BILL ANALYSIS
AB 1107
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Date of Hearing: April 21, 2009
ASSEMBLY COMMITTEE ON ENVIRONMENTAL SAFETY AND TOXIC MATERIALS
Wesley Chesbro, Chair
AB 1107 (Blakeslee) - As Amended: April 13, 2009
SUBJECT : California Environmental Protection Agency: economic
analysis.
SUMMARY : Requires an economic cost-benefit analysis (CBA) of
regulations proposed by the departments, boards and offices of
the California Environmental Protection Agency (Cal-EPA).
Specifically, this bill :
1)Makes legislative findings that regulations should maximize
benefits while minimizing cost and the cost and benefits of
environmental protection regulations should be subject to an
external professional peer review.
2)Requires Cal-EPA departments, boards and offices to complete
an economic analysis evaluating the cost and benefits of
proposed rules prior to adopting any regulation or water
policy.
3)Defines cost and benefits to mean reasonable identifiable
significant favorable or adverse effects that are expected to
result from the implementation of the regulations.
4)Provides that any person may request that the economic CBA be
subject to an external peer review. In the event of a request
for a external peer review:
a) Requires Cal-EPA to contract with the National Bureau of
Economic Research, the University of California, and the
California State University, or a group of economists
selected by the president of the University of California,
to conduct the external peer review.
b) Requires the individual requesting a peer review of the
economic CBA to enter into a contract with the Cal-EPA
department, board or office to pay for all of the cost
associated with conducting the external peer review.
5)Prohibits Cal-EPA departments, boards, and offices from
adopting any rules or regulations unless:
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a) The economic CBA, along with supporting economic data,
studies and public comments, are submitted to an external
peer review entity; and
b) A written evaluation of the economic CBA by the external
peer review organization is submitted and reviewed by the
department, board or office. If the department, board or
office disagrees with the findings of the external peer
review organization, they shall provide an explanation of
the basis of the disagreement; and
c) A public hearing on the external peer review of the
economic CBA, as well as the department, board or office
comments on the peer review report will be held. No notice
or hearing on the proposed regulations or rules can take
place before the public hearing on the peer review document
is held.
EXISTING LAW:
1)Establishes the Administrative Procedures Act (APA) to govern
the adoption of regulations by state agencies for purposes of
ensuring that state agency regulations are clear, necessary,
legally valid, and available to the public (Gov. Code 11340
et. seq.).
2)Requires independent peer review of scientific issues related
to regulations proposed by departments, boards and offices of
Cal-EPA (H&S Code 57004 et. seq.).
3)Requires Cal-EPA departments, boards and offices to evaluate
major regulation and alternatives to the requirements of the
regulations. Requires that if less costly alternatives are
available, that would be equally protective of the, and in
full compliance with statutory requirements, they must be
adopted (H&S Code 57005).
4)Establishes the California Global Warming Solutions Act of
2006. The act requires the Air Resources board to evaluate
the total potential costs and total potential economic and
noneconomic benefits of the plan for reducing greenhouse gases
to California's economy, environment, and public health, using
the best available economic models, emission estimation
techniques, and other scientific methods (H&S code 38500 et.
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seq.).
5)Establishes the Green Chemistry program, including a procedure
for the adoption of regulations by the Department of Toxics
Substance Control (DTSC). In adopting those regulations, the
DTSC must prepare a multimedia life cycle evaluation and
submit those regulations and the multimedia life cycle
evaluation to the California Environmental Policy Council for
review (H&S Code 25252 et.seq.).
FISCAL EFFECT : Potentially significant cost to Cal-EPA
department, boards and offices for the required economic CBA
required by this bill. Cal-EPA departments, boards and officers
are funded by both general and special funds that would be
responsible for the additional costs.
Potentially significant cost of external peer review for the
economic CBA. These costs would be recovered from the party who
has petitioned for the external peer review.
COMMENTS :
Purpose: According to the author, "AB 1107 is needed to ensure
that California regulators have the most unimpeachable economic
analysis possible to guide their regulatory efforts. By
requiring non-state entities to fund the external peer review,
regulators can thoroughly vet the economic impacts of proposed
regulations at no new cost to the state and without weakening or
detracting from the state's environmental objectives."
The sponsor of the bill, the California Chamber of Commerce,
states, "AB 1107 creates a uniform requirement to complete an
economic analysis of proposed rules and regulations for Cal EPA
and its boards, departments, and agencies. The economic
analysis is required to evaluate the costs and benefits of a
proposed rule at a level of detail that is appropriate and
practicable for reasoned decision making. AB 1107 also creates
a process by which a stakeholder can request that the economic
analysis be subject to external peer review and sets forth a
uniform process that promotes uniformity and transparency."
Opponents of the measure, including a coalition of environmental
and public health organizations, have raised concerns about the
effect of the review on the timeliness of regulations,
specifically they state, "Requiring Cal-EPA to conduct an
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economic analysis for each proposed rule while also allowing any
party to request a peer-review of that analysis would lead to
skyrocketing cost for the agency as well as considerable delays
to the process. This bill would render it nearly impossible for
the agency to act to protect the environment and public health
and create layer upon layer of red tape for an already overly
burdened and underfunded agency."
Existing Regulation Review : This bill proposes to establish a
new economic review requirement for Cal-EPA departments, boards
and offices. Under current law there is a variety of regulatory
review processes required to be completed prior to the adoption
of regulations.
1. Administrative Procedure Act .
All agencies and departments are subject to the APA<1> which
governs the adoption of regulations by state agencies for
purposes of ensuring that they are clear, necessary, legally
valid, and available to the public. The APA requires that
proposed regulations must comply with procedural requirements
that include publishing the proposed regulation along with a
supporting statement of reasons; mailing and publishing a notice
of the proposed action; and submitting a final statement to the
Office of Administrative Law (OAL) which summarizes and responds
to all objections, recommendations, and proposed alternatives
that were raised during the public comment period. The OAL is
then required to approve or reject the proposed regulation
within 30 days.
The APA requires state agencies to justify their proposed
regulations by evaluating the technical and empirical evidence
that supports the proposed regulation in comparison to
reasonable alternatives, and specifically requires specific
supporting evaluation and documentation supporting a proposed
regulation that requires the use of a specific technology or
which could have a negative impact on business.
2. Cal-EPA Economic Analysis of Regulations .
Cal-EPA departments, boards, and offices are required to
evaluate alternatives to proposed regulations and consider
whether less costly alternatives exist that would be equally
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<1> Government Code Section 11340 et. seq.
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effective in achieving the environmental protection.<2> The
Secretary of Trade and Commerce, in consultation with Cal-EPA,
has developed guidelines for methods and procedures to be used
in conducting these evaluations.<3>
Issues:
1)Additional economic analysis .
This bill provides new requirements for an economic CBA prior to
adopting regulation by the Cal-EPA department, boards and
offices. Existing programs, such as the California Global
Warming Solutions Act of 2006 and the Green Chemistry
Initiative, require an analysis of the economic impact of the
regulations. Additionally all Cal-EPA regulations require a
separate economic analysis that is then reviewed by the Office
of Administrative Law. In some cases the new requirement may
conflict with the statutory standards established for decision
making or it may duplicate existing requirements.
2)Requiring external peer review of economic analysis .
This bill requires an independent external peer review of the
economic CBA that must be prepared for all Cal-EPA regulations.
The peer review would be triggered by a request from any party
for such a review. The cost of the review would be the
responsibility of the person requesting the external peer
review. If an external peer review is appropriate then the
decision to conduct the review and the cost of the review should
be incorporated into the regulatory process to assure the
fairness of the decision-making process.
3)Cost-benefit as the standard of review for environmental and
public health regulation .
There are clear advantages to considering the costs and benefits
of regulatory actions; nonetheless, the creation of a new super
mandate to perform an economic CBA raises the question of the
role and usefulness of this kind of analysis on environmental
and public health regulations.
The applicability of CBA for environmental and public health
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<2> Health and Safety Code Section 57005.
<3> SAM Sections 6600 - 6680.
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programs<4> has been reviewed and several issues have been
raised, specifically:
1)CBA may reduce the qualities of life, health, and the natural
world to monetary values and is inherently flawed ignoring
social, cultural and religious values.
2)CBA has failed to appreciate long-term environmental risks,
minimizing the threat from potential catastrophes and
irreversible environmental harms, such as those posed by
global warming and nuclear waste.
3)CBA may ignore the question of who suffers as a result of
environmental problems and, therefore, threatens to reinforce
existing patterns of economic and social inequality.
Many of the current environmental programs rely on a form of
"technology-based" regulation, which requires the best available
methods for controlling pollution. Regulatory programs, such as
the federal Clean Air Act's Title I, specifically prohibit the
consideration costs in setting ambient-air quality standards.
Technology-based regulation, market-based regulation such as
pollution trading, and environmental right to-know programs all
have reduced pollution and protected the environment without
relying on the problematic method of CBA.
Double-referral: AB 1107 has been referred to ESTM and Natural
Resources Committees .
REGISTERED SUPPORT / OPPOSITION :
Support
California Chamber of Commerce (Sponsor)
American Chemistry Council
American Council of Engineering Companies, California
Building Owners and Managers Association of California
California Association of REALTORS
California Association of Wheat Growers
California Bean Shippers Association
California Building Industry Association
California Business Properties Association
California Forestry Association
California Grain and Feed Association
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<4> CBA and Regulatory Reform: An Assessment of the Science and
the Art , Raymond J. Kopp, Alan J. Krupnick, and Michael Toman,
1997, Resources for the Future.
Pricing The Priceless CBA: of Environmental Protection , Lisa
Heinzerling
Frank Ackerman, 2002, Georgetown Environmental Law and Policy
Institute.
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California Grocers Association
California Independent Oil Marketers Association
California Manufactures & Technology Association
California Pear Growers Association
California Retailers Association
California Seed Association
California State Floral Association
California Taxpayers Association
California Warehouse Association
Can Manufacturers Institute
Consumer Specialty Products Association
Industrial Environmental Association
International Council of Shopping Centers
National Association of Office and Industrial Properties
Pacific Coast Renderers Association
Pacific Egg & Poultry Association
Sacramento Area Sewer District
Sacramento Regional Sanitation District
TechAmerica
Western Growers
Western Plan Health Association
Opposition
Breast Caner Fund
California Rural Legal Assistance Foundation
Clean Water Action
Coalition for Clean Air
Commonweal
Consumer Federation of California
Environmental Working Group
Pesticide Watch
Sierra Club California
Silicon Valley Toxics Coalition
Analysis Prepared by : Bob Fredenburg / E.S. & T.M. / (916)
319-3965