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COMMENTS OF THE UTILITY AIR REGULATORY GROUP on the WHITE HOUSE OFFICE OF MANAGEMENT AND BUDGET NOTICE OF AVAILABILITY AND REQUEST FOR COMMENTS ON THE SOCIAL COST OF CARBON TECHNICAL SUPPORT DOCUMENT AND UPDATES 78 Fed. Reg. 70,586 (Nov. 26, 2013) Docket ID No. OMB-2013-0007 Allison D. Wood Tauna M. Szymanski HUNTON & WILLIAMS LLP 2200 Pennsylvania Avenue, N.W. Washington, D.C. 20037 February 26, 2014 (202) 955-1945 COMMENTS OF THE UTILITY AIR REGULATORY GROUP on the WHITE HOUSE OFFICE OF MANAGEMENT AND BUDGET NOTICE OF AVAILABILITY AND REQUEST FOR COMMENTS ON THE SOCIAL COST OF CARBON TECHNICAL SUPPORT DOCUMENT AND UPDATES 78 Fed. Reg. 70,586 (Nov. 26, 2013) Docket ID No. OMB-2013-0007 February 26, 2014 The Utility Air Regulatory Group (“UARG”) submits the following comments in response to the White House Office of Management and Budget’s (“OMB”) Notice of Availability and Request for Comments on the “Technical Support Document: Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order No. 12866” (“Notice”).1 Attached to these comments, and incorporated herein, is a technical report prepared by Dr. Anne E. Smith of NERA Economic Consulting entitled “Uncertainties in Estimating a Social Cost of Carbon Using Climate Change Integrated Assessment Models” (“NERA Economic Consulting”). Dr. Smith’s report catalogues numerous uncertainties associated with the U.S. Government’s (“USG”) derivation and application of the social cost of carbon (“SCC”) that have not been adequately addressed and that render any SCC estimate inappropriate and not useful for regulatory analysis. UARG is a voluntary, not-for-profit association of electric generating companies and organizations and national trade associations. UARG’s purpose is to participate on behalf of its members collectively in rulemakings and other proceedings that affect the interests of electric generators and in litigation arising from those proceedings. UARG is submitting comments on the Notice because the issues presented by the USG’s use of the SCC have the potential to dramatically impact the electric generating sector in Clean Air Act (“CAA”) proceedings. The electric generating companies that are members of UARG construct, own, and operate power plants, including fossil fuel-fired plants and other facilities that generate electricity for residential, commercial, industrial, institutional, and government customers. Operation of fossil fuel-fired power plants results in emissions of carbon dioxide (“CO2”), a greenhouse gas (“GHG”). The objective of this proceeding purportedly is to establish SCC values that the USG will use to assess the costs and benefits of GHG-related rules. Many of these rules regulate or otherwise affect power plants. A higher SCC value will increase the likelihood that a proposed rule will be more stringent by weighting the proposed rule’s estimated benefits more heavily. UARG therefore has a clear and significant interest in the present proceeding as well as in ongoing and future U.S. Environmental Protection Agency (“EPA”) rulemakings under the CAA that use the USG’s SCC estimates. 1 78 Fed. Reg. 70,586 (Nov. 26, 2013). 1 I. Introduction and Summary of Comments OMB’s Notice describes the SCC and the Interagency Working Group on the Social Cost of Carbon’s (“IWG”) Technical Support Document (“TSD”)2 as follows: The Social Cost of Carbon (SCC) is used to estimate the value to society of marginal reductions in carbon emissions. Th[e] Technical Support Document explains the derivation of the SCC estimates using three peer reviewed integrated assessment models and provides updated values of the SCC that reflect minor technical corrections to the estimates released in May [2013].3 OMB solicits comments “on all aspects of the TSD . and its use of IAMs [integrated assessment models] to estimate SCC values to support agency regulatory impact analyses [(“RIAs”)].”4 However, OMB said that “it is not requesting comments on the three peer reviewed IAMs themselves; rather we are requesting comments on their use in developing the SCC estimates.”5 The Administrator of OMB’s Office of Information and Regulatory Affairs (“OIRA”) further explains: “[T]he scope of the request for comment includes all aspects of the TSD and its use of IAMs to estimate SCC values.”6 OMB states that it is particularly interested in the following issues: The selection of the three IAMs for use in the analysis and the synthesis of the resulting SCC estimates, as outlined in the 2010 TSD[, and] the model inputs used to develop the SCC estimates, including [assumptions regarding] economic growth, emissions trajectories, climate sensitivity and intergenerational discounting; [H]ow the distribution of SCC estimates should be represented in regulatory impact analyses; and 2 In these comments, when the singular term “TSD” is used, it is meant to refer collectively to the February 2010 TSD, the May 2013 TSD, and the November 2013 TSD revision. 3 78 Fed. Reg. at 70,586. 4 Id. 5 Id. 6 Letter from Howard Shelanski, Adm’r, OIRA, to Wayne D’Angelo, at 3 (Jan. 24, 2014) (“OIRA Letter”) (emphasis added). 2 [T]he strengths and limitations of the overall approach of the [TSDs] . .7 The Summary section in the Notice links to a webpage containing the November 2013 revision of the May 2013 TSD.8 A link later in the Notice connects to the February 2010 TSD.9 As a result, the Notice covers and solicits comment on “all aspects” of the May 2013 TSD and the November 2013 TSD revision. Finally, OMB notes that the SCC values will continue to be refined “to ensure that agencies are appropriately measuring the social cost of carbon emissions as they evaluate the costs and benefits of rules.”10 For reasons described in further detail below, the numerous legal, procedural, and other shortcomings associated with the development, derivation, and application of the SCC warrant the immediate discontinuation of the use of SCC values in the regulatory context. OMB has not identified any legal authority for this proceeding, and lacks statutory authority to promulgate rules that would bind the USG to use its SCC estimates in regulatory analyses and agency proceedings. Adoption of the SCC values would be arbitrary, capricious, and contrary to law because such action would be unauthorized by statute and because the TSD is substantively flawed. Because there are no statutory principles to guide OMB’s exercise of discretion, this action also raises serious constitutional concerns under the non-delegation and separation of powers doctrines. In effect, OMB is purporting to exercise nonexistent legislative authority in prescribing policy to be followed by other agencies regarding consideration of the SCC in regulatory analyses and decisions.11 If OMB decides to continue with this proceeding in order to mandate that the USG use an SCC figure in rulemakings and other agency proceedings, it must commence an open and transparent proceeding that adheres to Administrative Procedure Act (“APA”) requirements, including inviting comments of all interested stakeholders on the legal basis for this proceeding 7 78 Fed. Reg. at 70,586. 8 Interagency Working Group on Social Cost of Carbon, United States Government, Technical Support Document: Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866 (May 2013, revised Nov. 2013), available at http://www.whitehouse.gov/sites/default/files/omb/assets/inforeg/technical-update-social-cost- of-carbon-for-regulator-impact-analysis.pdf (“May 2013 TSD”). 9 Interagency Working Group on Social Cost of Carbon, United States Government, Technical Support Document: Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866 (Feb. 2010), available at http://www.whitehouse.gov/sites/default/files /omb/inforeg/for-agencies/Social-Cost-of-Carbon-for-RIA.pdf (“February 2010 TSD”). 10 78 Fed. Reg. at 70,586. 11 See, e.g., Coal. for Common Sense in Gov’t Procurement v. Sec’y of Veterans Affairs, 464 F.3d 1306, 1317 (Fed. Cir. 2006) (“The definition of a substantive rule is broad and includes action that is legislative in nature, is primarily concerned with policy considerations for the future rather than the evaluation of past conduct, and looks not to the evidentiary facts but to policy-making conclusions to be drawn from the facts.”) (internal quotations omitted). 3 as well as the propriety and limitations of using the SCC to justify regulations. This proceeding also would have to provide to stakeholders an opportunity to review and comment on information relating to the USG’s derivation of the SCC values that to date has not been shared with the public. As explained in detail in Dr. Smith’s report, there are too many uncertainties in both the IAMs and the derivation and application of the SCC for SCC values to be useful in regulatory decisionmaking. Until there is greater certainty and confidence in these numbers – and greater consensus regarding their use in a regulatory context – the government should refrain from evaluating the “net worth” of regulations with SCC values. To that end, OMB should withdraw the TSD and direct that SCC values not be used in rulemakings, regulatory analyses, or other agency proceedings. If OMB nevertheless decides to continue with this proceeding, it should solicit comment in accordance with the APA on the full range of issues surrounding the SCC – including its legal authority, the usefulness of the IAMs for modeling SCC estimates, the assumptions underlying its derivation, and the validity of applying a dollar figure rife with uncertainties to justify rules that have real world impacts on regulated entities, the public, and the economic health of our nation. II. OMB’s Action Violates the APA. The APA defines a “rule” in relevant part as “an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy,” including “the approval or prescription of .

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