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Volume 46, Issue 8 — August 2016


Cost-Benefit Analysis as a Commitment Device

by Matthew Wansley

Cost-benefit analysis purports to calibrate regulation. But the way administrative agencies practice cost-benefit analysis can, at best, calibrate a rule at the moment of its promulgation. As scientific knowledge of regulated health, safety, and environmental risks accumulates—and as technology becomes more affordable—the assumptions underlying a rule’s cost-benefit analysis can rapidly obsolesce. Because of the structural incentives towards agency inaction, pressure from regulated firms, or attention to other priorities, outdated rules persist. The problem is what I call snapshot cost-benefit analysis: the administrative state’s practice of treating regulation as a one-off game by neglecting to adapt a rule when the best estimate of costs and benefits has changed. Cost-benefit analysis need not work this way. For many regulations, cost-benefit analysis could be used as a commitment device. When an agency analyzes a proposed rule, it should explicitly anticipate the adoption of a more stringent rule than the one it promulgates. The agency should then precommit to adopting the more stringent rule when a credible demonstration has been made that it has become cost-benefit justified. Just as the expected costs and benefits of a rule determine its initial level of stringency, the observed costs and benefits of a rule should determine when and how it is updated.

Going the Way of the Dodo: De-Extinction, Dualisms, and Reframing Conservation

by Alejandro E. Camacho

De-extinction, an emerging suite of selective breeding or biotechnological processes for reviving and releasing into the environment members or facsimiles of an extinct species, has been the subject of a recent surge of analysis in popular, scientific, and legal literature. Unfortunately, conservation laws likely to govern the revival and introduction of de-extinct species like the Dodo largely remain premised on outdated assumptions of nature as static and firmly divisible from human activity. Endangered species, invasive species, and public land management laws habitually privilege and even actively promote what they identify as natural and native over the unnatural and exotic. An analysis of the effect these laws might have on de-extinction efforts illustrates the limitations of the law’s reliance on these crude dualisms. Currently, deextinct species will often be obstructed as non-native and introduced (even if they might promote ecological function in a particular area) and may be allowed or promoted in locations they used to exist (even if likely to cause ecological damage). Accordingly, this Article argues that policymakers need to reformulate legal frameworks to be less dependent on simplistic dualisms in favor of cautious risk assessment and adaptive management that recognizes the dynamism of nature and humanity’s indivisibility from it.

Non-Transmission Alternatives

by Shelley Welton

Current transmission planning processes are unlikely to result in selection and implementation of non-transmission solutions, even where they are demonstrably superior. This shortcoming is obviously bad for proponents of distributed energy. It is also bad for those who hope to implement significant but thoughtful grid expansion in the coming decades. More transmission is critically needed to update infrastructure and to keep pace with renewable resource development, but each transmission line is also a fractious, expensive, and environmentally damaging endeavor. Where transmission can be avoided, it should be. FERC knows this, but has not yet translated its aspirations into effective regulations. Further reforms will be necessary to achieve true parity, and FERC should consider using its recently affirmed jurisdiction over practices affecting transmission rates to extend cost allocation to non-transmission alternatives. In the meantime, however, FERC needs a more forthright approach to non-transmission alternatives, which articulates the limitations of a stakeholder-driven comparable consideration mandate and seeks creative, collaborative solutions and reforms.

Rethinking Health-Based Environmental Standards and Cost-Benefit Analysis

by Michael A. Livermore and Richard L. Revesz

Whitman v. American Trucking Associations, Inc., is understood by advocates and commentators across the political spectrum to hold that EPA may not consider costs when setting NAAQS under the CAA. But American Trucking should not be interpreted as standing in the way of using cost-benefit analysis as a regulatory floor. Rather, we argue that health-based standards should never be less stringent than the standards determined by cost-benefit analysis. The central justification for health-based standards is that the level of regulatory protection should not be compromised by cost considerations. The current status quo turns this argument on its head, producing health-based standards that are less stringent than those that would result had cost been properly considered

The Permit Power Revisited: The Theory and Practice of Regulatory Permits in the Administrative State

by Eric Biber and J.B. Ruhl

Regulatory permits are ubiquitous in modern society, yet receive little attention in legal and policy commentary and law school curriculums. Broadly speaking, there are two contrasting approaches to permitting. “Specific permits” entail the agency engaging in extensive fact gathering and deliberation particular to the individual circumstances of an applicant’s proposed action, after which the agency issues a detailed permit tailored just to that applicant. “General permits” have the agency issue a permit, with no particular applicant before it, that defines a broad category of activity and allows entities engaging in that activity to take advantage of the permit with little or no effort on their part. General permits involve limited agency review of specific facts in any particular case unless the agency finds good cause to condition or withdraw the general approval. The question of interest here is where on the spectrum of approaches from extreme specific-permit design to extreme general-permit design a particular permitting program should fall given its policy goals, practical implementation context, and background concerns regarding agency exercise of permitting authority.


Non-Transmission Alternatives, Distributed Energy Resources, and a Multi-Directional Grid

by Michael Panfil

As Welton’s article illuminates, the electric sector is not as organized as it appears. Welton references the recent Supreme Court decision, FERC v. Elec. Power Supply Ass’n, and suggests that the case may provide FERC with not only the authority, “but ‘indeed, the duty’” to ensure just and reasonable rates through non-traditional means, such as true parity in treatment of non-transmission alternatives. Welton’s analysis is accurate, however both FERC v. Elec. Power Supply Ass’n and current transmission planning challenges are symptomatic of larger upheaval in the electric sector. This Comment endeavors to provide context for this upheaval, by first exploring and suggesting a cause for the ongoing foundational change. Next, the implications of FERC v. Elec. Power Supply Ass’n are discussed. This Comment ends with a broader estimation of how the sector could develop in the future in response to ongoing transformation.

Considering Non-Transmission Alternatives

by Randolph Elliott

Shelley Welton’s Non-Transmission Alternatives is a timely examination of an important issue in energy and environmental policy: What regulatory and business structures would best enable the Nation to plan, build, and pay for the right mix of electric transmission and alternative facilities? The Article explores reasons why the regional transmission planning process required by the Federal Energy Regulatory Commission’s Order No. 10002 is not up to that task. This Comment notes ways FERC could clarify key terms used in Order No. 1000—including “non-transmission alternatives” and “comparability”—to better define the roles of the commission and other public agencies and private actors.

What Appears Obvious Is Not Necessarily So

by Sally Katzen

This extraordinarily well-written, well-researched article by Michael Livermore and Ricky Revesz makes a significant contribution to the literature and public policy debates by challenging conventional wisdom—namely, that health-based NAAQS are more stringent (and hence more protective) than those that would be set were we to consider the costs of achieving those standards. The authors carefully, and to my mind convincingly, debunk the idea that health-based standards are necessarily more protective than those that might be based on cost/benefit analysis  or other economic considerations, providing facts rather than unsubstantiated rhetoric. This information is new and it is dramatic. While I believe there is much here that will fuel constructive consideration of a critical issue, I have two concerns: aspects of their characterization of how health-based standards are set; and their reading/analysis of the relevant Supreme Court precedent.

Rethinking Rethinking Health-Based Environmental Standards and Cost- Benefit Analysis: A Solution in Search of a Problem?

by Gary S. Guzy

Professors Livermore and Revesz present a seemingly well-documented call for moving beyond health-based environmental standards to optimize public health and environmental protections in their provocative article. Yet I do not believe that their assessment: (1) adequately reflects the degree to which existing health-based standard setting has worked well in delivering key public health and environmental protections under the Clean Air Act; (2) supports their conclusion that the current system is somehow based on secret considerations that allow costs to become “a dark and ominous presence that silently influences the proceedings” and thereby skews and weakens the results; or (3) sufficiently confronts the challenges that would occur from supplanting health-based standard setting in favor of cost-benefit considerations in instances where those might lead to more stringent standards. The proposal, in particular, does not consider how the creation of new categories of judicial review may impede the very results they seek and the degree to which it would undermine EPA’s credibility in the courts.

General Permits: An Environmental Minefield

by William W. Sapp, April S. Lipscomb, and M. Allison Burdette

At bottom, Eric Biber and J.B. Ruhl argue in their recent article that general permits are a panacea for many of the difficult permitting issues that modern administrative agencies face. We have no quarrel with their conclusion in theory; however, in practice—at least in the environmental arena—agencies such as the U.S. Army Corps of Engineers often abuse general permits.