The Ever-Expanding Regulatory Burden

The number of regulations and pages in the Federal Register and the Code of Federal Regulations is already staggering and growing at a record pace. From 2002 to 2008, the number of total pages, by year, in the Federal Register was between a low of 71,269 pages in 2003 and a high of 79,435 pages in 2008. After a dip to 68,598 pages in 2009, the 2010 and 2011 totals were 81,405 and 81,247, respectively. While the number of pages of the Federal Register fluctuated in the 70,000 range until 2010 and 2011, the number of total pages in the Code of Federal Regulations has trended upward from 145,099 in 2002 to 169,301 in 2011. Collectively, federal agencies issued 3,573 final rules in 2010 and 3,807 in 2011, according to the National Archives and Records Administration’s Office of the Federal Register.

The scope and pervasiveness of the expanding regulatory state leads to higher costs on business and the public. In 2008, federal government regulations cost an estimated $1.75 trillion, which equals 14 percent of national income. When combined with federal tax receipts (21 percent of national income in 2008), these two costs consumed 35 percent of national income in 2008. Of the $1.75 trillion, $381 billion relates to costs created by environmental regulations (Crain and Crain, “The Impact of Regulatory Costs on Small Firms,” September 2010).

Despite these high costs, there is no end in sight. In the annual “Regulatory Plan and Unified Agenda,” federal agencies report on the regulations they are working on for the upcoming year and beyond, and the status of the rule. In December 2011, federal agencies reported 4,128 rules were being worked on. EPA reported it was working on 318 rules. These included rulemakings to address greenhouse gas emissions from motor vehicles; review of National Ambient Air Quality Standards for ozone, sulfur dioxide, particulate matter and nitrogen dioxide; and standards for cooling water intake structures.

Some of the rules mentioned in the agenda are deemed “economically significant,” which means they have a cost of more than $100 million. The number of economically significant rules went from 160 in 2007 to 212 in 2011. At the very least, the cost of such rules is $21 billion (212 rules at a minimum of $100 million each). The agenda reveals the 212 economically significant rules originated in 23 separate agencies, with the EPA reporting 21 such rules.

An example is found in the New Source Performance Standards (NSPS) and National Emission Standard for Hazardous Air Pollutants (NESHAP) for Oil and Natural Gas Production, finalized in August. The NSPS is anticipated to prevent 190,000 tons of volatile organic compounds (VOC), 11,000 tons of hazardous air pollutants (HAP) and 1 million tons of methane. To achieve this result, EPA estimated the total annualized engineering costs are $170 million with an annual labor requirement to comply estimated at about 570 full-time equivalent employees. The final NESHAP amendments are anticipated to reduce 670 tons of HAP, 1,200 tons of VOC and 420 tons of methane. EPA estimated the total annualized engineering costs of the final NESHAP are $3.5 million with an annual labor requirement to comply estimated at about 30 full-time equivalent employees.

The reader will have to decide whether the cost of the additional regulation on the oil and natural gas industry is worth the benefits of the marginal reduction in pollutants. Obviously, federal agencies believe the benefits outweigh the costs. As a result, it is unlikely there will be a significant pause in the number of rules federal agencies impose on industry in the upcoming years.

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