By Kevin J. Boyle,1 Matthew J. Kotchen,2
V. Kerry Smith3
Government agencies are often re- quired to conduct benefit-cost analy- ses for major regulatory actions (1). When benefit-cost analysis is consis- tent with best practices, it provides a systematic and science-based approach for informing policy and regulatory
decisions. It has been particularly important
for health and environmental regulations.
Yet the wide disparity between the quantified
benefits in two recent and conflicting regulatory impact analyses (RIAs) related to the
U.S. Clean Water Act (CWA) has the potential
to undermine the credibility of agencies’ benefit-cost analyses. It also highlights the need
for a more systematic protocol that ensures
the information base is adequate and appropriately applied to support agency analyses
and public decision-making. This includes
applications in the context of the C WA, which
is the focus of an 11 October hearing in the
U.S. Supreme Court.
In 2015, the Environmental Protection
Agency (EPA) and the Army Corps of Engi-
neers (ACOE) issued the waters of the United
States (WOTUS) rule, which sought to update
and clarify which waters are subject to CWA
provisions (2). The key issue was the extent
of connectivity between navigable waterways
and different types of upstream water bod-
ies, including wetlands. The effect of the 2015
WOTUS rule was to expand coverage of the
CWA. Whereas supporters of the rule contend that it is consistent with the CWA and
related Supreme Court decisions, critics argue that it represents regulatory overreach
by the Obama administration. Presently, the
2015 WOTUS rule is not being implemented
because of a court-ordered stay based on
questions about which courts have jurisdiction to hear WOTUS challenges. The upcoming Supreme Court hearing is scheduled to
begin oral arguments on this case.
In the meantime, in February 2017, President Trump issued an Executive Order that
called for a “review” of the 2015 WOTUS rule
( 3). Then, in June 2017, the EPA and ACOE
proposed a new rule that would rescind the
Obama administration’s WOTUS rule ( 4).
The 2017 proposed rule, which is making its
way through the rule-making process, would
imply that the jurisdictions and associated
connected waterways added by the 2015 rule
would no longer be subject to the CWA.
Both rules have been subject to benefit-cost analysis by EPA and ACOE as part of
the RIAs ( 5, 6). Both RIAs deal with what is
ostensibly the same set of changes in water-related resources, but in opposite directions.
This means that the categories of costs
and benefits are reversed in the two analyses, but they can be interpreted in roughly
the same way. From the perspective of the
2015 WOTUS rule, the two analyses come
to starkly different economic conclusions.
The cost estimates remain unchanged, but
the quantified benefits in 2017 decrease by
almost 90%. The difference stems from a decision in the 2017 RIA to exclude wetlands-related benefits—which the same agencies
concluded 2 years earlier ranged from $300
million to $500 million per year. The effect
is an overturning of the initial finding that
the benefits exceed the costs of implementing the 2015 WOTUS rule.
Without endorsing the specific findings of
the 2015 RIA, we find no defensible or consistent basis provided by the agencies for the
decision to exclude what amounts to the largest category of benefits from the 2017 RIA.
We believe it is important to highlight the
implications of the 2017 decision to designate
wetlands-related benefits as unquantified,
which is inconsistent with best practices for
conducting benefit-cost analysis.
The 2017 RIA does not quantify wetland-related benefits because the studies used to
estimate these benefits were judged to be too
old, having all been conducted prior to 2000.
The stated reasons for their exclusion are as
follows: Older studies introduce uncertainty
because public attitudes toward nature protection may have changed; the studies may
not have used the most recent methodological approaches; and the limited number of
studies make it difficult to validate the estimates. The 2017 RIA also argues that more
1Virginia Tech, Blacksburg, VA 24060, USA. 2 Yale University,
New Haven, CT 06520, USA. 3Arizona State University, Tempe,
AZ 85281, USA. Email: firstname.lastname@example.org
Despite evidence, benefits of policies to
protect wetlands have been ignored. Coastal
waterway and marshland along the Georgia
Sea Islands, USA, is shown.
SCIENCE AND REGULATION
Deciphering dueling analyses
of clean water regulations
Hundreds of millions of dollars in benefits were discarded
6 OCTOBER 2017 • VOL 358 ISSUE 6359 49