Brenner, Robert

another rep:

United States Senate

Committee on Environment and Public Works

Minority Staff Report

EPA’s Playbook Unveiled: A Story of Fraud, Deceit, and

Secret Science

March 19, 2014

Contact: Luke Bolar — Luke_Bolar@epw.senate.gov (202) 224-6176

Cheyenne Steel — Cheyenne_Steel@epw.senate.gov (202) 224-6176

U.S. Senate Committee on Environment and Public Works (Minority)

EXECUTIVE SUMMARY

The greatness of our unique nation hinges on the fundamental purpose of the government

to serve at the will of the people and to carry out public policy that is in the public interest.

When it comes to the executive branch, the Courts have extended deference to agency policy

decisions under the theory that our agencies are composed of neutral, non-biased, highly

specialized public servants with particular knowledge about policy matters. This report will

reveal that within the Environmental Protection Agency (EPA), some officials making critically

important policy decisions were not remotely qualified, anything but neutral, and in at least one

case — EPA decision making was delegated to a now convicted felon and con artist, John Beale.

John Beale is the character from the bizarre tale of the fake CIA agent who used his perch

at the EPA to bilk the American taxpayer out of more than a million dollars.Even Jon Stewart,

host of the popular Daily Show, featured Beale’s bizarre tale as “Charlatan’s Web” on his

program in December 2013. Before his best friend Robert Brenner hired him to work at EPA,

Beale had no legislative or environmental policy experience and wandered between jobs at a

small-town law firm, a political campaign, and an apple farm. Yet at the time he was recruited to

EPA, Brenner arranged to place him in the highest pay scale for general service employees, a

post that typically is earned by those with significant experience.

What most Americans do not know is that Beale and Brenner were not obscure no-name

bureaucrats housed in the bowels of the Agency. Through his position as head of the Office of

Policy, Analysis, and Review, Brenner built a “fiefdom” that allowed him to insert himself into a

number of important policy issues and to influence the direction of the Agency. Beale was one

of Brenner’s acolytes — who owed his career and hefty salary to his best friend.

During the Clinton Administration, Beale and Brenner were very powerful members of

EPA’s senior leadership team within the Office of Air and Radiation, the office responsible for

issuing the most expensive and onerous federal regulations. Beale himself was the lead EPA

official for one of the most controversial and far reaching regulations ever issued by the Agency,

the 1997 National Ambient Air Quality Standards (NAAQS) for Ozone and Particulate Matter

(PM).

These standards marked a turning point for EPA air regulations and set the stage for the

exponential growth of the Agency’s power over the American economy. Delegating the

NAAQS to Beale was the result of Brenner’s facilitating the confidence of EPA elites, making

Beale the gatekeeper for critical information throughout the process. Beale accomplished this

coup based on his charisma and steadfast application of the belief that the ends justify the means.

Concerned about this connection, the Senate Committee on Environment and Public

Works (EPW) staff have learned that the same mind that concocted a myriad of ways to abuse

the trust of his EPA supervisors while committing fraud is the same mind that abused the

deference afforded to public servants when he led EPA’s effort on the 1997 NAAQS.

Brenner was known to have an objective on NAAQS, and would have done whatever was

necessary to accomplish his desired outcome. Together, Brenner and Beale implemented a plan,

which this report refers to as“EPA’s Playbook.” The Playbook includes several tools first

employed in the 1997 process, including sue-and-settle arrangements with a friendly outside

group, manipulation of science, incomplete cost-benefit analysis reviews, heavy-handed

management of interagency review processes, and capitalizing on information asymmetry,

reinforced by resistance to transparency. Ultimately, the guiding principal behind the Playbook

is the Machiavellian principal that the ends will justify the means. ANTI_GRAHAM?

In the case of the 1997 NAAQS, the Playbook started with a sue-and-settle agreement

with the American Lung Association, which established a compressed timeline to draft and issue

PM standards. This timeline was further compressed when EPA made the unprecedented

decision to simultaneously issue new standards for both PM and Ozone. Issuing these standards

in tandem and under the pressure of the sue-and-settle deadline, Beale had the mechanism he

needed to ignore opposition to the standards — EPA simply did not have the time to consider

dissenting opinions.

The techniques of the Playbook were on full display in the “Beale Memo,” a confidential

document that was leaked to Congress during the controversy, which revealed how he pressured

the Office of Information and Regulatory Affairsto back off its criticism of the NAAQS and

forced them to alter their response to Congress in 1997. EPA also brushed aside objections

raised by Congress, the Office of Management and Budget, the Department of Energy, the White

House Council of Economic Advisors, the White House Office of Science and Technology

Policy, the National Academy of Sciences, and EPA’s own scientific advisers — the Clean Air

Science Advisory Committee.

These circumstances were compounded by EPA’s “policy call” to regulate PM2.5 for the

first time in 1997. CARCINOGEN?] PM2.5 are ubiquitous tiny particles, the reduction of which EPA used to

support both the PM and Ozone NAAQS. In doing so, the Playbook also addressed Beale’s

approach to EPA’s economic analysis: overstate the benefits and underrepresent the costs of

federal regulations. This technique has been applied over the years and burdens the American

people today, as up to 80% of the benefits associated with all federal regulations are attributed to

supposed PM2.5 reductions. nb no cite

EPA has also manipulated the use of PM2.5 through the NAAQS process as the proffered

health effects attributable to PM2.5 have never been independently verified. In the 1997 PM

NAAQS, EPA justified the critical standards on only two data sets, the Harvard “Six Cities” and

American Cancer Society (ACS II) studies. At the time, the underlying data for the studies were

over a decade old and were vulnerable to even the most basic scrutiny. Yet the use of such weak

studies reveals another lesson from EPA’s Playbook: shield the underlying data from scrutiny.

Since the 1997 standards were issued, EPA has steadfastly refused to facilitate

independent analysis of the studies upon which the benefits claimed were based. While this is

alarming in and of itself, this report also reveals that the EPA has continued to rely upon the

secret science within the same two studies to justify the vast majority of all Clean Air Act

regulations issued to this day. In manipulating the scientific process, Beale effectively closed the

door to open scientific enquiry, a practice the Agency has followed ever since. Even after the

passage in 1999 of the Shelby Amendment, a legislative response to EPA’s secret science that

requires access to federal scientific data, and President Obama’s Executive Orders on

Transparency and Data Access, the EPA continues to withhold the underlying data that originally

supported Beale’s efforts.

After President Clinton endorsed the 1997 NAAQS and the Agency celebrated their

finalization, Beale became immune to scrutiny or the obligation to be productive for the

remainder of his time at the Agency. Similarly, the product of his labors have remained intact

and have been shielded from any meaningful scrutiny, much the same way Beale was protected

by an inner circle of career staff who unwittingly aided in his fraud. Accordingly, it appears that

the Agency is content to let the American people pay the price for Beale and EPA’s scientific

insularity, a price EPA is still trying to hide almost twenty years later.

After reaching the pinnacle of his career at the Agency in 1997, and facing no

accountability thereafter, Beale put matters on cruise control and enjoyed the lavish lifestyle that

the highest paid EPA employee could afford, producing virtually no substantive work product

thereafter. For Beale’s successes in the 1997 NAAQS process, Beale was idolized as a hero at

the Agency. According to current EPA Administrator, Gina McCarthy, “John Beale walked on

water at EPA.” This unusual culture of idolatry has led EPA officials to blind themselves to

Beale’s wrongdoing and caused them to neglect their duty to act as public servants. As such, to

this day EPA continues to protect Beale’s work product and the secret science behind the

Agency’s NAAQS and PM claims.

iii

FINDINGS

• After Robert Brenner assumed the position of Deputy Director of Office of Policy,

Analysis, and Review (OPAR), within the office of Air and Radiation, (OAR) in 1988, he

recruited John Beale to work for him in OPAR, and arranged to pay his friend the highest

step on the General Service pay scale, despite the fact that Beale had no prior government

experience.

• Brenner’s decision to hire Beale was based solely on their personal relationship and not

on Beale’s qualifications. Beale himself admitted that he had no environmental

experience. In the critical area of federal legislative experience, Beale’s supposed

qualification was an unpaid undergraduate internship for Senator John Tunney (D-CA).

• In 1994, Beale started spreading his most notorious lie, that he was an operative for the

CIA. Apparently the lie began as a joke by Beale’s coworkers, which Beale then seized

upon and spun into a full blown false identity.

• At the same time, under Beale and Brenner’s control, OPAR grew in both scope and

influence, stretching the boundaries of OPAR’s authority. According to a former high

ranking official, OPAR was Brenner’s “fiefdom” where he was considered to be “the

most influential career person at [the] Agency [as] head of OPAR.”

• Beginning in 1995, Beale and Brenner took the lead on EPA’s internal process to set

National Ambient Air Quality Standards (NAAQS) for Ozone and Particulate Matter

(PM). The duo set in motion “EPA’s Playbook,” a strategy to game the system by

compressing the Office of Information and Regulatory Affairs (OIRA) review via a

friendly sue-and-settle arrangement, relying on secret science, and inflating benefits

while underestimating costs.

• Evidence suggests that Beale used the NAAQS as a vehicle for his own self-aggrandizement

and rose above reporting just to Brenner and began to work alongside

Mary Nichols, the Assistant Administrator (AA) for OAR at the time, as well as thenAdministrator

Carol Browner.

• With these standards, EPA sought to regulate fine particulates (PM2.5) in addition to

larger particles (PM10) for the first time under the NAAQS, despite a distinct lack of

scientific understanding of the integrity of the underlying data.

• The two studies EPA relied upon, known as the Harvard “Six Cities” and American

Cancer Society (ACS II) studies, were and remain controversial. EPA’s own scientific

advisors warned EPA that the Six Cities study was “not in the peer-reviewed literature”no cite

and emphasized that there were significant uncertainties with the data, meaning EPA’s

decision to proceed with the standards was a pure “policy call.”

• Both Administrator Carol Browner and AA Mary Nichols admitted that neither of them

had actually read the studies. Rather, it appears that Browner and Nichols deferred to the

“expertise” of EPA’s career staff — Beale and Brenner — to make this “policy call.”

• Beale led EPA’s effort to suppress interagency criticism of the standards and issued the

“Beale Memo,” threatening OIRA officials who dared to criticize EPA in a letter to

Congress. EPA tried to hide the existence of the Beale Memo from Congress, but was

undermined by a conscientious whistleblower who surreptitiously turned over the memo

to Congressional staff.

• Beale used his leadership on the 1997 Ozone and PM NAAQS as a justification for

nearly all of his monetary awards. At the end of the Clinton Administration, Brenner

pushed through a renewal of Beale’s retention incentive bonus and recommended him for

a promotion to Senior Leader. This made Beale one of the highest paid, non-elected

federal government employees. He also used his work on the 1997 NAAQS as the

foundation necessary to secure his colleagues’ confidence, which paved the way for his

future lies and abuse of his leadership position at the Agency.

• When current Administrator Gina McCarthy was Beale’s supervisor, she was reportedly

very impressed with Beale’s intelligence and leadership ability when she moved him in

2010 to be the immediate office’s lead for all of OAR’s international work.

• In 2010, Brenner accepted an illegal gift from his golfing buddy, prominent DC attorney,

and member of the Clean Air Act Advisory Committee, Pat Raher; but retired in August

2011, before the Agency could take administrative action against him and the EPA Office

of Inspector General (OIG) could question him on the matter.

• Beale stopped showing up to work at EPA in June 2011; however, he never filed his

retirement paperwork. His ability to continue to collect his salary without doing any

work for EPA was facilitated by an arrangement he made with McCarthy before he left

the Agency, as he had no set termination date. In December 2012, McCarthy met with

Beale for the first time in nearly fifteen months, and he informed her that he was no

longer planning on retiring. Two more months passed before concerns with Beale were

officially reported to the OIG.

• On March 4, 2013, President Barack Obama nominated McCarthy to replace Lisa

Jackson as head of the EPA. EPW Republicans made transparency, including data

access, a priority throughout her confirmation process. Specifically, EPW Republicans

sought the Agency’s secret science used to justify nearly all regulations issued under the

Clean Air Act. This underlying science is the exact same science that Beale relied on in

setting the 1997 PM NAAQS.

• On April 30, 2013, McCarthy had cause to fire Beale, but instead elected to allow him to

voluntarily retire with full benefits.

• On July 9, 2013, the EPA finally agreed to initiate the process of acquiring and turning

over the secret data to EPW Republicans. On July 18, 2013, McCarthy was sworn in to

be the next Administrator of EPA. On August 21, 2013, pursuant to the agreement

regarding McCarthy’s confirmation, EPW Republicans received the first tranche of

scientific data.

• On August 23, 2013, the Department of Justice filed criminal charges against John Beale

and on September 27, 2013, Beale pled guilty to government theft of nearly $900,000,

pursuant to a plea agreement covering Beale’s crimes from 2000 to 2013.

• Several of Beale’s former colleagues submitted letters to the court requesting leniency in

Beale’s sentencing, including one key official from the 1997 NAAQS, Lydia Wegman.

These officials’ reaction to the scandal suggests that an individual can steal a million

dollars from taxpayers and perpetrate a crime for nearly two decades, but still be

considered — by some — as an environmental legend.

• On December 18, 2013, Beale was sentenced to 32 months in federal prison. Even after

his voluntary confession and subsequent conviction, many of his former colleagues refuse

to view him as a criminal. Some at EPA have clung to the narrative that Beale was CIA,

and believe that Beale was being abandoned by his former agency.

• On March 11, 2014, Senator Vitter sent a letter to the EPA inquiring where they were in

the process of being able to de-identify the datasets, a necessary step to making the data

accessible for independent reanalysis.

• On March 17, 2014, Senator Vitter sent a letter to Dr. Francesca Grifo, EPA’s Scientific

Integrity Official, regarding concerns with EPA continuing to violate the Organization for

Co-operation and Economic Development’s (OECD) guidelines for “Best Practices for

Ensuring Scientific Integrity and Preventing Misconduct.” The letter focused on data-related

misconduct (“not preserving primary data,” “bad data management, storage,”

“withholding data from the scientific community”) and outlining the serious concern that

Harvard, American Cancer Society, the researchers, and the EPA were likely responsible

for similar data-related misconduct as an OECD member country.

Contents

INTRODUCTION....................................................................................................1

I. WHERE IT BEGINS: Origin of an Alliance ..................................................2

a. A Friendship for Life......................................................................................................................................2

b. Establishing a Partnership at EPA ...............................................................................................................5

II. GAMING THE SYSTEM: Fooling EPA and the Public...............................7

a. Clinton Years: Creating an Infrastructure for Long-Term Abuse ............................................................7

b. George W. Bush Years: Waning Influence and Testing Patience ............................................................11

c. Obama Administration: Pinnacle of Fraud................................................................................................14

d. The Escape Plan: Joint “Retirement”.........................................................................................................16

III.ESTABLISHING EPA’S PLAYBOOK: BEALE AND 1997 NAAQS.......20

a. Beale and Brenner’s Tentacles Through EPA ...........................................................................................20

b. 1997 NAAQS Made Beale an EPA Legend ................................................................................................23

i. Beale’s PM2.5 “Policy Choice” Made History ........................................................................................25

ii. Beale Practices Damage Control over PM and Ozone NAAQS...........................................................35

c. A Sustainable Strategy: Beale and Secret Science Above Reproach........................................................39

i. EPA Shielded the Secret Science.............................................................................................................39

ii. Beale Made Friends in the Right Places During NAAQS.....................................................................41

iii. Beale Used NAAQS to Advance Fraud ..................................................................................................43

IV. SECRET AGENT AND SECRET SCIENCE: Still Plaguing Americans .45

a. Inflated PM2.5 Benefits Provide Cover for EPA’s Regulatory Agenda....................................................46

b. EPA Continues to Shield Secret Science.....................................................................................................50

c. Congress Fights for Transparency and Access to Secret Science.............................................................53

CONCLUSION.......................................................................................................58

vii

INTRODUCTION

The actions of John C. Beale, a former senior official at the U.S. Environmental

Protection Agency (EPA) who claimed to be a CIA agent for years and was later convicted of

fraud and stealing nearly $900,000 from American taxpayers, have disgraced the Agency and

raised questions about the integrity of the Agency’s management and oversight abilities. In

addition to investigating EPA’s incompetence in the Beale saga, the Senate Committee on

Environment and Public Works (EPW) staff has examined the ripple effects of Beale’s tenure

with the Agency. More specifically, staff has determined that Beale played a leading role in

shaping some of our nation’s most significant air regulations.

During the 1990s, Beale was instrumental in creating and implementing major

regulations pursuant to the Clean Air Act (CAA), which have shaped the nation’s most

expansive and overreaching environmental efforts for nearly two decades. Unambiguously,

Beale spearheaded the National Ambient Air Quality Standards (NAAQS) for Ozone and

Particulate Matter (PM) in 1997, which were justified using data from two controversial studies

that EPA has refused to share with Congress and the American public. These standards have

affected all aspects of the U.S. economy, with a profound impact looming on Americans’ utility

costs.

Working with Beale through the years was his self-described best friend Robert Brenner,

former Director of the Office of Policy, Analysis, and Review (OPAR) within the Office of Air

and Radiation (OAR), who recruited Beale to EPA. Evidence suggests that Brenner played a

pivotal role in Beale’s fraud. Additionally, for over a decade the two developed controversial

regulations under the CAA, establishing what this report refers to as “EPA’s Playbook” by which

EPA would expand and exacerbate its control over the U.S. economy. As the two men prepared

to jointly retire in 2011, Brenner highlighted their unique relationship and described Beale’s

influence in shaping EPA’s regulatory agenda:

I wanted to tell you what I should have said last night: it’s no coincidence that

OAR’s greatest legislative, regulatory and international successes came when you

were around to develop the strategy and make sure we all did our jobs in

carrying it out. There is just no one better at it than you.

Back in ‘88, I thought I’d get to spend 2 or 3 years working with you on a pretty

cool political/policy project. I still can't believe it turned into 23 years of working

with my best friend to try to make some good things happen--I lucked out.1

This report will detail the history of Beale and Brenner’s personal and working relationship, how

this relationship contributed to the most significant scandal in EPA history, and how these two

individuals were at the heart of constructing a heavy-handed regulatory agenda with long-lasting

and economically devastating effects

...

graduate degree,9 and then pursued a Master in Public Affairs at Princeton University. 10

...

illustrate one of the first examples of EPA employing the practice of “sue and settle,”224 whereby friendly plaintiffs sue the Agency and agree to settle on mutually agreeable terms reached behind closed doors without public participation.225 In the case of the 1997 NAAQS, the ALA lawsuit resulted in a consent decree ordering EPA to propose standards for PM by November 29, 1996, and to issue final standards by July 19, 1997.226 The consent decree was silent on the deadline for Ozone NAAQS. When EPA sent the proposed standards to the Office of Management and Budget (OMB) for review on November 4, 1996, the proposal included not just standards for PM, but ozone as well.227 EPA was not required to reconsider the ozone standard until 1998, since the Agency had just completed a review of ozone in 1993.228 However, it appears that Beale and Brenner made a “policy call”229 and determined that the Agency should propose standards for ozone in conjunction with the PM standards, which were subject to the court-imposed deadline. In proposing the Ozone and PM NAAQS in tandem, many scientific and analytical uncertainties were overlooked or deliberately ignored to comply with the compressed timeline

...

Ignoring Inconvenient Science The “policy choice” to simultaneously propose standards for ozone and PM was challenged on multiple fronts. In the first instance, scientific support was lacking due to the abbreviated analysis. According to CASAC, the science supporting a more stringent ozone standard was not sufficient.232 Despite this pushback from CASAC, EPA moved forward with the standards which had two major flaws: EPA ignored key health effects of reduced ozone and dramatically downplayed the costs of the standard. Overall it has been characterized that “EPA’s decision appears to be an overzealous grab for more administrative authority and a willingness to ignore unpleasant facts.”233 Specifically, EPA did not consider negative health impacts of decreased ozone, which included an increase in malignant and non-melanoma skin cancers and cataracts from increased exposure to ultraviolet B (UV-B) rays.234 Other federal entities, such as the President’s Council of Economic Advisors as well as CASAC, brought the omission to EPA’s attention. According to the Department of Energy, EPA’s ozone standard would cause “twenty-five to fifty new melanoma-related fatalities per year, 130 to 260 new cases of cutaneous melanoma, and 2,000 to 11,000 new cases of non-melanoma skin cancer, as well as 13,000 to 28,000 new cases of cataracts yearly.”235 CASAC concluded that there was no “bright line” on the appropriate standard for ozone since EPA’s proposal was too close to background levels (naturally occurring) of ozone.236 At the time, 86 percent of volatile organic compounds — a key ingredient in ozone production — were naturally emitted from plants and trees.237 Accordingly,

231 Letter from George T. Wolff, Chair, Clean Air Scientific Advisory Comm., to Carol Browner, Clean Air Scientific Advisory Committee (CASAC) Comments on the November, 1995 Drafts of the Air Quality Criteria for Particulate Matter and the Review of the National Ambient Air Quality Standards for Particulate Matter: Policy Assessment of Scientific and Technical Information (OAQPS Staff Paper) 4 (Jan. 5, 1996), available at http://yosemite.epa.gov/sab/sabproduct.nsf/BF3677846E679602852571A90065CC94/$File/casac03.pdf. 232 See Letter from Clean Air Scientific Advisory Committee to Carol Browner, CASAC Closure on the Primary Standard Portion of the Staff Paper for Ozone (Nov. 30, 1995) [hereinafter CASAC Ozone Closure Letter] (on file with Committee). 233 Randall Lutter, Economic Analysis and the Formulation of U.S. Climate Policy, in PAINTING THE WHITE HOUSE GREEN: RATIONALIZING ENVIRONMENTAL POLICY INSIDE THE EXECUTIVE OFFICE OF THE PRESIDENT 46, 48 (Randall Lutter & Jason F. Shorgen eds., 2004). 234 See MICHAEL FUMENTO, POLLUTED SCIENCE: THE EPA’S CAMPAIGN TO EXPAND CLEAN AIR REGULATIONS 48 (1997) (citing Letter from Ari Patrinos, Assoc. Dir. for Health & Evntl. Research, Dep’t of Energy, to John Bachman, Office of Air Quality Planning & Standards, Envtl. Prot. Agency (Jan. 4, 1995)). 235 Id. 236 CASAC Ozone Closure Letter, supra note 232, at 2. 237 FUMENTO, supra note 234, at 47 (citing Tom Spears, Trees Contribute to Smog, OTTAWA CITIZEN, Feb. 14, 1994, at A1).

...

Another concern with EPA’s proposed standards was the lack of data on actual human exposure to PM2.5. In Congressional testimony, one CASAC member called on EPA to stop making such assertions because “that causal relationship has not been proven” and explained that there is “a consensus [among CASAC members] that, in the strictest sense, causality has not been proven.”246 Administrator Browner eventually admitted to the Senate EPW Committee that monitors for measuring human exposure to PM2.5 were limited to only 55 cities.247 By contrast, there were 1,700 cities equipped with PM10 monitors. 248 Given the lack of data resulting from the limited number of monitors, EPA was also unable to assess how many counties would be in nonattainment, something the Agency would need to know in order to calculate whether the standards achieved the requisite benefits. These complaints were supported by the fact that EPA set the standards by relying on only a couple of studies. According to the President’s science advisors in the Office of Science and Technology Policy, “The database for actual levels of PM2.5 is also very poor, and only a handful of studies have actually studied PM2.5 per se.”249 In fact, of the five studies EPA relied upon in setting the PM NAAQS, only two of them conducted primary research on the effects of PM2.5, while the conclusions of the other three were based solely on the primary research conducted by the other two. 3. Known Problems with Key Studies The two studies EPA relied upon, known as the Harvard “Six Cities” and American Cancer Society (ACS II or CPS II) studies, were and remain controversial as they rely on primary research that was conducted more than 15 years prior to their selection by EPA — well before advancements in air quality. The Six Cities study was a long-term cohort study of the health effects associated with airborne pollutants, which dated back to 1970. Subjects were 8,069 randomly-selected adults living near coal-burning power plants in six U.S. cities that had a wide range of levels of ambient particles and gaseous pollutants. According to the study, there was a statistically significant relationship between PM and adverse health effects in three of the six cities, which formed the basis for a conclusion that those residing in polluted cities have a ...

When Dr. Jones refined EPA’s estimates based on the new formula, he found that rather than 15,000 deaths per year, the estimate should be less than 1,000.261 As Dr. Jones explained, “the agency has failed to recognize that the correction of the error causes the justification for the proposed PM2.5 standard to disappear.”262 Moreover, Sally Katzen, Administrator of the Office of Information and Regulatory Affairs (OIRA), informed Congress that there was such “substantial scientific uncertainty in the risk analyses” that “additional work had to be done.”263 However, EPA did not conduct “additional work” and failed to acknowledge Dr. Jones findings, thereby finalizing the rule based on the incorrect estimate of 15,000 deaths per year, therefore, EPA dramatically inflated the benefits associated with reductions in PM2.5.

...

The Six Cities study also failed to consider changes in humidity and temperature, which would have been constructive given that higher temperatures were associated with a 30% increase in mortality.271 This issue was broached bySenator Jeff Sessions (R-AL) during a February 1997 EPW Committee hearing in which one author of the Six Cities study, Dr. Schwartz, explained that they did not calculate for dewpoint, which is a measure of humidity, because “frankly [he] hadn’t seen humidity being put in lots of other studies.”272 However, EPA even noted in its analysis provided to CASAC that “most [short-term PM studies] include temperature a

e segment on The Daily Show with Jon Stewart (December 18, 2013).

....

The reality is that in 2012, eighty-five coal-fired power plants retired.377 Five times as much coal-generating capacity is expected to retire in the next six years alone,378 even as electric grid reliability in the Northeast became a dangerous and costly issue this winter. 379 According 368 Id. at Figure 1. 369 Id. The only times that EPA has deviated from this trend recently “have been rules addressing greenhouse gases (GHGs) under the CAA.” Id. 370 Id. at 8. 371 SMITH, supra note 364, at 9 (emphasis added). 372 Id. at Figure 1. 373 National Emission Standards for Hazardous Air Pollutants From Coal- and Oil-Fired Electric Utility Steam Generating Units and Standards of Performance for Fossil-Fuel-Fired Electric Utility, Industrial-CommercialInstitutional, and Small Industrial-Commercial-Institutional Steam Generating Units, 77 Fed. Reg. 9,304 (Feb. 16, 2012) (to be codified at 40 C.F.R. pts. 60, 63). 374 Id. (internal citation omitted). 375 Id. (citing ENVTL. PROT. AGENCY, REGULATORY IMPACT ANALYSIS OF THE PROPOSED TOXICS RULE: FINAL REPORT 1-1 (2011)). 376 Regulating to Regulators: Enforcing Accountability in the Rulemaking Process, CENTER FOR REGULATORY SOLUTIONS, http://centerforregulatorysolutions.org/wp-content/uploads/2014/02/Regulating-theRegulators_Enforcing-Accountability-in-the-Rulemaking-Process1.pdf (last visited Feb. 27, 2014). 377 See AEO2014 projects more coal-fired power plant retirements by 2016 than have been scheduled, ENERGY INFO. ADMIN., http://www.eia.gov/todayinenergy/detail.cfm?id=15031 (last visited Mar. 17, 2014). 378 See id. 379 See Matthew L. Wald, Coal to the Rescue, but Maybe Not Next Winter, N.Y. TIMES, Mar. 10, 2014, http://www.nytimes.com/2014/03/11/business/energy-environment/coal-to-the-rescue-this-time.html?_r=0.

Since Beale’s success in pushing through the 1997 NAAQS, EPA has increasingly relied upon benefits from reduced PM2.5 to inflate the benefits of costly regulations. 47 to the American Coalition for Clean Coal Electricity (ACCCE) things are soon to get more dangerous and far worse.380 EPA also used PM2.5 co-benefits to justify imposing costly control technology under the Regional Haze rule. Regional Haze, unlike the other provisions of the Clean Air Act, deals purely with visibility impairments and not health. However, EPA officials, including Robert Brenner, have encouraged the use of PM2.5 co-benefits to justify requiring power plants to install excessively costly pollution control.381 Even so, the increased cost of such controls is known to yield no perceivable visibility benefits.382 Since the 1997 Ozone and PM NAAQS, EPA has relied on supposed PM2.5 benefits to defend 32 major rules.383 Despite these questionable PM co-benefits, under the Obama Administration, these rules have been associated with the greatest cost on the economy, including: • Utility MACT — EPA estimated $9.6 billion annualized costs, 384 • Boiler MACT — EPA estimated $1.9 billion annualized costs, 385 and • Tier III Gasoline Sulfur Rule — EPA estimated $1.5 billion annualized costs. 386 Critically, EPW staff anticipates that EPA will also use co-benefits of supposed PM2.5 reduction in justifying its 2015 Ozone NAAQS, which is expected to carry an annual cost of approximately $19 to $90 billion.387 EPA has also changed the standards and formulation for determining the value of PM2.5 co-benefits in recent years, further distorting EPA’s cost benefit analysis. In 2009, for example, EPA modified its analysis and “greatly increased those co-benefits estimates-and did so in a way that [some] consider to have no scientific credibility.”388 This change, coupled with increased reliance on PM2.5 co-benefits, has caused a drastic increase in the theoretical benefits estimates for a significant share of EPA’s air regulations.

389 This strategic behavior has allowed the 380 Memorandum by Am. Coalition for Clean Coal Electricity, Coal Unit Shutdowns (Jan. 26, 2014), available at http://www.cleancoalusa.org/sites/all/files/Coal_Unit_Retirements_JAN_26_2014.pdf. 381 E-mail from Robert Brenner to Janet McCabe (Aug. 4, 2011 10:22 EST) (on file with Committee). 382 WILLIAM YEATMAN, U.S. CHAMBER OF COMMERCE, EPA’S NEW REGULATORY FRONT: REGIONAL HAZE AND THE TAKEOVER OF STATE PROGRAMS 7 (2012). 383 See Appendix A (list of rules). 384 National Emission Standards for Hazardous Air Pollutants From Coal- and Oil-Fired Electric Utility Steam Generating Units and Standards of Performance for Fossil-Fuel-Fired Electric Utility, Industrial-CommercialInstitutional, and Small Industrial-Commercial-Institutional Steam Generating Units, 77 Fed. Reg. at 9,304. 385 National Emission Standards for Hazardous Air Pollutants for Area Sources: Industrial, Commercial, and Institutional Boilers 76 Fed. Reg. 15,554, 15,582 (Mar. 21, 2011) (to be codified 40 C.F.R. pt. 63). 386 Control of Air Pollution From Motor Vehicles: Tier 3 Motor Vehicle Emission and Fuel Standards, 78 Fed. Reg. 29,816 (proposed May 21, 2013) (to be codified at various pts. of 40 C.F.R.). 387 NAM D. PHAM & DANIEL J. IKENSON, NDP CONSULTING, A CRITICAL REVIEW OF THE BENEFITS AND COSTS OF EPA REGULATIONS ON THE U.S. ECONOMY 13 (2012), available at http://www.nam.org/_{/media/423A1826BF0747258F22BB9C68E31F8F.ashx}. 388 Quality Science for Quality Air: Hearing Before the Subcomm. on Energy and the Env’t of the H. Comm. on Sci., Space, & Tech., 112th Cong. 5 (2011) (statement of Anne E. Smith).

389 Id. 48 Administration to disregard the high cost of CAA regulations as they are seemingly justified by inflated benefits.390 EPA is not the only federal agency taking advantage of PM2.5 co-benefits. The Office of Management and Budget (OMB) has routinely provided inflated analysis to Congress of the net benefits and costs of agency regulations, by not properly addressing the inflated use of PM2.5 cobenefits. Specifically, OMB’s annual report to Congress on the costs and benefits of federal regulations has increasingly relied on PM2.5 reductions to justify burdensome rules. Prescribed by statute, OMB must provide Congress an annual report on the costs and benefits, including quantifiable and non-quantifiable effects, of federal regulations.391 In its most recent report, OMB found that “the rules with the highest benefits and the highest costs, by far, come from the Environmental Protection Agency and in particular its Office of Air and Radiation.”392 OMB estimated that EPA’s Office of Air and Radiation accounted for nearly $109.4 to $629.1 billion in benefits compared to $29.4 to $35.3 billion in costs.393 OMB also found that EPA rules over the past ten years, “account for 58 to 80 percent of the monetized benefits and 44 to 54 percent of the monetized costs” of all federal regulations.394 In 2012 alone, EPA was by far the largest contributor of benefits and costs related to major regulations.395 For example, OMB highlighted that EPA issued three rules totaling $28.5 to $77 billion in benefits and $8.3 billion in costs.396 In comparison, the Department of Energy recorded the next highest balance of benefits and costs with two rules totaling $1.8 to $3.4 billion in benefits and $0.3 billion to $0.7 billion in costs.397 OMB recognizes that these air rule benefits are “mostly attributable to the reduction in public exposure to a single air pollutant: fine particulate matter” or PM2.5. 398 However, “PM2.5 benefits . . . figure prominently in regulations whose purpose is not to reduce PM2.5,” and OMB has acknowledged that these co-benefits may inflate benefit estimates.399 Further, in 2008, 2010, and 2012 “co-benefits comprise[d] over 50 percent of total benefits . . . and appear to be growing in prominence” under the Obama Administration.400 Susan Dudley, former Administrator of the Office of Information and Regulatory Affairs within OMB revealed:

390 OFFICE OF MGMT. & BUDGET, EXEC. OFFICE OF THE PRESIDENT, 2013 DRAFT REPORT TO CONGRESS ON THE BENEFITS AND COSTS OF FEDERAL REGULATIONS AND AGENCY COMPLIANCE WITH THE UNFUNDED MANDATES REFORM ACT 18 (2013), available at http://www.whitehouse.gov/sites/default/files/omb/inforeg/2013_cb/draft_2013_cost_benefit_report.pdf. 391 Consolidated Appropriations Act of 2001, Pub. L. No. 106-554, § 624, 114 Stat. 2763, 2763A-161–62. 392 2013 DRAFT REPORT TO CONGRESS ON THE BENEFITS AND COSTS OF FEDERAL REGULATIONS AND AGENCY COMPLIANCE WITH THE UNFUNDED MANDATES REFORM ACT, supra note 389, at 14 393 Id. at 13 394 Id. at 14. 395 Id. at 22. 396 Id. at Table 1-4.

Additionally, EPA issued a joint rule with the Department of Transportation accounting for the second largest amount of benefits and costs. 397 Id. 398 Id. 399 Susan E. Dudley, OMB’s Reported Benefits of Regulation: Too Good to Be True?, REGULATION, Summer 2013, at 28. 400 Id. 49

In 2008, 2010, and 2012 in particular, co-benefits from PM2.5 reductions represent significant portions of total upper bound benefits (in 2008, the NAAQS for another criteria pollutant, ozone, derived over 70 percent of its benefits from reductions in PM2.5). In 2010, four regulations claimed 100 percent of their benefits from ancillary reductions in PM2.5. . . . In 2012, 99 percent of the reported benefits from the EPA’s mercury and air toxics rules . . . were co-benefits.401 Dudley explained that “OMB’s role is to serve as a check against agencies’ natural motivation to paint a rosy picture of their proposed action.”402 However, it appears that OMB, while acknowledging problems associated with the use of co-benefits, has nonetheless endorsed and perpetuated EPA’s inflationary practice. The OMB has essentially codified the efforts of Beale and Brenner. In doing so, the Administration hides the true costs of EPA regulations and undermines the legitimacy of the costs and benefits of all federal regulations. Importantly, nearly all these benefits are calculated using the same underlying data from the original two studies Beale and Brenner used to justify the 1997 NAAQS for PM and ozone. They are the exact same studies that remain hidden from independent analysis almost 20 years later.

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