Clean Water Act

Pursuant to a congressional request, GAO reviewed the economic and compliance issues associated with two proposed Environmental Protection Agency (EPA) regulations to clean up polluted waters, focusing on: (1) the reasonableness of EPA's economic analyses for the two proposed regulations; and (2) whether EPA's determinations under the Unfunded Mandated Reform Act of 1995 and the Regulatory Flexibility Act were adequately supported.

GAO noted that: (1) there were limitations with EPA's economic analyses of the proposed regulations for the total maximum daily load (TMDL) and the National Pollutant Discharge Elimination System (NPDES) programs that raise questions about their reasonableness and about the determinations that EPA has based on them; (2) the outcomes of the analyses were heavily influenced by a number of key assumptions; (3) in the case of the TMDL program, for example, EPA assumed that states are essentially in full compliance with current regulations, or will be as a result of existing statutory and regulatory requirements; (4) EPA estimated only the costs that would result from the new requirements in the proposed regulations; (5) however, compliance with existing TMDL regulations has been problematic, and future compliance in the absence of the proposed regulation is uncertain; (6) GAO found similar uncertainties with key "baseline" assumptions that affect the cost estimates associated with the proposed NPDES regulation; (7) the key water quality data available to EPA to identify the number of waters not meeting standards and the number of TMDLs that will be needed are incomplete, inconsistently collected by states, and sometimes based on outdated and unconfirmed sources; (8) as a result of these limitations, EPA's cost estimates are subject to substantial uncertainty; (9) EPA provided little information on the benefits associated with the proposed regulations; (10) without information on both costs and benefits, it is difficult to confirm that the regulation is economically justified; (11) given the uncertainties surrounding EPA's cost estimates, GAO disagrees with EPA that EPA's analyses adequately supported its determination under the Unfunded Mandates Reform Act of 1995 that more detailed analyses of costs, benefits, and alternatives were not needed for either of the proposed regulations; (12) however, in the case of requirements for additional analyses under the Regulatory Flexibility Act, case law supports EPA's determination that because its proposed revisions to both regulations do not directly regulate small entities, additional analyses were not required; (13) several court decisions have ruled in analogous situations that agencies' regulations were not subject to the Flexibility Act's requirements for additional analysis; and (14) courts have held that where a proposed regulation does not impose any regulatory requirements at all on any entities, but instead expands agency authority to take future discretionary action, no initial regulatory flexibility analysis is required.