June 11, 2013

EPA’s Formaldehyde Rule: The Mystery of the Shrinking Benefits

Why does the White House take so long to review rules from the regulatory agencies?  As I have documented elsewhere, many rules have been stuck at the White House’s Office of Information and Regulatory Affairs (OIRA) for years.  Some of these remain there to this day.  What is the White House doing for the months and years that rules are stuck there?

One rule that just escaped from the clutches of regulatory review might provide a clue.  Just yesterday, EPA posted documents generated as a result of White House review of its rule on formaldehyde emissions from wood products.  These documents show at least one possible answer to the question of why review takes so long: perhaps it takes a very long time to make the benefits of regulation disappear!  This, at least, appears to be a primary consequence of the more-than-year-long tenure of the formaldehyde rule at the White House’s OIRA.

EPA’s rule on formaldehyde emissions went to OIRA with an estimate of annual benefits that ranged from $91 million at the low end to $278 million at the high end.  The rule left OIRA, however, with an estimate of annual benefits that ranged from $9 million at the low end to $48 million at the high end.  (To see a chart showing this change, go here: www.regulations.gov/#!documentDetail;D=EPA-HQ-OPPT-2012-0018-0495 and click on document entitled “2013-05-20_Formaldehyde-Implementation_NPRM_EO12866-Documentation_3-Redlined-Draft EA-A4-table.”)  The low-end estimate of benefits, in other words, decreased more than ten-fold as a consequence of OIRA’s review, while the high-end estimate decreased more than five-fold.  What happened? 

The before-OIRA and after-OIRA documentation is a red-lining nightmare, but it appears that while the formaldehyde rule was at OIRA, two large categories of potential regulatory benefits were dropped entirely from the category of quantified benefits.  When the rule went to OIRA, EPA estimated substantial benefits from reduced asthma cases in children and reduced infertility in adult women.  At OIRA, these benefits were demoted from a combined positive effect of tens or hundreds of millions of dollars per year to a simple “+B” – the notation chosen for unquantified benefits.

EPA had discussed both of these potential effects of formaldehyde exposure in a draft review of formaldehyde for its Integrated Risk Information System (IRIS) Program.  A review by the National Research Council of the National Academy of Sciences, published in 2011, criticized EPA’s risk assessment for formaldehyde in several respects.  Even after the National Research Council’s report, however, EPA had felt confident enough about the benefits of reducing formaldehyde exposure that it had included reduced asthma and reduced infertility in women in the analysis sent to OIRA.  Yet almost the entire discussion of these potential benefits was excised during the OIRA process. 

In the text approved by OIRA, EPA now merely pledges to evaluate “alternative approaches to quantifying the benefits associated with reduced respiratory symptoms” and states that it “does not feel it has sufficient information at this time on the relationship between formaldehyde exposure and reduced fertility to include a valuation estimate in the overall benefits analysis.”  Because the OIRA process remains so opaque, it is not possible to know why EPA so dramatically changed its mind (or had its arm twisted) on the benefits of reducing formaldehyde emissions.  It is also not possible to know whether changes to the substantive proposal that happened at OIRA happened as a consequence of these changes in the estimates of benefits or for some other reason.

Shouldn’t the public be allowed to know these things?  What is the purpose of the public comment this rule is about to undergo if the real decisions happen behind closed doors at the White House?

Lisa Heinzerling, CPR Member Scholar; Professor, Georgetown Law. Bio.

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