November 2, 2010

Prevention of Significant Deterioration/Title V Greenhouse Gas Tailoring Rule

Proposed Rule
Summary

Score: 38 / 60

Additional details
Agency
Environmental Protection Agency
Regulatory Identification Number
2060-AP86
Agency Name
Environmental Protection Agency
Rule Publication Date
10/27/2009
Comment Closing Date
12/28/2009

RULE SUMMARY

EPA is proposing to tailor the major source applicability thresholds for greenhouse gas (GHG) emissions under the Prevention of Significant Deterioration (PSD) and title V programs of the Clean Air Act (CAA or Act) and to set a PSD significance level for GHG emissions. This proposal is necessary because EPA expects soon to promulgate regulations under the CAA to control GHG emissions and, as a result, trigger PSD and title V applicability requirements for GHG emissions. If PSD and title V requirements apply at the applicability levels provided under the CAA, State permitting authorities would be paralyzed by permit applications in numbers that are orders of magnitude greater than their current administrative resources could accommodate. On the basis of the legal doctrines of ‘‘absurd results’’ and ‘‘administrative necessity,’’ this proposed rule would phase in the applicability thresholds for both the PSD and title V programs for sources of GHG emissions. The first phase, which would last 6 years, would establish a temporary level for the PSD and title V applicability thresholds at 25,000 tons per year (tpy), on a ‘‘carbon dioxide equivalent’’ (CO2e) basis, and a temporary PSD significance level for GHG emissions of between 10,000 and 25,000 tpy CO2e. EPA would also take other streamlining actions during this time. Within 5 years of the final version of this rule, EPA would conduct a study to assess the administrability issues. Then, EPA would conduct another rulemaking, to be completed by the end of the sixth year, that would promulgate, as the second phase, revised applicability and significance level thresholds and other streamlining techniques, as appropriate.

METHODOLOGY

There are twelve criteria within our evaluation within three broad categories: Openness, Analysis and Use. For each criterion, the evaluators assign a score ranging from 0 (no useful content) to 5 (comprehensive analysis with potential best practices). Thus, each analysis has the opportunity to earn between 0 and 60 points.

Criterion Score

Openness

1. How easily were the RIA , the proposed rule, and any supplementary materials found online?
Easily found on regulations.gov through RIN search. Links to regulatory information on the EPA website, but there was no information about this particular regulation.
3/5
2. How verifiable are the data used in the analysis?
The data used is the time and cost of filling out EPA permits for PSD and title V under the Clean Air Act, which would be triggered by proposed GHG regulations. These data are relatively straightforward and based on existing EPA permit programs and their Information Collection reports. Links are not provided for everything but are fairly well referenced.
4/5
3. How verifiable are the models and assumptions used in the analysis?
The models are simple paperwork burden models for the cost savings. The loss of health social benefits is assumed to be negligible, which seems reasonable.
4/5
4. Was the analysis comprehensible to an informed layperson?
Other than the complexity of the permitting requirements, the RIA is easy to follow because it mostly estimates time and cost savings from paperwork. It is very clearly written except for a lot of acronyms, but these were largely unavoidable.
4/5

Analysis

5. How well does the analysis identify the desired outcomes and demonstrate that the regulation will achieve them?
4/5
Does the analysis clearly identify ultimate outcomes that affect citizens’ quality of life?
The outcome identified is reduced useless paperwork that would be triggered by it going final with its endangerment finding that would produce "absurb results." This reduction in paperwork would clearly improve the quality of life.
5/5
Does the analysis identify how these outcomes are to be measured?
The outcome would be measured by the time and cost reductions for both the private sector and government.
4/5
Does the analysis provide a coherent and testable theory showing how the regulation will produce the desired outcomes?
The analysis makes the case that not providing regulatory relief by reducing permit requirements would result in "absurd results" according to legal reasoning.
4/5
Does the analysis present credible empirical support for the theory?
The analysis is mostly legal and common sense and doesn't appear to need elaborate empirical support.
3/5
Does the analysis adequately assess uncertainty about the outcomes?
There appears to be little uncertainty to assess.
3/5
6. How well does the analysis identify and demonstrate the existence of a market failure or other systemic problem the regulation is supposed to solve?
2/5
Does the analysis identify a market failure or other systemic problem?
The analysis identifies a government failure as the systemic problem but does not call it by that name. Instead it uses the legal doctrine of "absurd results" that would occur for small GHG sources if the GHG regulation is finalized.
4/5
Does the analysis outline a coherent and testable theory that explains why the problem (associated with the outcome above) is systemic rather than anecdotal?
The analysis does not address why the EPA is considering a regulation to correct a problem EPA itself would cause if it went ahead and issued another regulation. It doesn't address why it can't decide whether to go ahead or not with the offending regulation before issuing this regulation .
2/5
Does the analysis present credible empirical support for the theory?
No, see above comment.
0/5
Does the analysis adequately assess uncertainty about the existence or size of the problem?
The analysis discusses two baselines because EPA is uncertain how it will decide the GHG regulation. One baseline if the GHG regulation is issued and the second if the GHG regulation is not issued. The uncertainties about the GHG problem are not addressed in this rulemaking.
2/5
7. How well does the analysis assess the effectiveness of alternative approaches?
3/5
Does the analysis enumerate other alternatives to address the problem?
The analysis discusses about eight thresholds considered for exempting GHG sources for six years during which EPA will study the issue. The EPA considers three in detail.
4/5
Is the range of alternatives considered narrow (e.g., some exemptions to a regulation) or broad (e.g., performance-based regulation vs. command and control, market mechanisms, nonbinding guidance, information disclosure, addressing any government failures that caused the original problem)?
Just threshold exemptions are examined.
2/5
Does the analysis evaluate how alternative approaches would affect the amount of the outcome achieved?
There is relatively good analysis of the cost savings but little on the benefit loss side partly because the benefit loss is assumed to be negligible.
3/5
Does the analysis adequately address the baseline? That is, what the state of the world is likely to be in the absence of federal intervention not just now but in the future?
Federal intervention is regulatory relief; that is, a reduction in regulation assuming the GHG regulation is issued. The RIA does explain that the cost of issuing the tailoring rule in the absence of the GHG rule would likely be small. One problem is the RIA addresses what would happen if states did enforce GHG permitting rather than what would happen if states were unable to enforce,which is the rule's rationale.
2/5
8. How well does the analysis assess costs and benefits?
2/5
Does the analysis identify and quantify incremental costs of all alternatives considered?
Incremental cost savings are calculated for three threshold exemptions assuming there is no benefit loss.
3/5
Does the analysis identify all expenditures likely to arise as a result of the regulation?
It does not estimate the cost of this rulemaking if EPA decides not to issue the GHG rule and thus this rule would not be needed. Nor does it attemt to measurre the negative benefits which it discusses as the costs of deregulation.
2/5
Does the analysis identify how the regulation would likely affect the prices of goods and services?
EPA performs a cost savings relative to revenue estimate for various NAICS codes and business sizes but does not discuss the price impacts on goods and services.
3/5
Does the analysis examine costs that stem from changes in human behavior as consumers and producers respond to the regulation?
The analysis stops with industry and government cost savings.
0/5
If costs are uncertain, does the analysis present a range of estimates and/or perform a sensitivity analysis?
There is little discussin of uncertainty, perhaps because the cost savings do not appear to be uncertain, which are estimated to be over $50 billion.
3/5
Does the analysis identify the alternative that maximizes net benefits?
There is some discussion of the impacts of the thresholds in term of the number of affected entities, but it is not clear why a larger threshold was not chosen given the size of the cost savings and the negligible loss of social benefits.
2/5
Does the analysis identify the cost-effectiveness of each alternative considered?
Cost-effectiveness can be inferred from the cost threshold analysis.
2/5
Does the analysis identify all parties who would bear costs and assess the incidence of costs?
Cost savings by firm size and NAICS code is quite extensive but incidence is not analyzed.
4/5
Does the analysis identify all parties who would receive benefits and assess the incidence of benefits?
The analysis only briefly discusses in general terms the potential loss of benefits.
1/5

Use

9. Does the proposed rule or the RIA present evidence that the agency used the analysis?
The size of the cost reductions (over $50 billion) relative to the loss benefits (negligible) is evidence that EPA must have been influence by the cost savings estimates.
3/5
10. Did the agency maximize net benefits or explain why it chose another alternative?
The agency says it chose the middle threshold because of administrative feasibility for the permitting authorities. It only qualitatively mentions benefits and costs for the different thresholds.
2/5
11. Does the proposed rule establish measures and goals that can be used to track the regulation's results in the future?
EPA develops time and cost data under the information collection request it must submit to OMB under the Paperwork Reduction Act that could be used to measure changes in its goals of cost savings and promoting administrative feasibility.
3/5
12. Did the agency indicate what data it will use to assess the regulation's performance in the future and establish provisions for doing so?
The regulation states that EPA will initiate another rulemaking on this issue in five years and take into account any improvements at that time in the outlook for administrative feasibility and need for cost savings. The time and cost data EPA tracks can be used to assess the regulation's performance.
4/5
 
Total 38 / 60