by Pete Didisheim, NRCM Advocacy Director
Senator Courtney, Representative McKane, and members of the Joint Select Committee on Regulatory Fairness and Reform. My name is Pete Didisheim. I am the Advocacy Director for the Natural Resources Council of Maine, and I appreciate this opportunity to testify on LD 1. I am testifying in support of the bill and will describe ways that we believe the legislation should be further amended.
First, I would like to commend the Committee for its efforts on this legislation. Starting with more than 25 hours of field hearings around the state, and then continuing with countless hours of work sessions over the past two months, you’ve shown amazing stamina and seriousness of purpose, dealing with many arcane and complicated issues. You’ve managed the process in an open and transparent fashion, which we also greatly appreciate.
And it’s not just your stamina that’s been on display; you’ve also done a good job sorting through quite a laundry list of issues generated during your hearings, and selecting a finite number where legislation might make a difference and advance the mission of this Committee.
We appreciate that you’ve ended up with a bill that addresses process improvements, and does not weaken Maine’s environmental standards. That’s the right strategy for a state like Maine where our economy and our environment are so tightly intertwined.
With regard to suggested amendments, my comments focus on four of the bill’s 13 sections; Part A—Environmental Audit Program, Part B—Benefit-Cost Analysis, Part E—Citing Primary Source of Information for Rules, and Part H—Board of Environmental Protection.
Since 1995, 17 states have adopted environmental audit policies which encourage companies to voluntarily discover, disclose and correct environmental violations. Maine is one of those states, with an incentives program for disclosure and correction for small businesses (1). The proposal in LD 1 expands that policy to all businesses, in a fashion similar to many other states. Massachusetts, Vermont, and Connecticut each have policies similar to what is being proposed in LD 1.
NRCM has been supportive of adopting an expanded environmental audit policy in Maine, so long as the statutory language is fully consistent with EPA Guidance (2). In general, the proposed bill does track closely with EPA’s Audit Policy, but there are a number of provisions for which we have comments.
Pg. 2 §349-M 1. Definitions. C. “Compliance Management System.” The definition refers to a compliance management system “appropriate to the size and nature of its business.” The meaning of this phrase is unclear and could result in differences of opinion between DEP and a particular business as to whether the system put in place is of the appropriate size and nature. We suggest that the meaning of this statement be clarified either in the statute, or in the rules to be developed pursuant to the bill (§349-R).
Pg. 4. §349-0 3. Prompt Disclosure. This language refers to when a 21-day clock begins within which a business must fully disclose the specific violation in writing in order to qualify for reduced penalties. Specifically, the time is said to begin when “a person authorized to speak on behalf of the facility has an objectively reasonable basis for believing that a violation has occurred.” This is not the sort of language used in the Massachusetts, Vermont, or Connecticut environmental audit policies, and raises some questions – such as: What if an employee (someone not authorized to speak for the facility) discovers a violation, tells a supervisor, but the supervisor doesn’t promptly report it? When would the clock start? Other state policies simply state that the clock starts when a violation is discovered. We suggest striking the language about authorized persons. We also believe that the following language from the Massachusetts policy is constructive, and should be added, either to statute or the accompanying rules:
“The initial notification of a violation pursuant to this policy may be by telephone communication within 21 days after the entity discovers that the violation has occurred, but must be confirmed in writing within 5 days after such communication. Both communications must be received by the responsible compliance and enforcement manager at the Department.”
Pg. 5. §349-0 4. Discovery and Disclosure Independent of Government or Third-Party Plaintiff. This section requires that violations be identified and disclosed prior to any of a series of four possible actions. We recommend that a fifth action be added, consistent with the Massachusetts’ environmental audit policy (3):
“5) Discovery of the violation through any other means by a regulatory agency.”
Pg. 6. §349-P. Economic Benefit. In applying the environmental audit policy, we believe that it is important to ensure that the DEP retains full authority to impose penalties that remove any economic benefit gained as a result of noncompliance, so that violators do not gain a competitive advantage over businesses that are fully complying with state law. Even if the economic gain is considered insignificant, NRCM does not believe that it is good policy to waive economic benefit penalties. The current language doesn’t provide sufficient clarity in this regard, so we suggest replacing the existing language with the following, which is consistent with EPA guidance:
“The Department shall retain its full discretion to recover any economic benefit gained as a result of noncompliance to ensure that violators do not gain a competitive advantage over regulated entities that are in compliance.”
During its work sessions, the Committee received comments from two economists who are experts in benefit-cost analyses: Charlie Colgan from University of Southern Maine, and Jonathan Rubin from the Margaret Chase Smith Policy Center. Their testimony to the Committee included the following important points.
1) A credible benefit-cost study requires rigorous analysis by agency staff with significant experience with these type of assessments. This is not currently the case in Maine, so an investment in personnel and training will be required;
2) Benefit-cost analyses with regard to environmental and health issues have gotten easier over the past two decades, but they are not easy – in part because it can be difficult to assign dollar values to some of the benefits of such rules;
3) The data necessary to conduct a credible benefit-cost analysis is not universally available, and there are significant data gaps in Maine. As such, the process of acquiring new data will be time-consuming and expensive; and
4) The cost of these studies can be expensive, in the hundreds of thousands of dollars.
Both men commended the value of such studies, but both warned against trying to do these studies on the cheap – and that’s my worry with the Committee bill. As a practical matter, the language in the Committee bill is so limiting – in that it requires agencies to do these studies with existing or appropriated resources – that probably few if any benefit-cost studies will ever be done. But if such studies are done, then there is a real risk that they are done on the cheap, and done poorly, because LD 1 provides an insufficient statutory framework to ensure that such studies are done well. This could open the rulemaking process to new challenges and conflicts.
The Committee should understand that there are all sorts of mistakes, and bias, which can be inserted into a poorly done benefit-cost study. For example, an agency might weight an analysis mostly toward the costs, or mostly toward the benefits, of implementing a proposed rule – depending on an Administration’s political agenda. The analysis might use a high discount rate, dramatically reducing the value of future benefits. Or an agency might only consider human health benefits in terms of avoided deaths, while ignoring serious non-lethal health impacts that are difficult to monetize.
Although some advocates of benefit-cost studies argue that this is a neutral, objective tool, in which costs and benefits are equally considered, legal scholars have shown otherwise, concluding that benefit-cost studies are inherently political (4). Scholars also have shown that benefit-cost studies can have serious flaws in how one assigns values to avoided harms and implementation costs. One author, for example, has shown that if we had relied simply on benefit-cost studies, then society never would have eliminated lead in gasoline when it did, prevented building a dam in the Grand Canyon, or regulated occupational exposure to vinyl chloride – which has been a huge success in curbing cancer of the liver (5).
The controversies that surround use of benefit-cost analysis help illustrate why it is so important to follow rigorous protocols, applied by experienced and trained personnel, with the resources necessary to do these studies as well as possible. And the resources necessary can be very substantial. As Jonathan Rubin explained to Committee members, the federal EPA had 50 people involved for more than a year in producing a benefit-cost study for a single proposed rule dealing with national renewable fuel standards.
But a rigorous, resourced process is not what Part B envisions. Funding is not provided. There is no provision for the development of this analytical capacity in Maine state agencies. And the language does not mandate that established methodologies be used, such as the economic guidelines published by the National Center for Environmental Economics (6). Moreover, the scope of any benefit-cost study done pursuant to this language has been drastically reduced, from nine prescribed elements in the March 14th version of this provision, to a mere four elements in the Committee bill.
Which leads us to conclude that the Committee either needs to fish or cut bait on this. You need to provide a fully fleshed out statutory framework for benefit-cost studies, or remove this provision from the bill entirely and not pretend that it will result in such studies – because it won’t, without money, training, and development of agency expertise.
I have one final concern with Part B, and it’s with the last sentence of the section, on p.7. The way it reads now, if an agency somehow finds the resources to conduct a benefit-cost study, and it turns out to be obviously flawed, then it would be shielded from judicial review under section 8058 of the Administrative Procedures Act. This doesn’t make sense. If such a study is included with the record of a proposed rule, as envisioned, then it should be subject to judicial review in the same fashion as any other part of the record.
Our recommendation is that Part B be removed from the bill, because we can’t anticipate the Legislature finding the necessary resources to fund benefit-cost studies properly.
We are fine with the concept of requiring that agencies provide information about the sources of information used in developing the rule. This often is done as is, in the basis statement for a rule. Our concern, however, is with the language that suggests that there might be only one primary source of information that an agency relied upon. A single rule may be complex, with many different sections, each of which may have been the result of a different set of underlying sources of information. The recent Chapter 888 rules on bisphenol-A, for example, had 46 different citations in the footnotes of the basis statement.
Conversely, a proposed rule may also be fairly mundane, and professional judgment may be the primary source of information utilized. From the Committee’s discussion of this section, it appeared that “professional judgment” would be an allowable source that could be listed. As such, we would recommend that the language inserted into existing law, at 5 MRSA §8057-A, sub§4, be amended to read:
and, except for emergency rules, a listing of the primary sources of information, which may include professional judgment, relied upon by the agency in adopting the rule.
For the same reasons as described above, we also recommend that the list of primary sources of information not be protected from judicial review. If such a list is part of the record that forms the basis for a rulemaking, and if a rule is appealed, then the Court should have an opportunity to review all portions of the record.
We appreciate the work of the Committee in studying the structure, function, performance, and responsibilities of the Board of Environmental Protection. There has been a great deal of misconception and false information about the BEP, and the approach taken by the Committee in its work sessions has demonstrated that the BEP, overall, has served the public and the business community well.
With this draft bill you are rejecting the notion of abolishing the BEP, or sharply curtailing if purpose, focusing instead on more measured changes to the Board’s membership, scope, and responsibilities. We generally support these changes, with the following suggested amendments.
p. 19. Sec. H-2. 38 MRSA, §341-C.2. Qualifications and requirements. If the Board is to be reduced in size, we would prefer that it be cut to 9 members, rather than 7. This would preserve the opportunity to attract candidates with scientific and technical background, and also have sufficient slots for those with municipal experience, geographic diversity, and other perspectives.
p.20 § 341-D.2. Permit and license applications The proposed bill would shift the focus of the Board to only considering projects of statewide significance, if they meet three out of four proposed criterion. We are concerned that the list is missing an important criterion, that being: if it affects a natural resource of statewide significance. This criteria currently is captured in the DEP rules for the Board (7). We thus recommend amending the determination of statewide significance to “A project of statewide significance is a project that meets any three of the following five criteria,” and adding:
E. Affects a natural resource of statewide significance.
p. 21. Opportunity for public requests to the board to assume jurisdiction. We oppose elimination of the opportunity for Maine citizens to request that the Board assume jurisdiction of an application. Allowing citizens and interested parties to make a request does not mean that the Board necessarily will assume jurisdiction; but it does mean that members of the public will still have the right to make a case, and receive a response. Accordingly, we request that the following sentence not be stricken from existing law:
“Any interested party may request the board to assume jurisdiction of an application.”
p.22. 4. Appeal or review. (2) We support the Committee’s decision to preserve the Board’s ability to reach an independent decision on a license or permit appealed to the Board. Consistent with current law, the Board is not bound by the commissioner’s findings of fact or conclusions of law, and may adopt, modify, or reverse the Commissioner’s findings or conclusions. Any such decision “must be based upon the board’s review of the record, any supplemental evidence admitted by the board and any hearing held by the board.” This is the correct standard of review, and ensures that the Board can apply independent judgment to the facts. In practice, the Board rarely departs from the Commissioner on appeal, but the opportunity to do so must be preserved for the appeal process to have any legitimacy.
p. 13. 3. Small business. The definition of small business as having 50 or fewer employees is different than the APA definition of having 20 or fewer (8). A consistent definition may be appropriate.
p.28. Part L. Agency Review of Rules. This provision authorizes legislative committees to direct agencies to review specific rules. This may be a fine idea, if utilized discriminately. But it also could impose an enormous new workload on agencies, similar to a host of new legislative study requirements. DEP, for example, has hundreds of rules. We recommend adding a sentence that would provide criteria for selection of such rules for agency review, such as:
“Legislative committees shall restrict their requests for agency review of rules to those rules that have generated a significant level of concern regarding the relevancy, clarity, or reasonableness of the rule.”
In conclusion, I would like to again commend the Committee for its hard work on LD 1. This bill has come a long way over the past several months. With further changes such as suggested in this testimony, NRCM believes that a bill could be brought to the full Legislature that deserves broad, if not unanimous, support.
4 Is Cost-Benefit Analysis Neutral?, Driesen, University of Colorado Law Review, 2006, http://www.law.syr.edu/Pdfs/0finalcoloradoarticle.pdf5 Applying Cost-Benefit to Past Decisions, Ackerman, Heinserling, Massy, 2004, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=5761616 Partial Draft Amendment to LD 1, 3/14/11, included a mandate that any benefit-cost analysis follow established methodologies, including, but not limited to, USEPA guidelines.
7 Chapter 2, 17-C(4). p.16 http://www.maine.gov/dep/bep/licensing/Chapter%202.pdf8 §8052. Rulemaking. 5-A. http://www.mainelegislature.org/legis/statutes/5/title5sec8052.html