White House agrees: Safety and innovation should be maximized, cost and benefit must be considered

Former U.S. Environmental Protection Agency (EPA) policy counsel, Bob Sussman, in a May 12 blog posted by the Safer Chemicals, Healthy Family coalition, takes an unrealistic position on the role of cost benefit analysis in the Congressional efforts underway to reform the Toxic Substances Control Act (TSCA). The position is seemingly based on a cursory analysis of an important TSCA court decision and ignores long-standing principles in how effective government regulations should be developed. If the position, despite its flaws, is adopted, it has the potential to harm any prospect of meaningful reform to a law that is in need of reform, and for which that needed reform is within reach.

On January 18, 2011, President Barack Obama issued Executive Order 13563 – Improving Regulation and Regulatory Review. The articulated purpose of this order was to ensure the integrity and effectiveness of the regulatory system in the United States. “Our regulatory system must protect public health, welfare, safety, and our environment while promoting economic growth, innovation, competitiveness, and job creation. It must be based on the best available science…It must identify and use the best, most innovative, and least burdensome tools for achieving regulatory ends. It must take into account benefits and costs, both quantitative and qualitative.” These articulated principles make sense. Yet, for some reason, in the context of chemical management reform, opponents of recent bipartisan efforts to modernize TSCA ignore and disregard these principles in favor of a quixotic regulatory approach that seeks to “eliminate” all chemical risks while assuming doing such bears little or no costs, economic or societal. This flies in the face of the President’s Executive Order.

In a discussion draft of the Chemicals in Commerce Act (CICA), released by Representative John Shimkus in February, the provision that mandated EPA’s review of the safety of chemicals said that EPA’s considerations when determining safety are to be risk to health and the environment only – not cost and benefit considerations. Only later in the draft, when addressing how EPA would then impose risk-management measures on chemicals that need such in order to be considered “safe for their intended use,” are there references to EPA looking at whether proposed measures are “proportional to the risks of the substance” and “the requirements are cost-effective.” Unlike TSCA today, the February discussion draft took an approach that segregated the scientific safety analysis from how that analysis is then used to manage any risk posed. The first step only looks at the safety of the substance. The second step then weighs the costs and benefits of the uses of the chemical versus the cost and benefits of restricting the chemical, which is consistent with the President’s Executive Order.

This sensible approach, however, was still criticized. Why? Because the words “unreasonable risk,” used in TSCA today, were also included in the safety determination provision in the draft, potentially binding its interpretation and its “troublesome” historical cost benefit analysis implications. But this criticism is unfounded. Current TSCA and the draft of the CICA are not the same. The terms are not used in the same context. In the discussion draft, they are used with an explicit instruction to look at health and environmental risk, and nothing else. The drafters clearly articulated their intent, intent that can easily be memorialized in legislative history or report language. Responding to the criticism, the drafters in the House took pen to paper again to change the words so that EPA has to determine whether a chemical substance “will pose a significant risk of harm to human health or the environment.” The “baggage” of TSCA was eliminated.

But critics of the bipartisan TSCA reform efforts then switched gears. They focused their efforts against using any form of cost benefit analysis in the regulation of chemicals, pointing to the case that has been cited for years as the reason why TSCA does not work: Corrosion Proof Fittings vs. EPA.[1] “If EPA can’t even ban asbestos,” the talking point goes, “how can they do anything?”

Yet, what the court actually said in that decision regarding EPA’s actions to ban asbestos reveals that EPA’s failure did not have to do with never-ending cost benefit reviews or “paralysis by analysis.” In fact, EPA had regulated other substances under Section 6 of TSCA prior to attempting the asbestos ban. So what happened with asbestos? EPA relied on estimates, as opposed to actual data[2]; they failed to justify why other alternatives to a ban were not pursued[3]; they failed to consider the harm that would result from the use of substitutes, or as the court said “a death is a death, whether occasioned by asbestos or by a toxic substitute product[4].” EPA ignored risks and possible toxic effects of substitutes. The court concluded that EPA failed because of “the agency’s reliance on flawed methodology and its failure to consider factors and alternatives that TSCA explicitly requires it to consider.” Could EPA have regulated asbestos under Section 6? Yes, but the asbestos ban was struck down due to EPA’s failure to follow proper procedure and law. It wasn’t struck down due to never-ending or overly burdensome cost benefit analysis.

Weighing costs and benefits in safety-related regulation is not a new concept. The Federal Insecticide, Fungicide, and Rodenticide Act[5] requires EPA to consider “any unreasonable risk to man or the environment”[6] and take “into account the economic, social, and environmental costs and benefits of the use of the pesticide.”[7] The Consumer Product Safety Act[8] established a regulatory framework “to protect the public against unreasonable risks of injury associated with consumer products,”[9] not all risks. The courts have stated that this requires the Agency to balance the severity of the injury that might result from a product, factored by the likelihood of injury, versus the harm the regulation may impose on manufacturers and consumers.[10] The Federal Hazardous Substances Act[11] also provides for regulation of hazards that present an unreasonable risk of consumer injury. In this context as well, the courts have stated that the regulator must balance the injury and the likelihood of occurrence against the harm regulation would impose upon manufacturers and consumers.[12]

These safety statutes that regulate products in commerce in the United States recognize that a “safe” product might not be risk free. “There are many activities that we engage in every day – such as driving a car or even breathing city air – that entail some risk of accident or material health impairment; nevertheless, few people would consider these activities ‘unsafe.’”[13] That is what the court said when looking at the Occupational Safety and Health Act. And what is required to determine what indeed is “safe” in all of these contexts is a review of the cost and benefits of the use and the restriction of the substance or activity.

This review, in the regulatory context, occurs all the time, as illustrated. Regulatory agencies are expected to weigh these sorts of tradeoffs all the time. The American taxpayer expects it of them – common sense tells them the government can’t impose regulations on industry/business without making sure that the regulations will provide benefits to the public (here, health and environmental benefits) at a reasonable cost.

Congress, when enacting TSCA, stated that it should be the policy of the United States that “adequate authority should exist to regulate chemical substances and mixtures which present an unreasonable risk…and authority over chemical substances and mixtures should be exercised in such a manner as not to impede unduly or create unnecessary economic barriers to technological innovation.”[14] They further stated that is was the intent of Congress “that the Administrator shall carry out this Act in a reasonable and prudent manner, and that the Administrator shall consider the environmental, economic, and social impact of any action the Administrator takes or proposes to take under this Act.”[15] Congress recognized that the goal was not – and could not be – to eliminate all risk. That would be impossible to achieve. The goal was to arrive at regulation that balanced the costs – not solely economic – and benefits of the regulation of the chemical substance versus the costs and benefits of the use of the substance. The goal was to provide for “safety” while allowing innovation and commerce to flow without unwarranted interruptions.

TSCA, unlike the Clean Air Act and Clean Water Act, does not regulate an environmental medium – it regulates products in national and global commerce. Under the approach put forward by critics of the current TSCA reform vehicles, the use of cost factors would be completely discretionary for EPA. This “discretionary” factoring of other factors has no analytical rigor and ultimately does not operate under any transparent policy principles. For a statute like TSCA, which bridges the worlds of environmental protection and global trade, a policy framework that offers structure and predictability is necessary. Those who continue to insist on the “elimination” of all risk without even considering societal cost and benefit and those who refuse to consider the approach that has been utilized time and again in other regulatory programs either live in Utopia or don’t really want meaningful, practical reform. Either alternative won’t lead to a goal of an improved, modernized, and effective TSCA.