Risk Analysis and Cost-Benefit Analysis of Environmental Regulations

94-961 ENR

TABLE OF CONTENTS FOR THIS SECTION

LEGISLATIVE ACTIVITIES
-- LEGISLATION IN THE 103RD CONGRESS
-- OUTLOOK FOR THE 104TH CONGRESS

SELECTED REFERENCES

APPENDIX REQUIREMENTS FOR ANALYSIS OF RISKS, COSTS, AND BENEFITS IN SENATE-PASSED BILLS OF THE 103RD CONGRESS: A COMPARISON WITH REQUIREMENTS IN EXECUTIVE ORDERS OF PRESIDENTS REAGAN AND CLINTON

Table A-1. Key provisions of the Johnston Amendments to S. 171 and S. 2019, President Reagan's Revoked Executive Orders 12291 and 12498, and President Clinton's Executive Orders 12866 and 12875

LEGISLATIVE ACTIVITIES

LEGISLATION IN THE 103RD CONGRESS

More than a dozen bills and amendments on environmental risk analysis were introduced in the 103rd Congress. One was enacted, but it applied to the Department of Agriculture, not EPA. Nine other bills were passed by one chamber or reported by the committees of jurisdiction.

Arguably, the most influential risk proposals in the 103rd Congress were offered by Senator Johnston. The two "Johnston amendments" would have required EPA to analyze risks, costs, and benefits for proposed and final regulations. The original "Johnston amendment" was the first risk legislation debated on the Senate floor, and it was adopted on April 29, 1993, by a vote of 95 to 3. The amendment was incorporated as section 123 in S. 171, a bill to raise the U.S. Environmental Protection Agency (EPA) to department (cabinet) status. A similar proposal that would have amended a House bill to elevate EPA to the cabinet (H.R. 3425) was unsuccessful, however. The rule for consideration of the reported bill was defeated on the House floor, reportedly in part because the rule would have prevented introduction of non-germane amendments, such as that on risk and cost-benefit analysis.

During the second session of the 103rd Congress, Senator Johnston addressed some of the key concerns of House Members when he introduced a revised version of his amendment. It was adopted by the Senate during the May 18, 1994 floor debate on Senate-passed S. 2019, a bill to amend and reauthorize the Safe Drinking Water Act. Both amendments are summarized in the Appendix. The Appendix also compares the amendments' provisions with requirements in President Clinton's executive orders, which some argue, eliminate the need for legislation.

The Senate also passed S. 2019, amending and reauthorizing the Safe Drinking Water Act, which included in §15 a revised version of a bill originally introduced by Senator Moynihan (S. 110) that would have required EPA to rank pollution sources based on risk. The Senate also adopted House-passed H.R. 820, the National Competitiveness Act of 1993, after amending it to require all Federal agencies to prepare and publish an economic and employment impact statement for each rule and notice published in the Federal Register. The House passed H.R. 1994 reauthorizing EPA's environmental research program and establishing a core research program on risk reduction, and H.R. 3870 promoting research development and deployment of environmental technologies and requiring OSTP to establish a protocol for conducting and reporting the results of risk assessments which are conducted to inform efforts to prioritize research projects. The House Committee on Science, Space and Technology reported H.R. 4306, amended, Oct. 7, 1994 (H.Rept. 103-857). It would have established a program in EPA to develop risk assessment guidelines, oversee their implementation, provide for scientific peer review, identify and conduct research on risk assessment methods, and develop risk characterization guidance and oversee its implementation. A pilot program on comparative risk analysis and an interagency coordinating process in OSTP also would have been established by H.R. 4306.

For more detailed information on these and other proposals in the 103rd Congress, see CRS Report 94-716, Comparison of Environmental Risk Provisions in the 103rd Congress.

OUTLOOK FOR THE 104TH CONGRESS

The House Republican Contract with America promises that within the first 100 days of the 104th Congress risk legislation will be introduced, debated, and voted upon in the House. Title III of the "Job Creation and Wage Enhancement Act of 1995" (JCWEA), one of the draft bills distributed with the House Republican contract, appears to integrate several of the proposals that saw action in the 103rd Congress. For example, the JCWEA title III contains a slightly modified version of the original Johnston amendment, with coverage expanded beyond EPA to include all Federal agencies that promulgate regulations concerning human health and safety or the environment.

In addition, some proposals that did not advance in the 103rd Congress may have more vigor in the 104th; for example, almost all the provisions of H.R. 2910, the Risk Communication Act of 1993, are found in the JCWEA title III. It would require Federal agencies to distinguish explicitly between scientific findings and other considerations in risk assessments, to consider negative as well as positive experimental data, and to explain underlying assumptions and models. It also specifies the contents of all public risk characterizations and requires each agency to establish guidance for risk assessment and risk characterization. A modified version of H.R. 3695, which also was contained in the Republican Budget Initiative for Fiscal Year 1995, appears in title VII of the draft JCWEA. It would codify most of President Reagan's Executive Order 12291, but would significantly expand the requirements for Regulatory Impact Analysis and would define a "major rule" as any proposed regulatory action that would affect more than 100 persons or for which any one person would be required to expend more than $1 million to comply.

For more information on these or other proposals in the 104th Congress, see the CRS Issue Brief The Role of Risk Analysis and Risk Management in Environmental Protection (IB 94036).

SELECTED REFERENCES

Fraas, Arthur. The Role of Economic Analysis in Shaping Environmental Policy. Law and Contemporary Problems, Assessing the Environmental Protection Agency After Twenty Years: Law, Politics, and Economics. Durham, N.C., Duke University Press, 1991. p. 113-125.

Luken, Ralph A., and Arthur G. Fraas. The U.S. Regulatory Analysis Framework: A Review. Oxford Review of Economic Policy v. 9, n. 4, 1993: 96-111.

National Academy of Sciences, National Research Council. Improving Risk Communication. Washington, DC, National Academy Press, 1989. 332 p.

National Academy of Sciences, National Research Council. Risk Assessment in the Federal Government: Managing the Process. Washington, DC, National Academy Press, 1983. 191 p.

National Academy of Sciences, National Research Council. Science and Judgment in Risk Assessment, Washington, DC, National Academy Press, 1994. 574 p.

U.S. Congress. Office of Technology Assessment. Identifying and Regulating Carcinogens, OTA-BP-H-42. Washington, DC, U.S. Govt. Print. Off., Nov. 1987. 249 p.

U.S. Congress. Office of Technology Assessment. Researching Health Risks, OTA-BBS-570. Washington, DC, U.S. Govt. Print. Off., Nov. 1993. 228 p.

U.S. EPA, Economic Studies Branch, Office of Policy Analysis. EPA's Use of Benefit-Cost Analysis 1981-1986. Washington, U.S. EPA, August 1987. 55 p.

U.S. EPA, Office of Policy Analysis. Unfinished Business: A Comparative Assessment of Environmental Problems. Vol. 1. Washington, U.S. EPA, February 1987. 100 p.

U.S. EPA, Science Advisory Board. Reducing Risk: Setting Priorities and Strategies for Environmental Protection. Washington, U.S. EPA, September 1990. 8 p.

APPENDIX

REQUIREMENTS FOR ANALYSIS OF RISKS, COSTS, AND BENEFITS IN SENATE-PASSED BILLS OF THE 103RD CONGRESS:
A COMPARISON WITH REQUIREMENTS IN EXECUTIVE ORDERS OF PRESIDENTS REAGAN AND CLINTON

Introduction

The Senate of the 103rd Congress passed two versions of a proposal known as the Johnston amendment (S. 171, § 123 and S. 2019, § 18) that would have required economic and risk analyses for EPA regulations. The original Johnston amendment was incorporated into S. 171, a bill to elevate EPA to cabinet status. It would have required analyses for all EPA final rules and EPA certification that the benefits justified the costs. The revised version of the Johnston amendment, which was attached to Senate-passed S. 2019, a bill to reauthorize the Safe Drinking Water Act, would have required risk and economic analyses only for rules with an annual impact of $100 million or more, and certification that the proposed rule was cost-effective. It also would have required risk analysis for subpopulations at potentially greater risk than the population as a whole. A slightly modified version of the original Johnston amendment to S. 171 appears in the publicly distributed draft of the "Job Creation and Wage Enhancement Act of 1995" (title III, subtitle B), which the House Republican Contract with America states will be brought to the House floor within the first 100 days of the 104th Congress.

Many have argued that the provisions in the Johnston amendments are unnecessary, because EPA already is required by order of the President to analyze risks, costs, and benefits of its most costly regulations. According to the Clinton Administration, the President's Executive Orders 12866 on Regulatory Planning and Review and 12875 on Enhancing the Intergovernmental Partnership, extended and built upon the earlier orders of President Reagan on Federal Regulation (Executive Order 12291) and the Regulatory Planning Process (Executive Order 12498) (which were revoked and replaced by Executive Order 12866). Proponents of statutory requirements for risk and economic analyses counter that a legislative mandate to EPA is needed despite any overlap with Presidential orders, because the latter may be revoked by future Administrations. For example, they point out, President Clinton revoked President Reagan's Executive Orders 12291 on Federal Regulation and 12498 on the Regulatory Planning Process when he issued Executive Order 12866 on Regulatory Planning and Review. Title VII of the draft "Job Creation and Wage Enhancement Act of 1995" would codify most of Executive Order 12291, but would significantly expand the contents of an RIA and define a "major rule" as any proposed regulatory action that would affect more than 100 persons or for which any one person would be required to expend more than $1 million to comply.

This Appendix summarizes and compares the proposed requirements of the Johnston amendments and the executive orders for regulatory review issued by Presidents Reagan and Clinton. The discussion is summarized in Table 1.

Provisions of the Johnston Amendment to S. 171 (64)

To the extent permitted by law, the Senate-approved Johnston amendment to S. 171 would require the Department of the Environment, when promulgating any final regulation relating to human health and safety or the environment, to publish in the Federal Register:

(1) an estimate of the risk to public health and safety addressed by the regulation and its effect on human health or the environment and the costs associated with implementation of, and compliance with, the regulation;

(2) a comparative analysis of the risk addressed by the regulation relative to other risks to which the public is exposed;

(3) the Secretary's certification that:

(A) the estimate and analysis are based upon a scientific evaluation of the risk and are supported by the best available scientific data;
(B) the regulation will substantially advance the purpose of protecting the human health and safety or the environment against the specified identified risk; and
(C) the regulation will produce benefits to the human health and safety or the environment that will justify the implementation and compliance costs to the Government and the public.

If the Secretary cannot make the certification, the Secretary must report to Congress that the certification cannot be made and must include a statement of the reasons in the final regulation. Finally, the amendment states that the certification does not modify any statutes and is not subject to judicial review, and that "nothing in this section shall be construed to grant a cause of action to any person."

Several undefined terms and phrases in the Johnston amendment to S. 171 complicate evaluation and comparison to the executive orders. For example, is "an estimate, performed with as much specificity as practicable" (S. 171, as passed, §123) a single number, a range of numbers, a detailed quantitative description of the relationship between risks and costs, or simply a judgment about the value of a regulation? Because the debate surrounding the amendment seemed to assume that it is meant to require quantitative cost-benefit and risk analysis, a similar assumption is adopted in this report for purposes of discussion. Based on this interpretation, the S. 171 Johnston amendment's requirement to estimate risks and costs of environmental regulations seems similar to the requirements for analyses under executive orders, now revoked, that were issued by previous Administrations.(65) An important difference between the Johnston amendment to S. 171 and the other documents discussed below, however, is that this original Johnston amendment would apply to every final regulation issued by EPA, regardless of its significance, whereas the revised Johnston amendment and the two executive orders apply only to major or significant regulations.

Provisions of the Johnston Amendment to S. 2019

To the extent permitted by law, the Senate-approved Johnston amendment to S. 2019 (section 18) would require EPA, when promulgating any proposed or final major regulation relating to human health or the environment, to publish in the Federal Register a clear and concise statement that:

(1) describes and, to the extent practicable, quantifies the risks to be addressed by the regulation, including risks to significant subpopulations who are disproportionately exposed or particularly sensitive;

(2) compares the risks to be addressed to at least three other risks regulated by EPA or another Federal agency and at least three other risks not directly regulated by the Federal Government;

(3) estimates the costs to the U.S. Government, State and local governments and the private sector of implementing and complying with the regulation and the benefits of the regulation, including quantifiable measures and qualitative measures that are difficult to quantify; and

(4) contains a certification by the Administrator that:

(A) the analyses are based on the best reasonably obtainable scientific information;

(B) the regulation is likely to significantly reduce the risks to be addressed;

(C) there is no regulatory alternative that is allowed by the statute that would achieve an equivalent reduction in risk in a more cost-effective manner; and

(D) the regulation is likely to produce benefits that will justify the costs.

The amendment defines a major regulation as "a regulation that the Administrator determines may have an effect on the economy of $100 million or more in any one year." As in the original Johnston amendment to S. 171, EPA must report to Congress identifying major regulations for which complete certification could not be made and summarize the reasons. The amendment to S. 2019 also contains a clause clarifying the effect of its amendment on other statutes. This savings clause, however, is broader than the one contained in S. 171. S. 2019 states that nothing in the section affects any other provision of Federal law, shall delay action required to meet a deadline imposed by statute or a court, or creates any right to judicial or administrative review. Further, it states that in the event that a regulation is subject to judicial or administrative review under another provision of law, any alleged failure to comply with this section may not be used as grounds for affecting or invalidating such regulation.

Compared to the Johnston amendment to S.171, the Johnston amendment to S. 2019 more clearly indicates the extent to which risks and benefits of regulations should be quantified. Risks would be quantified "to the extent practicable" while costs and benefits would be estimated "including both quantifiable measures ... to the fullest extent that they can be estimated, and qualitative measures that are difficult to quantify."

By requiring analyses of proposed as well as final rules, S. 2019's Johnston amendment provides an opportunity for public comments before final regulations are promulgated, an opportunity not afforded by S. 171. Analysis of proposed rules in addition to final rules probably would not increase the burden on EPA (compared to the requirements of S. 171), however, because the Johnston provisions in S. 2019 apply only to major regulations, and only about 3.6 percent of the 168 final rules promulgated and 5.9 percent of the 1,694 rules proposed by EPA between 1981 and 1992 were "major."(66) In addition, S. 2019 allows EPA to publish a reference to the published statement for a proposed major rule in lieu of repeating the statement for a final major rule if it is substantially similar to the proposed rule.

Senate-passed S. 2019 would require risks to be compared to at least six other risks, whereas the amendment to S. 171 does not specify how many comparisons would be appropriate.

The Johnston amendment to S. 2019 requires EPA to analyze risks to significant subpopulations in addition to risks to the population as a whole; this provision reflects concerns about relatively large risks to small groups with higher exposures or unusual sensitivity to environmental hazards.

Under S. 2019, the Administrator must certify that regulations proposed or promulgated are the most cost-effective of the regulatory alternatives permitted by the authorizing statutes. This provision allows EPA to consider unquantifiable benefits of regulation, such as ethical and environmental benefits, in addition to economic benefits in establishing goals and standards for environmental quality and human health. In contrast, S. 171 might be interpreted to require certification that costs are justified quantitatively by the benefits, for example, by demonstrating that the regulation will produce a net benefit.

Comparison of Provisions

Table A-1 summarizes the following discussion.

First, it should be noted that none of the provisions compared below supersedes specific mandates in authorizing statutes, such as the Clean Air Act or the Safe Drinking Water Act, with regard to how EPA should weigh costs and risks in developing regulations; executive orders never supersede statutory mandates, and the Johnston amendments explicitly state that the requirement for certification (described below) does not modify any statutes.

The expressed purpose of President Clinton's executive order is to improve the development process for Federal regulations, making it more visible to the public and more efficient and ensuring the primacy of agencies in making decisions and the integrity and legitimacy of oversight. Another stated goal of the Clinton Administration is to expedite regulatory action. In contrast, President Reagan's orders were intended to improve the quality but also to reduce the number of regulations, and he sought to ensure more Presidential oversight of the regulatory process. The Johnston amendments would ensure that the public and Congress are informed about the Agency's estimates of risks, costs, and benefits associated with EPA regulations and that EPA officials have thought about the consequences of regulating. A key difference between the Johnston amendments and the executive orders is that the Johnston amendments would apply only to EPA, whereas the orders applied/apply to most Federal agencies.

The new order of the Clinton Administration directs agencies to promulgate regulations only when necessary due to "compelling public need" and after a reasoned determination that the benefits justify costs, or when required by law. The Reagan order, as mentioned above, permitted regulation only when benefits exceeded costs, unless this approach was prevented by law. The Johnston amendments are silent on this question.

The Clinton order directs agencies to conduct cost-benefit analysis for all ''significant regulatory actions." The definition of "significant regulatory action" is more inclusive than the "major rule" definition of Executive Order 12291, indicating that more regulations may be subject to cost-benefit and risk analysis under the Clinton order. (However, OMB will not review rules that are not found to be significant and may not require cost assessments for such rules, as discussed below.) Whether the Johnston amendment to S. 171 would be still more inclusive with respect to rules issued by EPA is unclear, because although it requires cost-benefit and risk analysis of all final regulations, regardless of their significance, it does not address proposed rules, notices of proposed rulemaking, or advanced notices of proposed rulemaking, all of which are defined as regulatory actions under the Clinton order and as rules under the Reagan order (with the exception of advanced notices of proposed rulemaking which were not included under the Reagan order). The revised Johnston amendment (S. 2019, §18) applies to proposed and final major rules.

President Clinton directs each agency to determine the significance of proposed regulatory activities initially, but authorizes OMB to designate additional rules as significant (within ten days of receiving the agency's list of planned regulatory actions). OMB also is permitted to waive review of an agency's significant regulatory actions. Under the two previous Administrations, OMB had similar authority, that is, to designate rules as major and to waive review of particular major rules. The Johnston amendments do not provide OMB or EPA discretionary power but recognize that circumstances may prevent EPA compliance. In such cases, S. 171 and S. 2019 would require EPA to report the reasons for noncompliance in the Federal register and to Congress.

President Clinton requires agencies to "consider the degree and nature of the risks posed by various substances or activities within its jurisdiction" in setting priorities for regulation. President Reagan required agencies instead to maximize net benefits. The Johnston amendments do not mention the setting of priorities, but EPA would be required to publish a comparative analysis of the risk addressed by the regulation relative to other risks to which the public is exposed.

The executive orders of Presidents Reagan and Clinton direct agencies to use different criteria in choosing particular regulatory objectives. Under the Reagan orders, agencies were required to pursue regulatory objectives that would "maximize net benefits", that is, achieve the greatest possible gain for society. Under the Clinton order, agencies will select regulatory objectives that address significant problems or compelling public need. The Johnston amendments are silent on this issue.

Having determined the targets of regulation, the Reagan Administration directed agencies to choose the regulatory alternative with the "least net cost." The Clinton Administration established three criteria for choosing a regulatory approach: maximize net benefits, minimize the overall regulatory burden for various segments of society, and design the most cost-effective regulation or alternative to achieve the objective. Again, the Johnston amendments do not address this issue.

The Reagan orders required analysis of potential benefits, costs, and net benefits of the proposed regulation and alternatives that cost less. Costs, benefits, and net benefits for each alternative were compared to those for the alternative of no regulation. The Clinton order similarly requires analysis of all costs and benefits of the proposed regulation and alternatives, including the alternative of no regulation. It also requires analysis of net benefits and cost-effectiveness of regulatory alternatives. The Johnston amendments would require analysis of risks and relative risks addressed by EPA regulations and the costs and benefits of regulating. The Johnston amendment to S. 171 could be interpreted to require calculation of net benefits, whereas the Johnston amendment to S. 2019 would require cost-effectiveness analysis of regulatory alternatives. The Clinton order appears to have the most comprehensive set of analytic requirements.

The Reagan orders and the Clinton order require analysis of the costs of enforcement and compliance to governments, regulated entities, and the public; impacts on innovation; and consideration of who pays and who gains. In addition, the Clinton Administration specifically requires analysis of benefits to the environment and public health and safety. The consistency, predictability, and flexibility of regulations must be considered as well. Finally, the Clinton order requires consideration of whether the impacts are fair. The Johnston amendment to S. 171 would require analysis of risk to individuals addressed by the regulation, the health and environmental effects of the regulation, and implementation and compliance costs. The Johnston amendment to S. 2019 would require analysis of risks to human health or the environment addressed by the regulation, including risks to significant subpopulations that are disproportionately exposed or particularly sensitive, the quantitative and qualitative benefits of the regulation, and the costs to the U.S. Government, State and local governments, and the private sector of implementing and complying with the regulation.

The Clinton order directs agencies to prepare and submit to OMB an annual Regulatory Plan, in which they identify their planned significant regulatory activities, including a description of how each action will reduce risks. Agencies must compare the magnitude of the risk addressed by each activity to the magnitudes of other risks within the jurisdiction of the agency. President Clinton's requirement for comparative risk analysis is similar to a provision in the Johnston amendments. The Reagan Administration did not require agencies to compare risks addressed by regulations, but they were required to submit information about regulatory actions underway or planned.

President Clinton's Executive Order 12866 also established a Regulatory Working Group to serve as a forum for interagency discussions. Topics to be addressed include comparative risk assessment, innovative regulatory techniques, and streamlined approaches for small businesses and other entities to facilitate their compliance with regulations. Interagency groups also were established under previous Administrations, often to promote coordination of regulatory activity and harmonization of risk assessment practices. The Johnston amendments do not address this issue.

The executive orders of Presidents Reagan and Clinton and the Johnston amendments all require analysis to be based on scientific information. In addition, the Clinton Administration and Johnston amendment to S. 2019 require agencies to use the "best reasonably obtainable scientific information." President Reagan required analysis "based on adequate information" and risk assessment. The Johnston amendment to S. 171 requires evaluation of risks and use of "the best available scientific data."

The Reagan orders prohibited Federal agencies, to the extent permitted by Federal law, from preempting State laws or regulations, except to protect civil rights or interstate commerce. Under the Clinton order, OMB is required to meet four times per year with representatives of State, local, and tribal governments to identify planned and existing regulatory activities with potentially significant impacts. Representatives of businesses, nongovernmental organizations, and the public also must be consulted about the significance of planned regulatory actions. The Johnston amendments do not address the role of State, local, or tribal governments or the private sector in the development of regulations.

Table A-1. Key provisions of the Johnston Amendments to S. 171 and S. 2019, President Reagan's Revoked Executive Orders 12291 and 12498, and President Clinton's Executive Orders 12866 and 12875

Endnotes

64 Section 123 in Senate-passed S. 171

65 For example, Executive Order 12044, issued by President Carter in 1978 and revoked by President Reagan in 1981, required Federal agencies to perform Regulatory Impact Assessments (RIAs) to consider the economic consequences of proposed regulations. The RlAs were to include a statement of the problem, a description of alternative ways of alleviating the problem, the economic costs of each alternative proposed, and the reason for selecting one of the options.

66 Luken, Ralph A., and Arthur G. Fraas. The U.S. Regulatory Analysis Framework: A Review. Oxford Review of Economic Policy v. 9, n. 4, 1993. p. 100.

67 Executive Order 12291, section 3(i), directs agencies to initiate reviews of rules in effect at the time of the order in accord with the purposes of the order and to perform RIAs of major rules. The order authorizes the Director of OMB to designate rules for review and to establish schedules for review and analyses under the order.

68 Section 5 of the order directs Federal agencies to submit to OMB a program under which the agency will periodically review its existing significant regulations to determine whether any should be modified or eliminated to make the agency's regulatory program "more effective in achieving the regulatory objectives, less burdensome, or in greater alignment with the President's priorities and the principles set forth in this Executive order."

69 Additional criteria are specified in guidelines provided by OMB (Circular Number A-94, October 29, 1992, and the Regulatory Program of the U.S. Government for April 1 1991 to March 31, 1992, Appendix V) and EPA (cited above), but these are not included in Table 1. OMB staff have indicated that their guidelines are not expected to change as a result of the Clinton order, and EPA has not issued guidance since it reprinted its 1983 Guidelines with revised appendices in 1991 (EPA-230-01-84-003). Respecting choice of regulatory approach, OMB guidelines state: entry into private markets should be regulated only where necessary to protect health or safety or to manage public resources efficiently; uniform quality standards for private goods or services should not be prescribed except where products are needlessly unsafe or product variations are wasteful, and voluntary private standards have failed to correct the problem; qualifications for receiving government licenses should be the minimum necessary; encourage unrestricted exchange of rights or obligations created by regulation; and the terms or conditions of Federal grants, contracts, or financial assistance should be limited to the minimum necessary to achieve the purposes for which the funds were authorized and appropriated.

70 According to page 5 of EPA's 1983 Guidelines, the benefits and costs of proposed regulations and important alternatives were to be compared to the benefits and costs in the absence of regulation, referred to as the "baseline". In addition, the Guidelines required consideration of alternatives to Federal regulation such as "negotiated voluntary actions, and market, judicial, or State or local regulatory mechanisms" and "market-oriented regulatory alternatives."

71 President Reagan's Executive Order 12612 on Federalism Considerations in Policy Formulation and Implementation is still in effect. In general, it aims to "restore the division of governmental responsibilities between the national government and the States that was intended by the Framers of the Constitution and to ensure that the principles of federalism established by the Framers guide the Executive departments and agencies in the formulation and implementation of policies" (52 Federal Register 41685, Oct. 26, 1987). Section 6(c)(3) of the order required agencies preparing Federalism Assessments for policies "identify the extent to which the policy imposes additional costs or burdens on the States, including the likely source of funding for the States and the ability of the States to fulfill the purposes of the policy".