The National Conference of State Legislatures (NCSL) is the bipartisan organization that represents the nation's 7,541 state legislators. We assess federal legislation and regulation to ensure that state and federal responsibilities are appropriately sorted out. We further work to remove impediments to successful implementation of federal law and regulation. Also, NCSL serves as the key resource for state lawmakers for information and analysis of federal legislative and regulatory actions on environmental and other issues.
NCSL is a strong supporter of the principles underlying the Clean Air Act Amendments of 1990. NCSL has repeatedly and forcefully stated its view that the federal government should implement and maintain an environmentally sensitive and cost-effective clean air policy that establishes minimum national ambient air quality standards in cooperation and consultation with state and local governments.
NCSL supports minimum federal standards for ambient particulate matter and ozone. Protection of human health and preservation of the environment are a top priority for states. NCSL urges EPA to proceed diligently with full implementation of the Clean Air Act to achieve healthy air quality for the public and the environment. Specifically, NCSL believes that both stationary and mobile sources must reduce emissions of ozone and particulate matter precursors, nitrogen oxide (NOx) and volatile organic compound (VOC).
NCSL does not possess the scientific or technical expertise required to evaluate and comment on the specific standards set out in the proposed rules. NCSL believes it would be imprudent to make educated, but not expert, guesses regarding the support or opposition to the proposed standards.
However, NCSL has serious concerns related to the process of promulgation of the proposed rules to revise the standards for ozone and particulate matter. The concerns result largely from the failure of the U.S. Environmental Protection Agency (EPA) to comply with federal law and Presidential executive orders on unfunded mandate relief. The concerns do not focus on the new standards or the underlying science that is the basis for the new standards. NCSL refrains from commenting on the content of the proposed rules for new particulate matter standards and revised ozone standards.
My testimony will focus solely on the process by which EPA developed the rules and its failure to comply with provisions of the Unfunded Mandate Reform Act of 1995 and two Presidential executive orders. NCSL asserts that in order to adhere to provisions of the Unfunded Mandates Law and Executive Orders 12866 and 12875, EPA is required to:
1. Assess the full cost of state compliance with the revised standards.
2. Disclose all federal resources available to states for compliance activities.
3. Identify and assess all alternatives to the proposed revisions and select the least burdensome and most cost-effective option.
4. Consult and work closely with state and local governments during promulgation and implementation of the revised standards.
5. Provide full federal funding and complete guidance for state implementation.
6. Publish detailed explanations of the reasons for revising the standards.
NCSL makes these recommendations as an organization with a commitment to the Clean Air Act. NCSL believes the Clean Air Act Amendments of 1990 address important air quality issues and are essential to protecting public health and the environment. At the same time, in order to meet the goals of the Clean Air Act, Congress and the EPA must fulfill their responsibilities to provide financial and technical assistance to states. Moreover, EPA has a legal and ethical obligation to meet the requirements of UMRA and Executive Orders 12866 and 12875.
The Unfunded Mandate Reform Act of 1995
The Unfunded Mandate Reform Act (UMRA) is an historic piece of legislation that recognizes the threat to our constitutional system of federalism represented by federal legislation that imposes costs and requirements on state and local governments without regard to their ability to comply. Among others, the purposes of the Act are "to promote informed and deliberate decisions, by Congress on the appropriateness of federal mandates in any particular instance."
EPA is obligated by law to adhere to UMRA during promulgation of revisions to ozone and particulate matter standards. With the enactment of UMRA, Congress promised states relief from the burden of unfunded mandates and further promised states that federal agencies would work cooperatively with them to develop regulatory alternatives that are less expensive and more cost-effective. Congress understood that federal mandate relief efforts will preserve the financial viability of state governments, thus ensuring successful implementation of federal laws and regulations.
Title II of UMRA requires federal agencies to prepare and consider estimates of the budgetary impact of regulations containing unfunded federal mandates on state, local and tribal governments, unless otherwise prohibited by federal law. Congress imposed this requirement on federal agencies in order to generate the data necessary for informed congressional decisions on regulatory and appropriations issues. NCSL believes that the aggregate economic burden of the proposed air quality standards are great enough to trigger further congressional action to reduce the burden on the states, either by increasing appropriations or relieving regulatory burdens. Furthermore, UMRA requires EPA to generate estimates of mandate costs in order to develop less burdensome regulatory alternatives.
Executive Orders 12866 and 12875
President Clinton issued Executive Order 19866 "Regulatory Planning and Review" in September, 1993, in response to states' concern of being overwhelmed by the cumulative effect of unfunded mandates. The intent of 12866 is to establish "a regulatory system that protects and improves health, safety, and well-being of the American public and the environment, and improves the performance of the economy without imposing unacceptable or unreasonable costs on society."
The President issued Executive Order 12875 "Enhancing the Intergovernmental Partnership" in October 1993 as a supplement to 12866. Under 12875, federal agencies are specifically directed to reduce unfunded mandates on state, local and tribal governments and increase their flexibility in complying with federal regulations.
The orders demonstrate the Administration's commitment to relieving the economic burden of unfunded federal mandates on the states. Though EPA partially complied with Executive Order 12866 by submitting information to OMB, EPA has an obligation to fully comply with Executive Orders 12866 and 12875 by adopting the most cost-effective options when promulgating the proposed changes to the national air quality standards for ozone and particulate matter.
In response to the proposed changes to the national ambient air quality standard for particulate matter and ozone, NCSL asserts that EPA is required to strictly adhere to the following provisions of UMRA and Executive Orders 12866 and 12875:
1. EPA must assess the full cost of state and local compliance with regulatory actions to revise the national ambient air quality standards for particulate matter and ozone.
[UMRA Section 201 and Executive Order 12866 Section 1(b)(3)]
UMRA and Executive Order 12866 require EPA to estimate the aggregate economic impact that the revised standards will have on state, local and tribal governments. If the estimated aggregate annual expenditures of the rule is $100 million or more, the rule is considered a "significant regulatory action" that triggers requirements to complete and publish with the rule the following in-depth analysis:
1. Qualitative and quantitative assessment of the anticipated costs and benefits of the mandate;
2. Analysis of federal financial assistance and other federal resources available to state, local,
and tribal governments;
3. Estimates of future compliance costs;
4. Analysis of any disproportionate budgetary effects on any regions, states, localities and tribes;
5. Estimates of the effects on the national economy;
6. Reports of EPA's prior consultation with elected state, local and tribal officials;
7. Summary of submitted comments from the various levels of government; and
8. EPA's evaluation of those comments.
EPA produced regulatory impact analyses, pursuant to Executive Order 12866, that assess the costs, economic impacts and benefits associated with implementation of the revised standards. Though the revised standards are "significant regulatory actions," EPA claims, in the regulatory impact section of the proposed rules, that it does not have to comply with UMRA because "it is inconsistent with applicable law." EPA has failed to produce most of the required in-depth analyses listed above, specifically numbers two through eight, and failed to publish, as part of the proposed rule in the Federal Register, any of the analyses.
Estimates of how much money state, local and tribal governments will need to spend to comply with the revised air quality standards are critical. The President of the United States as well as Members of Congress have a need to know how much the revised standards will cost the states in order to make informed executive and legislative decisions regarding, not merely the Clean Air Act, but also the imposition of new mandates in other areas. Decisions by the President and Congress pertaining to funding of current and future mandates depend on accurate information from federal agencies regarding the financial burden on states and localities.
EPA's estimate must contain all costs associated with changing the air quality standards. This estimate should account for the costs of enactment of state authorizing legislation, promulgation of state regulations, development of new state air quality plans, construction of pollution control measures, and installation of monitoring stations.
Furthermore, estimates must account for the new, more stringent air quality programs that would be required in many states. Many areas have already employed efficient and effective air pollution control measures, such as HOV lanes and public transportation programs. In an attempt to reduce pollution levels even lower, some states may have to use expensive, inefficient, and potentially unpopular measures, such as the employer commute option program.
2. EPA must disclose all federal resources available to state and local governments that may be used to cover the cost of implementing and achieving the revised standards.
[UMRA Section 202]
UMRA requires EPA to disclose all federal funding and other resources available to states for implementation of the revised standards. Executive Order 12875 Section 1(a) takes this concept one step further by prohibiting EPA from imposing new standards that are not required by law unless there are federal funds available to cover the costs or, EPA can submit to OMB documentation of consultation with state officials and data supporting the need for the mandate. According to both proposed rules, EPA submitted documentation to OMB in partial compliance with Executive Order 12866, but neither rule contained notice of EPA compliance with Executive Order 12875. Again, NCSL asserts that EPA must fully comply with both Executive Orders 12866 and 12875.
3. EPA must select the least burdensome and most cost-effective option that will achieve the same level of public health protection.
[UMRA Section 205 and Executive Order 12866 Section 1(b)(3) and Section 1(b)(6)]
UMRA and Executive Order 12866 require EPA to assess and consider all options and to adopt the least expensive and most cost-effective alternative for achieving the intended goal of the proposed rules. In addition, Executive Order 12866 requires EPA to prepare a cost-benefit analysis to demonstrate that the benefits justify the costs of the proposed rule. NCSL asserts that EPA's failure to consider cost during the proposed rulemaking process was in violation of UMRA and both Executive Orders. Congress and the President clearly intended to require EPA to consider cost issues and implementation problems when setting revised standards.
NCSL disputes claims by EPA that it is prohibited from considering the cost of attaining revised national air quality standards. UMRA requires federal agencies, including the EPA, to assess the economic impact of their regulatory actions on state, local and tribal governments, as well as the private sector. Absent a clear statement by Congress that it intended to exempt Clean Air Act regulations from the coverage of the Unfunded Mandates Reform Act, the EPA may not presume that it is prohibited from considering the cost of attaining revised national ambient air quality standards. UMRA, Title I, Section 4 clearly lists the categories of federal law that are excluded from its coverage. The Clean Air Act is not one of the listed exclusions.
Furthermore, NCSL challenges EPA's assertion in testimony before the Senate Committee on Environment and Public Works that actions during the public health phase are completely independent from actions during the implementation phase. NCSL also disputes EPA's claim that the revised standards, in themselves, would not impose any additional cost or mandates. NCSL strongly believes that the chosen standard closely relates to the cost of implementation. Because the cost varies for different standards, NCSL asserts that the EPA must fully comply with UMRA and Executive Order 12866 by considering cost when adopting revised standards. Furthermore, EPA must adopt standards that are more cost-effective, more attainable, more acceptable to the public and more likely to be implemented successfully.
4. EPA must furnish state legislators with opportunities to provide meaningful input during development and implementation of any changes to the national ambient air quality standards.
[UMRA, Sec. 204; Executive Order 12866, Sec. 1(b)(9); and Executive Order 12875, Sec. 1(b)]
UMRA and Executive Orders 12866 and 12875 require EPA to consult and work with state legislators to reach a mutual understanding about how to further improve air quality without imposing such burdensome costs or unpopular control measures that the process breaks down. NCSL lauds EPA's coordination of the Clean Air Act Advisory Committee to fulfill this intergovernmental dialogue requirement. Listed among the members of the committee was a state senator from Maryland. NCSL understands that the state senator participates in advisory committee meetings and is content with the efforts that EPA is making to continue regular dialogue with the advisory committee.
Though EPA has fulfilled this obligation to date, NCSL would like to stress the importance and legal obligation of EPA to continue working with state legislators during promulgation of the revised standards. State legislators must draft, consider and enact enabling legislation to authorize new or amended state programs, including those required by federal law or regulation. Without enabling legislation, state agencies have no authority to administer state programs. In addition, state legislators are solely responsible for appropriating state funds that pay for state programs. State legislators, therefore, must not be dictated to, but rather must be made full partners in the process of defining and implementing mutual goals.
The states have a wealth of experience in implementing control programs. State legislators, similarly, have expertise in crafting environmental programs in ways that are sensitive to local values and conditions. NCSL encourages Congress and the EPA to pay particular attention to the voices of that expertise and experience. EPA should establish a regular process for communication with state legislators and should develop a working group of legislators to become more actively involved in the implementation process.
In addition to specific provisions discussed above, UMRA and Executive Orders 12866 and 12875 contain overall principles that federal agencies should follow during promulgation of federal regulations that impose unfunded mandates on states. NCSL asserts that EPA should adhere to those principles as follows:
5. EPA should provide full federal funding, complete technical guidance and maximum flexibility to states for compliance with the revised standards.
The imposition of new air quality standards without additional federal funds contradicts the commitment of the Administration and Congress to reduce the burden of unfunded mandates on states. NCSL believes that states must have full financial and complete technical assistance to ensure attainment of the new standards, and to cover in part the cost of new mandates on states.
NCSL understands that Clean Air Act, Section 105 is the main source of federal assistance for state air quality programs, including implementation of new national ambient air quality standards. Section 105 authorizes EPA to provide states with grants that cover up to three-fifths of the cost of implementing state plans. Because EPA determined that the proposed rules are "significant regulatory actions," meaning that the total annual cost of compliance will be in excess of $100 million each, NCSL seeks an explanation of why the budget request by EPA for Section 105 grants for fiscal year 1998 was only $157 million, merely $4 million more than estimated FY 1997 outlays. According to EPA estimates, $4 million in additional funding will not be enough to cover the costs associated with these revised regulations.
If EPA imposes new standards for ozone and particulate matter without providing accompanying financial and technical assistance, states will face a significant financial burden. If the challenge presented by this unfunded mandate burden cannot be met, states may face expensive and economically restrictive offset sanctions. The sanctioned area would experience additional economic hardship caused by the need to offset any new emission sources by twice as much reduction in other sources. This has the potential to significantly stunt economic growth. The depressive effects on local economies coupled with increasing cost of compliance may accelerate a downward spiral of non-compliance. Widespread non-compliance may undermine public support for the Clean Air Act and breed increased public cynicism about the government's ability to effectively administer programs.
6. EPA should publish detailed explanations of why the specific revisions are necessary and provide scientific evidence to support the estimated benefits to public health.
EPA must demonstrate to the satisfaction of federal, state and local officials as well as to the public that revised standards are necessary and that the new standards will increase protection of public health and the environment. NCSL fears that the controversy surrounding the revisions may arouse enough public opposition to ultimately reverse EPA's decision. If the revisions are rescinded after finalization, states may have entered into commitments, such as purchasing testing equipment or contracting for more public transit. It would be difficult and expensive for states to withdraw from contracts if the final revisions are rescinded.
In recent years, there have been cases where EPA has imposed a mandate on regulated entities and then, after a public outcry, retracted the mandate. In some cases, the regulated entities had complied with the mandate by entering into contractual and financial commitments based on the imposed mandate. These regulated entities were left with few options once the mandate had been rescinded: either pay large penalties to withdraw from legal and financial commitments or contend with an outraged public.
A classic example of this problem, as discussed above, is the mandate that required states to include IM-240 testing equipment as part of the enhanced inspection and maintenance program. Some states complied by including this technology in their air quality plan. These states bought land and financially committed to buy the expensive IM-240 equipment. Public opposition, fueled by expectations of long lines and costly inspections, convinced many states and finally the EPA to abandon the costly testing equipment. States now have the flexibility to choose the most efficient and effective technology for their enhanced inspection and maintenance program.
Rather than repeat the IM-240 fiasco, EPA is better advised to comply with UMRA and Executive Orders 12866 and 12875 in order to deal upfront with the cost and implementation problems.
Once again, NCSL asserts that EPA is required to strictly adhere to the provisions and principles of UMRA and Executive Orders 12866 and 12875 while promulgating revisions to the national ambient air quality standard for particulate matter and ozone. Clearly Congress and the President intended EPA to comply with these edicts by estimating and considering cost during its rulemaking actions. The burden of unfunded mandates on state, local and tribal government has become too great. Congress and the President recognized the looming threat of rampant unfunded mandates and have directed federal agencies to ameliorate the problem.
Mr. Chairman and members of the subcommittee, thank you for the opportunity to share the views of the National Conference of State Legislatures regarding the proposed revisions to the National Ambient Air Quality Standards for particulate matter and ozone.