Unintended Consequences of Environmental Regs

by Levi Russell

Over at the Texas Ag Law Blog, Tiffany Lashmet provides a discussion of the history and current state of the Waters of the United States (WOTUS) rule in relation to ag. Her post is very informative and I suggest you check it out. Here's a slice:

Rescinding a rule already promulgated is not as simple as it may sound.  The EPA has published a new proposed rule in the Federal Register, which essentially seeks to codify the rule as it was prior to the 2015 EPA rule being passed (and, due to the 6th Circuit stay, the approach currently in place across the US).  Specifically, the proposed rule would rescind the 2015 approach and codify an approach consistent with the Rapanos Supreme Court decision, applicable case law, and other longstanding agency practices. 

Now, notice and comment rulemaking will take place, which will allow the public to offer input on the new proposed rule.  This period is open through August 28, 2017.  After that, the EPA plans to conduct a “substantive re-evaluation” of the definition of WOTUS and conduct notice and will likely propose a new rule after property notice and comment rulemaking occurs. [Read new proposed rule and comment here.] 

Meanwhile, the 2015 rule is not in force anywhere in the United States, as the 6th Circuit stay remains in place.  Thus, currently, the definition of WOTUS is governed by the pre-2015 rule that got us the complex decision in the Rapanos case.  Unfortunately, until a new rule is promulgated, landowners are left with trying to interpret the Rapanos decision in order to know whether federal permits are required on their land.

Over the past couple of years I've been thinking about the costs associated with regulation like this. Certainly the intent of environmental regulation of agriculture is to internalize the external costs associated with the production of agricultural goods.

For example, we value the food and fiber produced by modern agricultural practices, but their production entails such things as water and air pollution, soil erosion, and other economic "bads." Environmental regulation is intended to curtail the production of those bads by ensuring that producers bear the cost of producing them. However, no policy is perfect and it is reasonable to think that some of the costs of regulation might be borne by consumers rather than producers.

To examine that question, I recently finished up a working paper examining the relationship between EPA regulation and relative food cost. You can read the whole thing here (and I'd appreciate any feedback), and here's the abstract:

Cost-benefit analysis of agri-environmental regulation is limited in the sense that it only examines the effects a single regulation will have on the public and polluters. Further, important mechanisms through which the public might bear part of the cost of regulation are not examined. This paper uses new data that allows for examination of regulation by a specific government agency on a specific industry to determine whether and to what extent relative food costs are affected by regulation of agriculture by the Environmental Protection Agency (EPA). The index allows for an examination of the overall effect of regulation, which is an important addition to the existing literature. Findings indicate that the costs of EPA regulation have not been borne solely by producers and that relative food costs would be lower now if EPA regulation had not increased over time.

Environmental Law Tradeoffs for Ag

by Levi Russell

Tiffany Dowell at Texas A&M has a great, concise blog post about a recent circuit court decision that will undoubtedly increase costs associated with environmental regulation of farms. As usual, I encourage you to read the entire post, but here's an excerpt:

Environmental groups, led by Waterkeeper Alliance, argued that CERCLA and EPCRA do not allow the EPA to exempt anyone from reporting requirements if there are releases over the statutory reportable quantity.  Further, the environmental groups claim that the rule is arbitrary in treating waste on farms differently than similar waste in other places, such as at a zoo or a slaughterhouse, which would not be exempted from reporting.  On the other side, the National Pork Producers Council also filed suit, albeit for a very different reason.  The Council claimed that the CAFO exception is not allowed because it was based upon the public’s desire for information, rather than based upon the purpose for which the statute was enacted–facilitating emergency response.

...

Now that the rule containing the farm exemption is no longer in place, under federal law, farms that may emit hazardous substances from animal waste above the threshold amount are legally required to report such emissions.   One major problem, which was noted by the court, is that there has been no determination of how these emissions should be measured.  It is unclear how farmers are expected to know whether their emissions are above reportable quantity, or how they are to measure them for reporting.  It may be that some operations can simply file an annual notice of continuous release if the releases are “continuous and stable in amount and rate.”  Hopefully, the EPA will offer some additional guidance documents in light of this ruling.  Operations for which this may be an issue should consult with their attorney to determine what steps to take.

A few things to note here:

1. The exemption was not for large animal feeding operations, it was for regular farms. With that exemption gone, farmers will be subject to significant regulatory uncertainty and cost.

2. That uncertainty and cost will fall disproportionately on small farmers. While this type of regulation will apply to larger farms, it will be difficult, at least in the short run, to know exactly where the threshold is. How many cows/hogs/chickens/etc does it take to create 100 pounds per day of ammonia or hydrogen sulfide? It will also complicate investment decisions for small farmers.

3. There's clearly an industry concentration vs environmental quality tradeoff here. A public concerned with the continued existence of the "family farm" would be smart to consider this tradeoff.

4. Tiffany notes that public comment played a role in the circuit court's decision, implying that interested parties can have some say in the regulatory process, at least when regulations are challenged in the courts. I suspect this will be a losing battle for ag in the future if the public continues to grow more concerned about these issues.

Expert Advice and Optimal Policy

by Levi Russell

Is it possible to bring expert opinion to bear on policy without the current system of administrative bureaucracy? That was the question on my mind when I read this post by my former colleague Tiffany Dowell at Texas A&M. The specific case discussed in Tiffany's post is a jurisdictional dispute against the Army Corps of Engineers (an administrative bureaucracy charged with enforcing much of US federal environmental policy) regarding a provision of the Waters of the United States (WOTUS) rule.

I won't get into the specifics of the WOTUS rule here. The point I want to make is broader, namely that we are not using courts as much as we could to accomplish policy goals. Currently at the federal level, the Executive branch has broad powers to interpret legislation, to write regulations that are legally binding for everyone, and to enforce those regulations without much interference from the Judicial branch.

The problem is that administrative bureaucracies have little incentive to consider potential unintended consequences and do a poor job of accounting for the costs of regulations. If, to fix these relatively poor incentives, the power of the bureaucracies is reduced, where would it go? Some of it could go to the Legislature and the rest might be entrusted to the Judicial branch directly. These two branches might do a better job of enforcing things like non-point- (in the case of the Legislature) and point-source (in the case of the Judicial branch) pollution since they're more directly bound by public scrutiny (Legislature) or hundreds of years of nuisance law (Judiciary).

What about expertise? Don't the administrative bureaucracies bring a lot of brain power to these regulatory problems? Definitely, but such expertise is often called on in legislative committees and on the witness stand in court cases. It doesn't require one to be flippant about environmental problems to suggest that there are, potentially, better institutional models to deal with things like pollution and environmental quality.

Nudging the Nudgers with Better Regulatory Policy

by Levi Russell

A recent law blog post by Brian Mannix (hat tip to David Henderson for the link) discusses the significance of the Congressional Review Act (CRA) during a presidential transition period. In a nutshell, the CRA allows congress to overturn a regulation written by an agency in the executive branch with a bare majority in each house until the 60th day after it is issued. Of course, like a bill, the president can veto, in which case congress must come up with a 2/3 majority to override the veto. Given that most presidents wouldn't want to stop their own branch of government from implementing regulations, the CRA doesn't often come into play. However, since Republicans control both houses and the incoming president is a Republican, there are some interesting things that could happen given the Republicans' ostensible preference for less regulation. Mannix has some interesting examples in his post so I suggest reading it.

What interested me was a specific line in the post:

Note that the CRA mechanism is distinct from the proposed REINS Act mechanism.  Under REINS, Congress would need to approve of major regulations before they become effective; under the CRA rules become effective if Congress refrains from disapproving.

This got me thinking about behavioral economics and the idea of "nudges." An example of a nudge is a change to the rules that makes the "best" option the default. Often nudges are suggested as part of government policy, but that's not always the case. An oft-repeated example is to make 401k enrollment with your employer the default option while still providing an "opt out" opportunity for those who don't want to contribute to a 401k.

Looking again at the last sentence in the quoted text above, the REINS Act strikes me as a great example of "nudging the nudgers." That is, imposing a rule on those in the executive branch who are in charge of making and enforcing rules based on legislation. Specifically, the REINS Act would make the default position "no new regulations" and only those that passed additional scrutiny by elected representatives would actually be issued. I argue that, at least potentially, the REINS Act would lead to better regulation for a couple of reasons:

1) There would be more oversight by elected representatives of the regulatory process than there is currently.

2) Massive regulations like those written based on Dodd-Frank or the Affordable Care Act would probably be issued more slowly since the regulations would have to be approved by Congress. This would give us a chance to see how the initial regulations actually play out rather than relying on speculative cost/benefit analysis (side note - most regulations aren't subjected to cost/benefit analysis anyway).

Additionally, the REINS Act could reduce the problem of passing on more authority to the executive branch than it was designed to have. This problem arises when Congress passes a very general bill (which is more likely to garner enough votes to pass than a very narrowly-written bill) empowering the executive branch's bureaucracy to write regulations that are less likely to be in line with the will of the people.

The REINS Act was passed in the House last year and is currently sitting in the Senate. It would be great to see more discussion of this bill, but perhaps I just missed it. I'd love to read your thoughts in the comments below!

Bonus: Here's a great article on "nudging the nudgers."

Note that the CRA mechanism is distinct from the proposed REINS Act mechanism.  Under REINS, Congress would need to approve of major regulations before they become effective; under the CRA rules become effective if Congress refrains from disapproving. - See more at: http://www.libertylawsite.org/2016/11/17/midnight-mulligan-the-congressional-review-act-rides-again/#sthash.dJwa6OFY.dpuf

Can Plows Create Mountain Ranges?

by Levi Russell

According to the EPA, the Clean Water Act does not require a permit for normal agricultural practices including the following:

Normal farming, silviculture, and ranching practices. Those activities include plowing, seeding, cultivating, minor drainage, and harvesting for production of food, fiber, and forest products.

Upland soil and water conservation practices.

Agricultural stormwater discharges.

Return flows from irrigated agriculture.

Construction and maintenance of farm or stock ponds or irrigation ditches on dry land.

Maintenance of drainage ditches.

Construction or maintenance of farm, forest, and temporary mining roads.

That sounds pretty comprehensive to me, but the EPA and US Army Corps of Engineers has apparently decided to circumvent their own rule. A report released by the Majority Staff of the Senate Committee on Environmental and Public Works claims that

Landowners will not be able to rely on current statutory exemptions or the new regulatory exemptions because the agencies have narrowed the exemptions in practice and simply regulate under another name.  For example, if activity takes place on land that is wet: 
- plowing to shallow depths is not exempt when the Corps calls the soil between furrows “mini mountain ranges,” “uplands,” and “dry land;”
- discing is regulated even though it is a type of plowing;
- changing from one agricultural commodity constitutes a new use that eliminates the exemption; and 
- puddles, tire ruts, sheet flow, and standing water all can be renamed “disturbed wetlands” and regulated. 

This expansion of jurisdiction is apparently not what the EPA previously claimed it would be. If farmers are required to get permits to cultivate the soil, I'd bet on a couple of things:
1) the average farm size will grow dramatically as smaller farmers go out of business very quickly;
2) food prices will rise, or will fall more slowly than they otherwise would.

I doubt the average person looking at this situation would call those outcomes "good" but they're highly likely in my opinion. As Public Choice theory indicates, the EPA is not a residual claimant with regard to its policies, so its incentives are not as well-aligned as are the owner of the typical non-monopoly firm. Further, the EPA has plenty of incentive to increase the quantity of work for its employees and lawyers. This question remains: Will the farm lobby be able to keep their exemptions?

Farmers as Environmentalists

by Levi Russell

This morning in my daily ag reading I came across an article entitled "Greens Make Green." The author lays out the case for the farmer-as-environmentalist better than I've ever seen, so I thought I'd share it here. The underlying economic argument here is that there is great incentive compatibility between farmers (who are interested in long-term profits) and environmental sustainability. Do you find it compelling? Let me know in the comments.

In truth, farmers and environmentalists should be allies. The environmental and agricultural communities have more in common than conventional wisdom might suggest. Both desire to preserve our planet and its resources for future generations. I am not shy about saying farmers are the original environmentalists.

To a person, every farmer I have ever met is driven by an ethical obligation to protect the environment. They view themselves as stewards of the land. And for good reason: Nearly all want their children and grandchildren to carry on the tradition. Cousins Scott and Tom Deardorff II reflect the common theme of sustainability that connects the past to the present and future. Founded in 1937 by patriarch and great-grandfather W. H. Deardorff, Southern California-based Deardorff Family Farms has dedicated four generations to refining its environmental craft. For nearly eight decades, the Deardorff family has been driven by the relentless pursuit of improvement, pioneering many farming practices aimed at increasing productivity while reducing their reliance on natural resources.

Today, Scott and Tom have not only embraced but expanded the family legacy of stewardship. For example, they have invested heavily in the latest water-saving technologies, including drip irrigation and state-of-the-art weather stations and soil moisture monitors. The cousins have also curtailed the use of fertilizer and pesticides on their organic vegetable farms through innovative soil fertility programs and integrated pest management systems. And they recently completed construction on a cooling and packing facility that meets the highest green building standards in the country.

Multigenerational farms like theirs are the heart and soul of agriculture in the West and across the country. They are the very embodiment of sustainability. We should be so lucky as to entrust all our natural resources to the collective care of such thoughtful stewards.

If you can't bring yourself to buy the moral argument, at least consider renting the financial one. Farmers are business owners. They are motivated by sustainable profit. Their businesses are dependent on healthy soil and clean water, both of which lead to stronger yields and higher quality products. The math is quite simple: An environmentally healthy farm can deliver sustainable profits, while land that has been abused will one day cease to produce anything. Furthermore, inputs like fertilizer and pesticides are expensive; a business that doesn't minimize operating costs won't stay in business very long. Clean air, soil, and water are all outcomes supported by environmentalists. So why do so many continue to paint farmers as the enemy?

In his farewell address, President Eisenhower famously warned the nation against "unwarranted influence .  .  . by the military-industrial complex." Today we see the maturation of an environmental-industrial complex, defined by multimillion-dollar global enterprises closely integrated with academia and government regulators implementing environmental programs.

Like a storyline out of Mad Men, environmental activists have channeled their inner Don Drapers, fomenting fear of business and industry, and of human activity generally, in order to build a database of committed donors. It is an ingenious business model, used by corporate America since the early 1920s, when Gerard Lambert stigmatized halitosis to sell Listerine. Marketers have long understood that fear is a powerful motivating tool.

Every cause needs a bad guy, a threat that must be put down. For Listerine, it was bad breath. For too many environmental organizations, farmers—cast as the pillagers of Mother Earth—have served as compelling bogeymen (typically referred to as "corporate agriculture," "industrial agriculture," or the like) to alarm the 98 percent of Americans who aren't farmers.

We are all motivated to some degree by self-interest. Farmers are motivated by the love of farming and social good that comes from providing healthy food, and they are also motivated by the desire to succeed financially. Environmental activists working in big organizations aren't all that different. There is no doubt that most choose a career based on a commitment to environmental values and a desire to do good. And there is also no doubt that another motivation, and one that is entirely defensible, is the financial reward and career security that these organizations can provide.

Unfortunately, in the public debate, it is perfectly acceptable to point to farmers' financial motivations and equally unacceptable to acknowledge the financial motivations of environmental advocates. Those in private enterprise who are targeted by the policy and political initiatives of the environmental lobby ought to be more vocal about that.

If one can acknowledge the reality that the environmental lobby is motivated not only by the values of environmentalism, but also by the financial rewards of growing a motivated donor base, one might ask whether it would benefit these organizations to ever declare a problem solved. After all, while committed donors might feel good upon hearing such an announcement, they would also have one less reason to contribute.

Nowhere was this more in evidence than during the opposition waged against Senator Dianne Feinstein's compromise California drought legislation in 2014, which culminated in a joint-letter from multiple organizations slamming her bill.

Not one to seek the ire of environmentalists, the senator candidly responded—as quoted in the San Francisco Chronicle—that they "have never been helpful to me in producing good water policy." She went on to lament, "I have not had a single constructive view from environmentalists of how to provide water when there is no snowpack."

The practice of environmental protection and the business of environmentalism are two sides of a scale. Our nation's natural resources have benefited from much that has come from the former, but today the scale is weighted too much to the latter. It is the business side of environmentalism that produces the political targeting of agriculture.

It should stop. We share a common aim: to safeguard the planet for its people, animals, and plants. Imagine how much good could be accomplished if all farmers, regardless of size, whether conventional or organic, were accepted and embraced as partners for environmental protection. Now that is a narrative I know Don Draper could sell.

Tom Nassif is president and CEO of the Western Growers Association.

Yes, Virginia, Plowing is Pollution

by Levi Russell

Obviously the title is meant to be facetious. I'm just in shock about this ruling and am concerned about the ramifications it will have for producers in the future.

Below I reproduce a short Farm Futures article that summarizes a recent court decision in California regarding the Clean Water Act. As cynical as I am, this decision did surprise me.

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Judge Kimberly Mueller on June 10, 2016 in the U.S. Eastern District Court of California found that John Duarte, a nursery operator and wheat farmer, plowed wetlands, four to six inches deep, and therefore violated the Clean Water Act (CWA).

The Judge found Mr. Duarte, by chiseling a pasture, discharged fill material into a water (vernal pool) of the United States. Get this! The Court wrote “In sum, soil is a pollutant. And here, plaintiffs instructed [a contractor] to till and loosen soil on the property.”

This plowing, according to the Court, caused “…the material in this case soil, to move horizontally, creating furrows and ridges.” You will not believe this. 

The Court wrote, “This movement of the soil resulted in its being redeposited into waters of the United States at least in areas of the wetlands as delineated...” In sum, the Judge found that chiseling no more than a few inches of soil constituted an addition of a pollutant to a wetland.

Stunning!

The Court also evaluated whether the tractor and soil chisel plow were point sources under the CWA. The Court cited cases which found that bulldozers, backhoes, graders, tractors pulling discs and rippers can be point sources under the CWA.

The Court describes Mr. Duarte’s equipment as having 7 shanks with 24-inch spacing and each shank was 36 inches long. The Court wrote, “The equipment loosened and moved the soil horizontally, pulling the dirt out of the wetlands [vernal pools] and redepositing it there as well.” 

Vernal pools are described as meeting all three wetland parameters. They are dry the majority of time. As a result, the Court found that the equipment used to aerate the soil was a point source under the CWA.

Under the CWA there must be a discharge of a pollutant to navigable waters from a point source. Again, it is believed that to have a discharge of a pollutant, there must be an addition of the pollutant to the navigable waters. It is also believed that farming operations allegedly have an exemption under the CWA which exempts certain activities of farming and ranching from CWA permitting requirements. (The Court seems unaware that farming is considered a nonpoint source covered by section 319 of the CWA)

The CWA regulations defines farming and declares “Normal farming…activities such as plowing, seeding, cultivating, minor drainage and harvesting for the production of food, fiber and forest products,…” are not activities which are prohibited or regulated under the CWA. Plowing is also defined by EPA as meaning “…all forms of primary tillage, including moldboard, chisel or wide-blade plowing, discing, harrowing and similar physical means utilized on farm, forest or ranchland for the breaking up, cutting, turning over, or stirring of soil to prepare it for the planting of crops.”

The Court found that Mr. Duarte’s activities did not meet the exemption EPA has provided for farming. The Court believed that the land being aerated by Mr. Duarte had not been land used for farming activities but for the grazing of animals. (Grazing or pasturing of animals apparently is not an agricultural activity!) The Court believed the farming operation which could be exempted had ceased to operate as a farm, and that Mr. Duarte was engaging in new agricultural activities. 

Legal complications

The case is extremely complicated from a legal standpoint where Mr. Duarte sued the Army Corps of Engineers (Corps) claiming the Corps had violated his 5th Amendment right to due process and his 1st Amendment right against retaliatory prosecution. According to the opinion, there were two rounds of motions to dismiss significant evidentiary objections and objections over what constituted hearsay. The U.S. Department of Justice filed a counterclaim against Mr. Duarte using the CWA and won.

Basically the case says plowing can be a polluting activity particularly in areas that can be identified as vernal pools, vernal swales, seasonal wetlands, seasonal swales and areas where there may be intermittent and ephemeral drainages.

Mr. Duarte had purchased the land in order to plant winter wheat. He had been very careful in hiring consultants to identify any wetlands. Apparently what he did was insufficient according to Judge Mueller, an Obama appointee, who served as a City Councilwoman in Sacramento. In addition she has worked as a U.S. Magistrate Judge but appears to have no experience in agriculture. It shows!  It is indeed surprising that an attempt to grow wheat on approximately 450 acres results in the violation of the CWA.

Supply of and Demand for Environmental Regulation

by Levi Russell

I have a project in mind that I thought I'd share here and hopefully get some feedback. On previous posts (here and here) I've discussed some supply factors of environmental regulation. I think there's a lot more that can be done to find measures of factors affecting the supply of and demand for environmental regulation that I think would make a good public choice type paper.

There's already a lot of literature out there on supply and demand of regulation. The foundational theoretical papers by George Stigler, Gary Becker, Sam Peltzman, Fred McChesney, and Richard Posner are obvious starting points for a project like this. Some empirical/historical papers can be found here, here, here, here, here, here, and here. The last one is a lighter read.

I'm interested specifically in environmental regulation. I'm interested in it as an ag economist but also as a student of regulation in general. Environmental regulation makes up a significant portion of all regulation in the US and has for a coupe of decades.

Demand factors I have in mind include the number of species on the endangered species list, dollars spent on lobbying efforts by environmental groups on key environmental legislation, and results of surveys of public opinion on environmental problems.

Supply factors include indices of legislator support for environmental causes, majority parties in congress and the executive branch, legislation published by environmental groups, and measures of legislator ideology.

I’ll probably use data from the Mercatus Center’s RegData on Title 40 of the Code of Federal Regulations which contains most of the EPA's regulatory text. I want to look at environmental regulation in general, but also focus on specific industries such as agriculture, airlines, mining and fossil fuel extraction, manufacturing, construction, and transportation.

Any thoughts you have are greatly appreciated!

Environmental Common Law vs Administrative Regulation

I recently listened to an old EconTalk podcast featuring Clemson economist Bruce Yandle. Yandle is famous for the "Bootleggers and Baptists" theory of regulation. In this episode, he discusses an alternative to the current form of federal environmental regulation. Specifically, he talks about the pre-1970s era when state-level common law settled disputes between parties in regard to environmental quality.

Yandle begins by discussing the tragedy of the commons or the commons problem. For those who don't know, the tragedy of the commons refers to the problem we face with public access to scarce resources. He talks about the stages of evolution of property rights and introduces his juxtaposition of common law approaches to environmental policy to administrative regulation with some historical examples. I'll leave those for the interested listener (the podcast is about 1 hour in length, the extra run time at the end is devoted to a comment by the host).

Here are several of Yandle's points that make his case for the common law approach vis-a-vis the current regulatory approach:

- The state- and city-level common law standard prevalent before the 1970s applied to the parties to the dispute, no one else, though a particular case might be cited in the decision of another. The basic principle was that you didn't have a right to pollute your neighbor's property without their permission.

- Many businesses seeking to discharge waste went to downstream landowners and offered to pay to offset the water quality deterioration rather than purchase the land outright (though this was common as well). This makes a Coasian point: there must be someone who is harmed by the discharge for an externality to exist. Getting rid of all pollution is not likely to be cost-effective. The downstream property holder had a right to water quality based on his or her ownership of the land.

- Common law generally works on a  case-by-case cost-benefit standard whereas regulations don't. The license to discharge or the technological standard required to mitigate pollution applies to all, Yandle says that this implies that the damage done by the pollution isn't legally relevant, only the rules laid out by the regulator.

- Though differential access to legal services is potentially an issue, district attorneys (or tort law, in my amateur, non-lawyer opinion) could be used to solve this problem.

- Did the common law standard work well? Previous research indicates that progress in water and air quality before 1970 was roughly indistinguishable from progress after.

- Yandle is positive about the prospect of using the EPA as an environmental research organization and expert witness in environmental common law cases.

- I can't resist one example. Anglers' associations in England and the English part of Canada have successfully brought suit against polluters and improved water quality under the existing common law standard. This is possible because a landowner also owns the wildlife on his or her property. Yandle says that this is not so in the US; that wildlife are considered public property here. Anglers' associations in the UK have been so successful in common law courts and are now so powerful that all they have to do is make a phone call to a business inadvertently killing fish in a stream or river and the problem is fixed quickly and quietly. Overall, Yandle makes a persuasive case in favor of environmental common law.

EPA-Funded Shenanigans

The EPA has had some image issues lately on the agriculture front. Back in December the Government Accountability Office (GAO) "concluded that the EPA violated express limits on the use of appropriations for indirect or grassroots lobbying, and that in doing so, the agency violated the Antideficiency Act." A regulatory agency using federal funds for "grassroots lobbying" is pretty despicable in my mind but it provides more evidence that the public interest theory of regulation has some serious problems.

The EPA was back in the news recently thanks to a similar oversight. Apparently "an EPA grant to the Northwest Indian Fisheries Commission [was] used to support an anti-farmer advocacy campaign in Washington state.  The campaign included billboards and a website that support increased regulation of agriculture in Washington state."

My initial reaction was that this was likely to be just a simple oversight and that the EPA probably wasn't culpable. Maybe the grant was intended to fund education and the groups receiving money just went a little too far. The problem is that

It appears a large portion of the EPA financial assistance went to pay a public relations and lobbying firm, Strategies 360, to conduct an advocacy campaign called ‘What’s Upstream?’ in partnership with environmental activists, including Puget Soundkeeper Alliance and Western Environmental Law Center.

That could still be a simple oversight, but shouldn't the EPA be looking at regular grant reports to see where their money is going? I can't see how money going to a "public relations and lobbying firm" has anything to do with education.

I hope the folks at the EPA get their house in order. In my opinion, they're running the risk of drawing the ire of people who aren't necessarily interested in agriculture or cutting government spending but simply have a problem with fraud and abuse in federally-funded programs.

What do you think? Is all this overblown or is the EPA pushing an agenda?

My Confusion on WOTUS and Ag Exemptions

In the past I've been puzzled over the conflicting stories told about WOTUS by the EPA and Farm Bureau. The EPA claims that the rule does not impact normal farming operations but will require permits for many non-day-to-day activities farmers might engage in that would affect a "water of the United States." Farm Bureau makes much stronger claims, indicating that many typical practices will be hindered by bureaucratic red tape.

I've not found any source that nails down precisely what is and is not a "water of the United States." That's more than a little bit unnerving, as the definition of that term is the basis of the regulatory authority. [A previous version of this post indicated that my colleague Tiffany Dowell-Lashmet claimed that the EPA's characterization of the WOTUS rule is more accurate than FB. I've been informed that this is not her view and have deleted the offending portion of the post.]

A recent DTN column entitled "Farming Under Regulatory Fear: California Farmer's Battle Spotlights Growing Fear of Government Overreach" sounds at first like clickbait, but brings to light a case that makes me think Farm Bureau's claims are more accurate than I first believed. The article is ungated for now, but might be behind a paywall in the near future.

PERC Weighs in on EPA's WOTUS Rule

Over the past year, I've explored several aspects of EPA regulation (here, here, here, and here). In a blog post last month at the Property and Environment Research Center (PERC), law professor Jonathan Adler discussed the conservation aspect of the EPA's contentious new definition of "waters of the United States" (WOTUS). In the post, he makes some good points about the ways in which an expansion of federal government conservation efforts could affect private or state government conservation.

Adler says that previous court restrictions on EPA's authority were the impetus behind the new definition of "waters of the United States":

The new definition was prompted by the failure of prior agency definitions to withstand judicial review. In 2001, and again in 2006, the U.S. Supreme Court rejected the agencies’ overly expansive notion of their own jurisdiction. Authority to regulate activities touching upon “waters of the United States” is broad, but not infinite, the Court ruled, and must ultimately connect to the nation’s navigable waters. Already multiple suits are pending in federal court challenging the new WOTUS definition for failing to heed this guidance.

He writes that the underlying theory behind the new definition is that conservation can be maximized if and only if federal regulatory authority is maximized. However, Adler claims that there are potential crowding-out effects associated with the new definition. He gives a couple of examples:

Consider the case of wetlands, which are subject to the Clean Water Act under the new WOTUS rule insofar as they are adjacent or otherwise connected to navigable waters and their tributaries. If federal regulation does not cover all wetlands—and it does not—other steps are necessary to maximize wetland conservation. Yet conservation groups and state and local governments cannot know where their efforts are most needed if they do not know where federal regulatory authority ends and the need for additional efforts begins. 

The expansion of federal regulatory jurisdiction also threatens to penalize and discourage conservation efforts more directly. Among other things, the Clean Water Act prohibits the discharge of pollutants, defined to include clean “fill material” such as dirt, in the nation’s waters without a permit, and the WOTUS rule defines waters to include many wetlands. This means that even the most well-intentioned conservationists may need a federal permit to undertake ecological restoration on private land. Why does this matter? Because obtaining such permits can be costly and time-consuming—and failure to comply can bring criminal penalties. And as has been shown in the context of endangered species, excessively punitive regulations can discourage voluntary conservation on private land.

Adler concludes:

There are more than 100 million acres of wetlands in the United States, and approximately three-fourths of these are on private land. This means that insofar as federal regulatory efforts discourage private conservation, they can have significant, unintended consequences. The unrestrained expansion of regulatory jurisdiction may be good for federal agencies, but it’s not always good for conservation.

What's clear is that this new definition, whatever form it takes, will have substantial effects on agriculture and conservation. We don't yet know whether those effects will be positive or negative on net.

Major Environmental Legislation and EPA Regulations

In my last post on EPA regulation of agriculture, I looked at the majority party in the House, Senate, and the party of the President from 1974 to 2014. Some of it lined up with what I think most people, including me, would assume (i.e. Democrat control means more regulation), but much of it didn't. I suspect part of this is a function of our short memories but a good portion of it could be the relative independence with which regulators operate. They don't necessarily need legislative mandates to change the regulatory environment. One other thing to keep in mind: the regulations in this index can apply to any aspect of agriculture. Regulatory restrictions on forestry, crop farming, ranching, concentrated animal feeding operations, and aquaculture are all included in this index.

In this post I want to show some major legislation and regulatory actions laid over the same 1974-2014 regulatory restrictions data. I don't know if the events I identify on the chart are the causes of subsequent increases in regulation. I picked most of these events off the EPA History website, so the agency itself believes they're significant. If and when I dig into the RegData data for a research project, I'll be able to tell a more interesting story.

The graph shows EPA regulatory restrictions on agriculture. Data were taken from the RegData Database at the Mercatus Center at George Mason University. The data are counts of restrictive words in the Code of Federal Regulations such as "cannot," "must," "shall," etc weighted by the probability that the particular Title and Part apply to agriculture. This time I converted the restrictions count into an index (something the Center recommends) in part to make it easier to see just how much regulatory growth the ag industry has experienced. In 2014, there was 492% more regulation on agriculture than there was in 1974.

Basic Textual Analysis of EPA Regulations

In the last post I showed the relationship between the majority party in the House, Senate, and Presidential office and EPA regulatory restrictions on agriculture from 1974 to 2014. As I noted there, the relationships aren't always clear and they definitely aren't what a "naive" understanding of the current political divide would predict. In this post I thought I'd take a step back and provide a more general summary of EPA regulations, without the focus on politics and agriculture.

The RegData 2.2 database provides highly detailed data on regulation at the federal level. Cutting it down to just EPA regulation yields 11,353 observations. Each observation gives a number of restrictions and word count for a given Part in a given Title in a given year in the Code of Federal Regulations. Titles are divided into Chapters, Subchapters, and Parts, but RegData doesn't split the data up by Chapter or Subchapter.

The Title designation basically tells you which agency you're looking at, though agencies like the EPA can be found in several Titles. The primary Title for the EPA is 40. Parts divide the Titles into subject areas. For instance, Title 40, Part 171 includes information about the certification of pesticide applicators. Part 406 details effluent guidelines for grain mills.

The chart below shows the number of Parts in Title 40 from 1974 to 2014. There are more than 3 times as many Parts now as there were in 1974. Most of the growth in Parts since 1974 occurred before the mid-1990s. If you look at my previous post, the number of parts generally tracks with the number of restrictions on agriculture. I don't know whether this is a coincidence or not.

40 Years of EPA Regulation - Political Factors

I've been a bit lazy about posting lately, but I think the next series of posts will be interesting if you liked our previous posts on the EPA. Within the last few weeks, the Mercatus Center has put out a much longer time series going back to 1974. I have some ideas for journal articles I'll be exploring over time, but as I sift through the data I thought I might share some of the insights they provide as I go.

Most of us who haven't studied the EPA's history in detail probably have a few assumptions about the political drivers of EPA regulation, especially regulation of agriculture. We'd probably think about things like pesticide bans, clean air and water regulations, and fuel standards. We'd probably associate these regulations with Democrats, with an exception for Nixon, who created the EPA.

The charts below show the annual index of regulatory restrictions on agriculture by the EPA (red line). The blue shaded areas indicate years in which Democrats held the majority in the House of Representatives, the Senate, or held the Presidency.

Natural Resource Potpourri

I don't have the expertise in natural resource economics to really do a lot of writing on the topic. However, I want to make sure we cover it at least occasionally, so I'll probably stick to this potpourri format for now. I hope some day we find a contributor who is interested in this area.

Lynne Kiesling has a great post on the benefits of retail electric markets. Living in the state of Texas, I can attest to the advantages of this kind of direct competition between providers. Here's Kiesling:

The report’s policy recommendations are in keeping with the idea that market processes provide opportunities for producers and consumers to benefit through experimentation and trial-and-error learning, and that product differentiation through innovation is the most potent form of dynamic competition for creating meaningful consumer benefits.

Digital Trends has an interesting piece on electric vehicles and their actual impact on the environment:

The best outcome for EVs was a 24-percent improvement in global-warming potential over the average gas powered car, and between 10 percent and 14 percent over diesel. These numbers are nothing to sneeze at, but they change radically depending on the source of electricity that EVs are powered on. 

The above numbers rely on the European power mix, which more heavily favors nuclear, hydroelectric, and renewable sources of energy than other parts of the world. 

The global warming potential for EVs that rely on natural gas – generally considered to be the cleanest fossil fuel – show an improvement of only 12 percent over gasoline, and break even with diesel. 

Most alarming, EVs that depend on coal for their electricity are actually 17 percent to 27 percent worse than diesel or gas engines. That is especially bad for the United States, because we derive close to 45 percent of our electricity from coal. In states like Texas, Pennsylvania, and Ohio, that number is much closer to 100 percent. That’s right folks; for residents of some of the most populous states, buying an EV is not only toxic, it’s warming the planet more than its gas-powered counterparts.

Potpourri

I haven't done one of these in awhile, so I thought I'd put some stuff I've read recently that caught my eye.

Jayson Lusk recently blogged about my article currently in review at the Journal of Regulatory Economics on the effects of USDA and EPA regulation on ag productivity.

Don Boudreaux, spurred by a back and forth between Russ Roberts and Paul Krugman, has a couple of great posts (here and here) on economics as a science and its ability to generate falsifiable predictions. Very thought provoking.

Marc Bellemare documents the top 5 journals in ag economics based on recently-calculated impact factors. The ordering is interesting, but it's important to remember that there are many measures of journal quality. This paper, sent to me today by a colleague, puts ag and applied economics journals into groups (A+, A, B, C, D). All of this is good information which, as an assistant professor, I find very useful.

Matt Bogard has some interesting thoughts on the abilities required for working as a data scientist outside the academic world.

Neonics and the Farmer as Peacemaker

Neonicotinoid (neonic) pesticides are a commonly-used class of pesticides that have stirred up their share of controversy in the last few years. These pesticides have come under fire for their alleged negative impact on bee populations. The issue is typically framed as a war between the environmental groups, who are concerned about bee population health, and the agrochemical companies, who are concerned about their revenue stream. Research institutions play the role of the black market arms dealer supplying ammunition to both sides.

A recent article in the Guardian takes aim at the political aspects of the issue, focusing on the debate in the UK and the EU. Thankfully, the article considers the view of an often-ignored party in the debate: farmers. The article seems to give a slight edge in the war to the chemical companies, if only because the scientific evidence seems to be currently shaking out in their favor, but the most interesting participants in this war are farmers.

Potpourri

Don Boudreaux discusses the issue of monopsony power and the minimum wage in an interesting fashion.

Prompted by criticism from local food advocates, Jayson Lusk clarifies his position. It continually baffles me that so many people equate opposition to subsidies for or outright government provision of some good or service with opposition to that good or service itself.

Paul Krugman's most recent comments on the minimum wage have sparked several productive discussions in the blogosphere. One post in particular stands out to me. In it, Scott Sumner uses this episode to illustrate the difference between economists who take basic theory seriously when it comes to practical matters of policy and those who don't.

The EPA continues to generate policy uncertainty in the corn markets by failing to set volume obligations. On top of this, repeal of the Renewable Fuels Standard continues to garner support on both sides of the aisle. What exactly this potential repeal would mean for corn producers, I don't know. My initial thought would be that corn prices would fall, causing losses in the short run, but that input prices and planted acres would adjust (over time) and the policy-change-induced losses would cease. Additionally, we could expect lower fuel costs and slightly lower food prices if the RFS were repealed.