A History Lesson On Cries Of Overregulation

EPA Regularly Overestimates Regulatory Costs

Blog ››› ››› SHAUNA THEEL

Fox News contributor Steve Hayes claimed that federal agencies "never" overestimate the costs of regulation to suggest that a new rule to reduce smog-creating pollutants will cost more than the Environmental Protection Agency predicts. But studies have found that the EPA previously overestimated the cost of regulating the same pollutant, and has historically overestimated costs.

The EPA estimates that reducing the amount of sulfur in gasoline, which contributes to smog, will add less than a penny to the price of a gallon of gasoline. Hayes suggested on Special Report that the EPA's estimate is too low, saying "of course there is going to be more cost":

But a study by the financial analysis firm Navigant Economics prepared for The Emissions Control Technology Association found that the EPA overestimated the costs of previous sulfur regulations:

Regression analysis shows that Tier 2 regulations, which required a reduction in the average sulfur content of gasoline from 300 ppm to 30 ppm, had no material impact on the retail price of gasoline.


The EPA estimated that Tier 2 would increase the average cost of refining gasoline by about two cents per gallon, and that Tier 3 will increase the average cost of refining gasoline by one cent per gallon. Because Tier 2 had no material impact on the retail price of gasoline, it is unlikely Tier 3--projected to generate private costs half the size of those generated by Tier 2--will have any impact either.

And a 2010 review by Resources for the Future found that the EPA "tend[s] to overestimate the total costs of regulations," noting that the agency overestimated costs for 14 of the rules it examined and only underestimated costs for 3 rules.

Chart created by Media Matters based on RFF report

Industry estimates of regulatory costs have been shown to be even more overblown in retrospective studies. Keeping with this historical trend, the American Petroleum Institute claims that EPA's latest rule would raise gas prices by 6 to 9 cents, but its analysis didn't assess the rule that was ultimately proposed by the EPA, which provides significant flexibility to refineries. 

The Navigant Economics study also found that like other clean air rules, the proposed sulfur rule will have more benefits than costs.

Source: Institute for Policy Integrity, April 2012

Even conservative columnist Charles Krauthammer, who has railed against court-upheld EPA rules as "outright lawlessness," called the agency's new rule "good regulation" because it will reduce smog, saving lives.

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