2012 Report to Congress on the Benefits and Costs of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities

2012 Report to Congress on the Benefits and Costs of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities 2012 Office of Management and Budget Office of Information and Regulatory Affairs 2012 REPORT TO CONGRESS ON THE BENEFITS AND COSTS OF FEDERAL REGULATIONS AND UNFUNDED MANDATES ON STATE, LOCAL, AND TRIBAL ENTITIES TABLE OF CONTENTS EXECUTIVE SUMMARY ..................................................................................................................... 3 PART I: 2012 REPORT TO CONGRESS ON THE BENEFITS AND COSTS OF FEDERAL REGULATIONS............................................................................................................................. 8 CHAPTER I: THE BENEFITS AND COSTS OF FEDERAL REGULATIONS ................................................ 9 A. Estimates of the Aggregated Annual Benefits and Costs of Regulations Reviewed by OMB over the Last Ten Years ....................................................................................... 11 B. Trends in Annual Benefits and Costs of Regulations Reviewed by OMB over the Last Ten Years ....................................................................................................................... 20 C. Estimates of the Benefits and Costs of Major Rules Issued in Fiscal Year 2011 .......... 23 D. The Impact of Federal Regulation on State, Local, and Tribal Governments, Small Business, Wages, and Economic Growth ...................................................................... 37 CHAPTER II: RECOMMENDATIONS FOR REFORM AND REPORT ON IMPLEMENTATION OF EXECUTIVE ORDER 13563 ................................................................................................................................ 56 A. A Culture of Retrospective Review: Recent Achievements and Future Progress ......... 64 B. Simplification, Coordination, and Reduction of Uncertainty ........................................ 69 C. Smart Disclosure ............................................................................................................ 76 D. Public Participation, Open Government Partnership, and National Action Plan .......... 80 E. Soliciting Public Recommendations on Regulation and Employment Effects .............. 85 CHAPTER III: UPDATE ON THE IMPLEMENTATION OF OMB’S INFORMATION QUALITY INITIATIVES ....................................................................................................................................................... 87 A. Continuing Commitment to Information Quality ................................................................ 87 B. Government-Wide Information Quality Guidelines ............................................................ 88 C. Information Quality Bulletin for Peer Review .................................................................... 93 PART II: SIXTEENTH ANNUAL REPORT TO CONGRESS ON AGENCY COMPLIANCE WITH THE UNFUNDED MANDATES REFORM ACT ............................................................ 98 Introduction ............................................................................................................................... 99 CHAPTER IV: REVIEW OF SIGNIFICANT REGULATORY MANDATES .............................................. 101 A. Environmental Protection Agency ............................................................................... 101 B. Department of Energy .................................................................................................. 101 C. Department of Transportation ...................................................................................... 102 D. Department of Education ............................................................................................. 102 1 E. Department of Health and Human Services ................................................................. 103 F. Department of Treasury ............................................................................................... 103 G. Joint Rulemakings ........................................................................................................ 104 APPENDIX A: CALCULATION OF BENEFITS AND COSTS ................................................................ 105 APPENDIX B: THE BENEFITS AND COSTS OF 2000-2001 MAJOR RULES ....................................... 124 APPENDIX C: INFORMATION ON THE REGULATORY ANALYSES FOR MAJOR RULES BY INDEPENDENT AGENCIES .................................................................................................................................... 126 APPENDIX D: THE BENEFITS AND COSTS OF MAJOR RULES BY ADMINISTRATION ...................... 128 APPENDIX E: INFORMATION QUALITY AND PEER REVIEW .......................................................... 134 A. Links for Agency Information Quality Correspondence ............................................. 134 B. Links for Agency Peer Review Agendas ..................................................................... 137 C. Agencies that Do Not Produce or Sponsor Information Subject to the Bulletin ......... 139 APPENDIX F: AGENCY CONSULTATION ACTIVITIES UNDER THE UNFUNDED MANDATES REFORM ACT OF 1995 ................................................................................................................................ 141 APPENDIX G: RESPONSE TO PEER REVIEWERS AND PUBLIC COMMENTS ..................................... 152 APPENDIX H: REFERENCES .......................................................................................................... 157 2 EXECUTIVE SUMMARY In accordance with the Regulatory-Right-to-Know Act,1 the Office of Management and Budget (OMB) prepared this Report to Congress on the Benefits and Costs of Federal Regulations (Report). This is the fifteenth annual Report since OMB began issuing this Report in 1997. The Report summarizes estimates by Federal regulatory agencies of the quantified and monetized benefits and costs of major Federal regulations reviewed by OMB over the last ten years (see page 11, below, for the criteria for identifying “major” regulations for this report). The principal findings are as follows. • The estimated annual benefits of major Federal regulations reviewed by OMB from October 1, 2001, to September 30, 2011, for which agencies estimated and monetized both benefits and costs, are in the aggregate between $141 billion and $691 billion, while the estimated annual costs are in the aggregate between $42.4 billion and $66.3 billion. These ranges are reported in 2001 dollars and reflect uncertainty in the benefits and costs of each rule at the time that it was evaluated. • Some rules are anticipated to produce far higher net benefits than others. Moreover, there is substantial variation across agencies in the total net benefits produced by rules. The overwhelming majority of rules have net benefits, but over the last decade, a few rules have net costs, typically as a result of legal requirements. • During fiscal year 2011, executive agencies promulgated 53 major rules, of which the majority (30) were budgetary transfer rules. For the 30 budgetary transfer rules, the issuing agencies quantified and monetized the budgetary transfer amounts. (The budgetary amounts reflect the principal economic consequences of such rules.) . For 12 rules, representing the strong majority of the benefits and costs of rules issued in fiscal year 2011, the issuing agencies quantified and monetized both benefits and costs. Those 12 rules were estimated to result in a total of $34.3 billion to $89.5 billion in annual benefits and $5.0 billion to $10.1 billion in annual costs. For three rules, the issuing agencies (the Department of Treasury and the Department of the Interior) were able to quantify and monetize only benefits. For these three rules, the agencies estimated annual benefits of about $600 million to $700 million. For six rules, the issuing agencies were able to quantify and monetize only costs. For these rules, the agencies estimated total annual costs of about $400 million to $1.1 billion. 1 Section 624 of the Treasury and General Government Appropriations Act of 2001, Pub. L. No. 106-554, 31 U.S.C. § 1105 note. 3 . For two rules, the issuing agencies were able to quantify and monetize neither benefits nor costs. • The independent regulatory agencies, whose regulations are not subject to OMB review under Executive Order 12866, issued 17 major final rules. The majority of rules were issued to regulate the financial sector. It is important to emphasize that the figures here have significant limitations. In some cases, quantification or monetization is not feasible. When agencies have not quantified or monetized the benefits or costs of regulations, or have not quantified or monetized important variables, it is generally because of conceptual and empirical challenges, including an absence of relevant information. Many rules have benefits or costs that cannot be quantified or monetized in light of existing information, and the aggregate estimates presented here do not capture those non-monetized benefits and costs. In some cases, quantification of various effects is highly speculative. For example, it may not be possible to quantify the benefits of certain disclosure requirements, even if those benefits are likely to be large, simply because the impact of some such requirements cannot be specified in advance. In other cases, monetization of particular categories of benefits (such as protection of homeland security or personal privacy) can present significant challenges. As Executive

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