Tuesday, January 18, 2011

Responses to Obama’s regulatory review order

Most oil and gas, as well as environmental, organizations did not respond immediately to US President Barack Obama’s Jan. 18 executive order for federal agencies to review their regulations and improve them where necessary. The National Petrochemical & Refiners Association did.

NPRA President Charles T. Drevna said that the order calls for elimination of federal regulations which hinder economic growth and job creation. “At a time when unemployment tops 9% and our nation’s vital manufacturing base is shrinking, President Obama is acting in the nation’s best interests,” Drevna said in a Jan. 18 statement. “By removing unnecessary regulatory burdens, the president can free up the mighty engine of our free enterprise system to create jobs and bring a return to prosperity for families across our nation.”

US Chamber of Commerce President Thomas J. Donohue also welcomed Obama’s order. “While a positive first step, a robust and globally competitive economy requires fundamental reform of our broken regulatory system,” he said on Jan. 18. “Congress should reclaim some of the authority it has delegated to the agencies and implement effective checks and balances on agency power. It also means repealing or replacing outdated or ineffective regulations, ensuring realistic cost-benefit analyses using quality data. No major rule or regulation should be exempted from the review, including the recently enacted health care and financial reform laws.”

At the core of Obama’s order is the idea that each federal agency should propose or adopt a regulation only after reasonably determining that its benefits justify its costs (recognizing that measuring such costs and benefits can be difficult). An agency should structure its regulations to impose the least burden on society while reaching regulatory objectives, “taking into account, among other things and to the extent practicable, the costs of cumulative regulations.”

It should select approaches which maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity. It should, to the extent feasible, specify performance objectives instead of specifying the behavior or compliance methods for regulated entities to adopt. And it should “identify and assess available alternatives to direct regulation, including providing economic incentives to encourage the desired behavior, such as user fees or marketable permits, or providing information upon which choices can be made by the public.”

Other responses to Obama’s order undoubtedly will appear after oil and gas and other groups study it more fully. But it initially looks as if the president has accepted the idea advanced by Republicans, the US Chamber, and other business organizations that new regulations’ potential costs should be honestly and objectively determined and considered before rules are finally adopted.

Two officials at the Center for Public Integrity at New York University’s School of Law said that the order is significant because it will give groups seeking stronger environmental, public health, and safety protections more tools. Richard Revesz, the law school’s dean and the center’s faculty director, said that the president made several noteworthy changes to the federal regulatory review process which progressive groups should embrace.

“First, he underscores the importance of considering the equitable distributional impacts of regulation, to protect the well-being of the most vulnerable groups in our society,” he said. “Second, he creates more opportunities for public participation. “Third, he expresses a strong commitment to scientific integrity, to prevent risk assessments from being skewed to promote political ends. Fourth, he incorporates under-regulation into retrospective review of rules, recognizing that too little regulation can be as pernicious as too much. Fifth, he asks for better coordination among federal agencies so that they don’t work at cross purposes. Sixth, he enhances the transparency of the regulatory process, so that the public can better evaluate the actions of the government.

“The cumulative effect of these changes is to balance the scales of cost-benefit analysis in the direction of strong and effective government protections for the American people,” Revesz maintained.

Michael Livermore, the center’s executive director, said that Obama opened new channels for public interest groups to make the case that stronger health and safety policies often make good economic sense. “By signing this document, Obama will reiterate his commitment to the pragmatic notion that data counts for more than demagoguery,” he said. “This move demonstrates the administration’s belief that when cost-benefit analysis is done right, the facts often support stronger protections.

“In the long term, this order is likely to displease those industry groups that want less regulation without regard to public benefits,” Livermore continued. “Balanced economics don’t work that way: Both the costs and the benefits of protecting Americans’ health and environment must be given equal weight. Obama’s move today will help those public interest groups seeking smarter stronger protections, and will help lead to a fairer fight in the regulatory arena.”


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