problems of and soon may place Ford Motor Co. in the same financial straits, said Wilhelm. ?Over the past two decades, the rcentage of foreign cars sold here has been stea ily growing. ?Our steel industry is going down the tube in no small part because of our government's excessive pollution requirements as well as our unwise tax policies." Wilhelm noted the coal industry also is being forced into a depression when rising petroleum prices should promote a boom. Q?Twwu-vj?v-I-uwv-l--v 40 Deraon' FREE JAN.23.1983 A $40 billion error U- forecasters tripped up by a sleek GNP One of the jokes going around among economic forecasters at the Uni- versity of Michigan is that the predic-N tion for 1982 was Just tine. The only problem was the economy didn? measure up to it.? Instead of growing by almost. 5171- billion, as forecast, the economy shrank. - -.1 in Quantitative Economics is the oldest and smallest. Now in its 30th year, the Michigan .. . model packs its structural components ltito just 120 equations. By comparison, by more than $23 billion. measured in? . constant dollars. Exports tell more than twice the expected drop. Disposable income rose only half as much as ex- pected Hymans claims he and his associates were on target in loreseeing that Presl- dent Reagan's program. enacted in; Despite those muffs, Professor Saul 111. 1981. ?had unbalanced the devil out of the iederal budget He blames the current and projected deficits ior much of the economy '5 malaise. in comparison with the so-called ?Big Three" private forecasting ser- vices Chase. Wharton and Data Resources Research Seminar bigger. services use hundreds of .1111 its various parts. was-N 501111111111 11111 h'um'an ari- sumptions about such matters as Wage rates. price levels. tax revenue, profits and government policy. the computer- ized model makes comparisons with 'mance is recorded during the year, the actual historical data and produces a forecast for the overall economy. The assumptions are developed by Hymans. several faculty members and three graduate researchers. For 1983, the forecast is for real economic growth of 2.9 percent. and for 1984 5. 8 percent. The 1983 estimate is higher than the average of 45 forecasts tracked reguiarly'by Robert :25; 3331?? maxi!? Eggert. the proprietor of Blue Chip Economic Indicators of Sedona. Arlz. Eggert who helped set up the Michi- gan model while an executive with Ford Motor Co. describes the U- 311 forecasting service as ?among the f?.equations that represent the economy. best." . The highest 01 the Blue Chip fore- ?casts calls for real GNP growth of 4.9 percent. The average. or consensus. ?forecast is for 2. 5 percent growth. And _'Eggert own prediction 15 real growth of 3. 5 persent. As the ecbnomy '5 actual perfor- real numbers will be substituted for the predicted ones.. and the forecast re- vised. perhaps dramatically. The Initial (November 1981) U-M torecast?for 1982. for instance. pegged total automobile sales at 10.8 million. Actual sales fell short of eight million. and that's one of the reasons forecast of a mid-1982 recovery missed . . . -91. . a, .- . 3411?? rofessorsaul Reagan' deficits? ?unbalanced the devil out of the federal budget. the mark. Between November 1981 ahd March 1982, the forecasters lowered their gross national product figure by almost $19 billion but still were short of the actual figure by more than $21 billion. Bernie Sheilum 339151;?. "51:1, as To the editor: I'd like to respond to some of the com- merits made at the City CouncilrEPA meeting held on Mach 6th. It appears that council members have still not done eir homework and continue to react with emotionalism rather than facts?f the public is ill- informed perhaps3he burden of eduo eating them on the shoulders ofthe elected of?ci . Their comments are heavily laced th personal attacks but light on facts. ECOMM has offered many times to pro?tide documentation supporting their cdncerns. Those facts have held up undermuch scrutiny in the past year. Those my of?cnals who have taken us up on our offer to view those facts have been unable to dispute our information. Their only response has been to attack us personally. This seems to be inconsistent with the image Mid- land likes to portray, ?Science not Emo- tionalism.? - A May 1983 staff report by the Michigan Department of Natural Re- sources (MDNRI .tates: ?Potential sources of this (di?inl contamination were not identi?ed Dow but data pre- sented in that samo'raport point to one likely source. Particulate matter col- lected from the rotu'y kiln incinerator on site when Operated without sup- plemental fuel showed the prescence of at lepls up to 8,200 parts per billion.? - This trial burn was conducted i 1977-78 (date unsure) without per- mission from the state or the EPA. The community was never told that they were human guinea pigs. Dow sub- mitted this information after the trial burn. the amount that Midland residents were exposed to for years. This very likely resulted in widespread dioxin contamination of the Midland area via particulate matter, wind dispersion, and soil erosion. At that time the Centers for Disease Control should have done a cancer risk assessment to determine what our chances are for con- tracting cancer due to that exposure. I agree with the city people that a study without a health assessment is mean- ingless In 1936. Dow produced a product known as Dowicide. The Dowic1des were described in a company prospectus dated 16 December 1936. however. even before this prospectus was published. the first reports of severe chloracne as- sociated with the use of chlorophenols had reached the medical literature. Earlier that same year severe cases of chloracne were reported in lumber workers in Mississippi involved in treating wood with a fungicidal form- ulation. apparently Dowicide H. which consisted of primarily tetra- chlorophenol. In a detailed report. (Southern Medical Journal} it was indi- cated that three or four hu ndred persons were involved. Initially erythema and ulceration of the skin were observed, followed by formation of comedones. and pustules. thickening of the skin and urinary disturbances. In some cases leg cramps. thrombosis or highly colored urine were present. The lesions were remarkably persistent. some- times lasting several years after the ?nal exposure. In 1937, Butler(Dowl reported asimi- lar incident at the Dow plant in Mid- land. involving 21 workers who had handled phenol and Wilma 2134.! COMM: We all ave . to decide ._what ?acceptable risk? is! tetrachlorophcnol. Marked hyper- keratosis was observed with enormous numbers of comt-tlones. in some cases so numerous as it produce a black dis? coloration. Severe scarring and per- szstence of the condition were noted. In his paper Butler stated that these chemicals should not be used as biocides until the mechanism by which they caused chloracne was understood. The plant was closed temporarily. Butler indicated that experiment- ation with animals would be under~ taken to attempt to elucidate the me- chanism of toxic. ty. but he was not sup- ported in this effort by the company. Ifone does their homework they will soon learn that this is only one of many instances where scientists within this organization h:.ve warned manage- ment of the possible health effects of chemicals. Sound science is not always the deciding factor. This is as frus- trating to good scientists as it is to us. There is a world outside of Midland ?lled with brilliant scientists and com- petent individuals who have spent many hours doing their homework. We applaud their honesty and courage. as il-ry are often denied re ?I't grants as a result of their independence. ECOMM's position is that indi- viduals should be allowed to make their own decisions. That is not possible until we are given all of the necessary infor- mation necessary to make those de- cisions. We want to be told when there are accidental releases and trial burns. . us decide what is safe for us and our families. We support a ?community right to know? rule. New York recently asked over 12.000 businesses to report on where they have been dumping toxic or hazardous chemicals since 1952. There has been no real systematic industrial survey undertaken in Michigan to as- sess industry?s former waste disposal practices. The laws regulating the dis- posal of toxic waste are relatively new. Dow has been here since 1897. Do they know where all of their wastes have beendurnped? Could some of our neigh- borhoods and parks be built near former dumping areas? All of us need to share the burden of carelessly dumping wastes. but the situation will never im- prove until admit that there is a problem an: .-rt working together to solve it. There is evidence thacwe are still be- ing exposed to unacceptable levels of chemicals through Dow's incinerator. An EPA Journal article in 1978 states that tetra-dioxin can be disintegrated and consumed by heat. but only at sus- tained temperature above 2.500" F, much above the capacity of any ordi- nary mcinerator. Application of heat seems to intensify its reactlon. Accord- ing to some it may have the po- tential of multiplying its own quantity under certain conditions of heating. Dow is licensed to incinerate 2.3.7.8-TCDD at well under 2.500? F. These are some of the facts that EC- OMM is dealing with. as well as numer- ous others. I urge you to do your own homework. Don?t take our word for it. Take a drive outsule the city. Try Rockwell Drive. a county road that?s been closed since June due to a leaking landfill. You might then want to swing by the 152 acre Salzburg landfill. characterized by Dow as the ?Cadillac of landfills" {closed due to leakage into clean zone). Then there's always the Poseyville Landfill . that was used for hazardous materials for years. without any clay liner. You might then want to review the recent literature on land?lls that con- clude ?All land?lls leak eventually.? Keep reading and you will ?nd that emissions from hazardous landfills also pose a signi?cant risk. When you hear the line that these ?tiny" little bits of chemicals pose no risk. ask the question. who is keeping track? What are the effects of all of these things? They do add up. lean assure you that I don't like deal- ing with this information any more than you do. but 1 have every right to ask these questions. Everyone for themselves what is an risk. I don?t intend to take time: work to exchange insults wi? think they?re doing a greatc' Midland by not educating on the issues. That of cou choice. I choose to face the f. are and continue to seek i hope that there are others do the same. DIAP Direct: P_i