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Why Anne Burford got the lead out.


One area where the Reagan administration has strengthened protections of health and safety is the regulation of lead in gasoline. But the Environment Protection Agency's support for tough lead standards did not arise out of a sudden agreement with environmentalists. Rather, the EPA came to see that some business interests might actually benefit from strong environmental regulation. The case of lead standards is a classic example of how regulation often creates winners and losers even within a particular industry and how this knowledge influences public policy.

Early in the Reagan administration, Anne Burford, the ambitious new administrator of the EPA, took seriously her presidential mandate to get her agency off the back of business. "Regulatory relief' for the business community was a high priority of the new administration. In his first months in office, President Reagan issued an executive order requiring that a cost-benefit test be applied and met by all regulatory proposals. He also established a highly visible Task Force on Regulatory Relief, chaired by Vice President George Bush (a former oil industry executive), to identify existing regulations that could be relaxed. The EPA quickly emerged as a major target, and on August 12, 1981, the Task Force directed the agency to examine the existing regulations aimed at phasing down the use of lead as a gasoline additive.

The EPA commissioned an economic study. In a November 30 memorandum to Burford, Joel Schwartz of the Energy Economics branch reported that a relaxation of standards would save industry approximately $133 million. This saving would not be uniform for all competitors. Rather, the large refiners who had already made major investments in alternative technologies would save approximately one-tenth of a cent per gallon while small refiners would save, on average, nine-tenths of a cent. For petroleum refiners this difference was substantial.

Understandably, environmentalists were not enthusiastic about any relaxation of these hardwon standards. The position of industry, however, was more complicated and less easy to understand. The National Petroleum Refiners Association (NPRA) supported relaxation--but with some reservations related to what they felt were "loopholes' in the rule the EPA had proposed.

The loopholes concerned the ability of companies whose only business was the "blending' of gasoline to purchase inexpensive low-grade fuel, mix it with large amounts of lead to boost the octane, and undersell the refineries by as much as five cents per gallon. If the EPA relaxed the rules on lead, these blenders would be able to continue to exploit this advantage in a marketplace in which, in the previous year, about 40 domestic petroleum refineries had closed.

A similar concern related to importers of gasoline, who were not subject to the same rules that faced domestic refiners. Thus, while the NPRA apparently supported a relaxation of the standards, the nature of their objections suggested that the existing rules were not only tolerable but perhaps even desirable in that they might help reduce the glut in overall refining supply and the competitive threat of imported gasoline.

Some of the larger producers, such as Mobil and Exxon, were actively against the relaxation, arguing that the advantage to their competitors was especially unfair given their own prior commitments of capital to comply with the standards.

With environmentalists and the medical community favoring tougher standards and many in industry opposing relaxation of the rules, the EPA withdrew its proposal. Instead, in what was seen as a dramatic change in policy, the EPA made it known on July 30, 1982, that it would actually tighten the limits on lead additives in gasoline.

At the outset of this policy deliberation, it had sseemed logical for Anne Burford to propose the loosening of these requirements. After all, such an action presumably would be met with favor by the industrial interests that had supported the Reagan candidacy. But Burford apparently had failed to appreciate fully the effects of her proposed regulatory actions on competition. At the time of her proposal to reduce standards, the petroleum-refining industry was experiencing a glut in supply and attendant downward price pressures. A relaxation of standards would have expanded the already excess available supply of gasoline-refining capacity and added to these downward price pressures. In other words, standard relaxation would not only result in a dirtier environment but it could cost the regulated industry profits as well. Obviously, this was a politically unattractive combination, as Burford apparently soon discovered.

Two years after this policy reversal, the EPA once again tightened the standards for leaded gasoline.
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Author:Leone, Robert A.
Publication:Washington Monthly
Date:Apr 1, 1986
Previous Article:Regulations that work.
Next Article:Conflicts and contradictions.

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