The U.S. Environmental Protection Agency (EPA) has released a cost-benefit analysis for a proposed rule aiming to tighten the federal standard for human exposure to ground-level ozone, also known as smog. Before its release, the White House Office of Management and Budget (OMB) edited scientific language in the analysis in order to downplay the economic benefits of the proposed rule.

On June 21, EPA announced a proposed rule revising the national standard for ground-level ozone. EPA proposed a range, 0.070 parts per million (ppm) to 0.075 ppm, from which it will choose a final standard. The current standard is 0.08 ppm. OMB reviewed and edited the proposed rule before EPA released it for public viewing. EPA's proposal has drawn criticism for being too weak to fully protect the public from the adverse health effects of ozone.

On Aug. 2, EPA released a cost-benefit analysis for the proposed rule. Executive Order 12866, Regulatory Planning and Review, requires agencies to prepare a detailed economic analysis for rules that may have an annual impact on the economy of $100 million or more — an impact the ozone rule is likely to levy. The process and format for these cost-benefit analyses is governed by OMB Circular A-4, which was issued in 2003.

Agencies must attempt to monetize the costs and benefits of proposed rules and then judge the economic value of the rules through "net benefits" calculations. For purposes of comparison, agencies must also assess the costs and benefits of a variety of alternatives. Agencies release the final products as regulatory impact analyses (RIA). Before the RIAs are made public, OMB reviews and edits them.

In its review and edits of the ozone RIA, OMB manipulated scientific language in order make the benefits of EPA's proposed rule appear smaller, thus reducing its appeal from an economic standpoint. OMB consistently calls into question the causal relationship between ground-level ozone exposure and premature mortality and argues ground-level ozone is significantly beneficial due to its ability to block UVB rays.

According to the RIA, "the overall body of evidence is highly suggestive that (short-term exposure to) ozone directly or indirectly contributes to non-accidental cardiopulmonary-related mortality." For the purposes of cost-benefit analysis, assuming a causal relationship dramatically increases the economic benefits of reducing ozone exposure by incorporating the monetized value of human lives saved. As EPA states in the RIA, "Including premature mortality in our estimates had the largest impact on the overall magnitude of benefits: Premature mortality benefits account for more than 95 percent of the total benefits we can monetize."

Once EPA began drafting the RIA, OMB began altering language, which resulted in undermining the causal relationship between ozone and premature mortality. According to publicly available documents, an early draft of the RIA stated, "There is considerable variability in the magnitude of the ozone-related mortality association reported in the scientific literature, which we reflect by summarizing the primary estimates from four different studies below."

OMB altered the language to: "There is considerable uncertainty in the magnitude of the association between ozone and premature mortality. This analysis presents four alternative estimates for the association based upon different functions reported in the scientific literature." [emphasis added]

EPA's original language recognizes differences in the conclusions of scientific studies on the relationship between ozone and mortality, but it does not question the existence of a causal relationship. OMB's edits are clearly intended to question the relationship.

OMB's manipulation is reflected in the benefits calculation for the proposed rule. At OMB's behest, EPA made two benefits calculations for each regulatory alternative — one that assumes a causal relationship between ozone exposure and one that assumes no relationship. EPA then presents monetized benefits as a range including the figures from both assumptions. The final outcome is damaging: Claiming no causal relationship reduces benefits associated with decreased mortality and skews the benefits range for each regulatory alternative in order to downplay the economic benefits of the proposed rule.

In its review and edits, OMB also pushed for the inclusion of questionable negative benefits by trumpeting the claim that ground-level ozone is beneficial because it blocks harmful UVB rays. Ozone does protect against UVB exposure, but the majority of protection occurs in the stratosphere, not at ground level. The ground-level ozone which shields UVB rays is largely naturally occurring, as opposed to the anthropogenic sources reduced by ozone regulations, according to EPA.

In initial drafts of the RIA, EPA addressed the negative benefits of increased UVB exposure but did so in only one paragraph. After OMB's review, EPA included a more detailed discussion and pledged to "work to present peer-reviewed quantified estimates for the final rule."

Expanding the discussion of UVB rays may reflect the influence of OMB's Office of Information and Regulatory Affairs (OIRA) Administrator Susan Dudley. According to a report by OMB Watch and Public Citizen, Dudley has a record of attempting to undermine the benefits of reduced ozone exposure by cautioning against increased UVB exposure. Dudley's nomination to head OIRA faced opposition from public interest groups and some senators for her views that regulations are harmful to the economy. President George W. Bush named Dudley administrator by recess appointment in April.

The Clean Air Act prohibits EPA from considering economic factors in setting its standard for ozone. The law orders EPA to protect public health within "an adequate margin of safety" regardless of economic costs or benefits.

The Act does not exclude economic considerations entirely. The air pollutant standards EPA sets are a two-step process. After setting the standard using only public health considerations, EPA then sets an implementation regulation in order to guide polluters in the proper way to achieve emission reductions. In this phase, EPA may consider economics in determining the most efficient way to reduce air pollution.

This proposed rule is in the first step of the Clean Air Act process. Nonetheless, EPA is forced to prepare the accompanying RIA because of provisions in E.O. 12866 and Circular A-4. Despite the intensive process of preparing the more-than-350-page document, EPA will be unable to use the RIA in setting the standard for ozone. Nevertheless, industry lobbyists are already manipulating its findings with the goal of weakening the regulation. According to the Associated Press, a spokesman for the National Association of Manufacturers called the proposed rule "very expensive." OMB may also use the RIA's findings when it reviews the draft of the final rule.

In fact, because OMB forced EPA to include figures assuming no causal relationship, the net benefits range is so large the analysis may be of little use. For the 0.070 ppm option, estimated net benefits range from -$20 billion to $23 billion.

Examining benefits outside of an economic context provides information about the potential impact of the ozone standard. The upper-end of the benefits range for the 0.070 ppm option assumes as many as 5,400 lives saved and 780,000 school absences prevented per year.

EPA is under court order to publish the final standard by March 2008. The final rule will be accompanied by a final RIA, both of which will be subject to OMB review.