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ANDREWS OFFICE PRODUCTS CAPITOL HEIGHTS, MD (K)

DOCKET OFFICER DATE AUG 12 1994 TIME 41: ' " n AA - Comments on U.S. Department of Labor Proposed Rule on Indoor Air Quality in Federal Register, Vol. 59, No. 65, April 5, 1994, pp. 15968-16039 Docket No. H-123 August 12, 1994 By W. Kip Viscusi George O. Allen Professor of Economics Duke University Department of Economics Box 90097 Durham, NC 27708-0097 Telephone: (919) 660-1833 Faxi (919) 684-8974 TIBR 0007358

Professional Backaround I have been retained by Covington & Burling to provide an analysis of the proposed OSHA rule for indoor air quality. My professional career has been devoted to an analysis of the economics of risk-related issues. I am currently the George G. Allen Professor of Economics at Duke University and have published 15 books and over 150 articles, many of which deal with the issues addressed in this rulemaking. For example, many of these books focus on job safety. One of my recent books and several recent articles focus on cigarette smoking. I am the founding editor of the Journal of Risk and Uncertainty and currently serve on seven other editorial boards, including the American Economic Review. I am also quite familiar with the rulemaking process. During the Carter Administration I served as the Deputy Director of the President's Council on Wage and Price Stability, which was responsible for all White House oversight of major new government regulations. In that position, I also served as a member of the Regulatory Analysis Review Group. During the 1980s I had several contracts and purchase orders with the U.S. Department of Labor's occupational Safety and Health Administration and with the Office of the Secretary of Labor, in which I prepared studies focused on job safety issues. One of my efforts in this regard involved being called in to settle a dispute between the Occupational Safety and Health Administration and the U.S. Office of Management and Budget over 2 TIBR 0007359

the OSHA hazard communication rule. My analysis of this rule, which supported issuance of the regulation, was credited by both the New York Times and the washington Post as being instrumental in leading to the promulgation of the OSHA hazard communication standard. I also served as a consultant under contract in the preparation of several analyses that formed the substantive basis for the regulatory impact assessments submitted by OSHA as part of the rulemaking process. I have also served as a consultant or as a contractor to a wide variety of Federal regulatory agencies and to the U.S. Office of Management and Budget. I currently serve on two EPA Science Advisory Boards. For further information on my background, I have attached a copy of my C.V. and bibliography. Overall Comment I have been retained by Covington & Burling to focus primarily on the environmental tobacco smoke (ETS) aspect of the proposed indoor air quality standards. Although I will focus on this aspect of indoor air pollution, I will also offer some comments that are more general in nature. Overall, I believe that OSHA has not prepared a sufficiently thorough analysis of the benefits and the costs of the proposed regulation. The benefits are overstated, and many of the critical cost components have been ignored. Perhaps most important is that even from the rather narrow perspective of whether this regulation addresses a significant risk, there is no rationale for the regulation. The potential ETS risks are highly 3 TIBR 0007360

speculative and, even if they are at the levels claimed by OSHA, they may not even be sufficiently significant to warrant regulation. The proposal also has a number of serous methodological problems. 1. OSHA did not quantify the benefits and costs of the reaulation in a comprehensive manner. In effect, the supporting analysis treated detailed assessment of the benefits and costs as being beyond the scope of what was necessary for a proposed rule. The discussion of the OSHA Benzene case (see page 16000) suggested that all that must be shown is that there is a°significant risk of harm" in the workplace and that "the new standard is reasonably necessary to reduce or eliminate that risk." OSHA is required to quantify the benefits and costs of regulation under Executive Order 12866 governing the regulatory oversight process. Moreover, the existence of a significant risk alone cannot provide a sensible basis for policy. Ultimately some balancing is required. Taking the logic of OSHA's policy approach to another context, it would be desirable to abolish the construction industry because doing so would eliminate truly significant risks. There would, of course, be costs associated with this, but few could argue, given the inherently dangerous nature of construction activity, that banning such activity would be "reasonably necessary" to eliminate these risks. OSHA does not apply this narrow logic to risks throughout the economy because doing so would not be a sensible approach to 4 TIBR 0007361

regulation. Throughout its history, OSHA has attempted to achieve some kind of informal balancing of the costs of a regulation and the benefits derived from it. In some cases this balancing comes in the form of discussions of "affordability." In other instances, the focus may be on employment effects, which may serve as a signal that the costs involved are too large. The position that I will take here is that what is "reasonably necessary" depends on the costs associated with the regulation and not simply the risk. The ultimate test for any policy is that the benefits that it provides to society exceed the costs that it imposes. These effects may not all be quantifiable in dollar terms, but unless the regulation is in fact improving societal welfare, then one would be hard-pressed to argue that it is °reasonably necessary" to pursue such a course of action. 2. ;s the ETS risk significant? In justifying the ETS indoor air regulations, OSBA focuses primarily on whether the risk is significant. The significance of the risk provides the primary impetus for issuing the regulation. The discussion supporting the significance of the risk draws upon the OSHA Benzene decision in which the Supreme Court indicated that a one in a billion risk from drinking chlorinated water would not be considered significant, but a 1/1,000 risk from gasoline vapors would be significant. In that regard, OSHA 5 TIBR 0007362

has calculated that the risk from ETS is 1 in a 1,000 (page 16001) and consequently qualifies as being significant. It is helpful to consider this example in detail since it should not be taken at face value. Because OSHA has used a lifetime risk perspective, I will adopt a similar approach here. The amount of water people drink per day from different sources ranges from 2.1 - 2.9 quarts.' To be conservative, I will assume that people drink nine glasses of chlorinated water per day where this may come, for example, from sodas or other products. An individual who drinks 9 glasses per day each year for 70 years will drink 229,950 glasses in his or her lifetime. If the risk per glass is 1 in a billion, as hypothesized by the Court, the lifetime risk is 2/10,000. Now let us consider ETS. OSHA estimates that between 144 and 722 people will die from lung cancer (page 16000) each year because of ETS. If the base population of 74 million nonsmoking American workers exposed to ETS (page 16001) are exposed over their entire 40 year worklife expectancy,' the lifetime risk ranges from 1/10,000 to 4/10,000. Thus, the risk of drinking chlorinated water falls between the two bounds of the risk range estimated by OSHA for ETS. Overall, when translated into lifetime risks as opposed to risks from a particular exposure so that both the ETS risks and the risks being discussed by the 'See Food and Nutrition Encyclopedia (1994). ZThe worklife expectancy is 39.1 years. See BLS Bulletin 2254. Even for a 70 year worklife, the ETS risk range claimed by OSHA is not much greater, as it is 1/10,000 - 7/10,000. 6 TIBR 0007363

Court in the Benzene decision would be on the same time frame, we find that the risks are quite comparable and are of the same general magnitude. Even if we take OSHA's risk assessments at face value, the assessed risks are in the range for which the Court has indicated that "the risk clearly could not be considered significant." As I will note below, the risks associated with ETS appear to be much smaller than OSHA has claimed, if indeed there are any risks at all. 3. The ETS risk assessments are hiahly soeculative. What is relevant for the purposes of the expected effects of the regulation are the expected mean effects of ETS, not the upper bound. Moreover, it is the consensus estimate, not the worst case, that is pertinent. If one is applying classical statistical methods, as has been the case in past analyses of ETS, the standard procedure is to use 95 percent confidence intervals for these tests. All but one ETS study fails to meet this test of statistical significance. Although there continues to be considerable debate about the magnitude of the ETS risks, it is noteworthy that a recent report by the Congressional Research Service concluded that the risks involved remain highly speculative.' Indeed, even the comments by OSHA in the Federal Reaister indicate that our knowledge of ETS risks is highly imprecise and the apparent magnitude of these risks appears to be quite small. For example, in the Federal 'See Appendix A of Jane Gravelle and Dennis Zimmerman (1994). 7 TIBR 0007364

Register discussion OSHA notes that "...in passive smokers these risks are not so easily demonstrated" (page 15976). The discussion continues, as there is later the claim that "recent evidence suggests that passive smoking has subtle but statistically significant affects on the respiratory health of adults" (page 15977). These statements reflect both the imprecision of our knowledge as well as the absence of firm statistical evidence at the usual confidence levels for judging statistical significance. Other submissions no doubt will explore these issues in much greater detail, but for the purposes of obtaining a comprehensive economic assessment one should note that OSHA's risk assessments cannot be accepted at face value because of the absence of reliable data. 4. The overall costs of the indoor air quality standard will lead to adverse mortality effects. OSHA estimates that the annual cost of compliance with the indoor air quality standard will be $8.1 billion. For reasons that will be detailed below, this estimate is likely to be low, but for the purposes of the discussion here this estimate provides a useful reference point for discussion. Considerable recent economic literature` has documented the link between regulatory expenditures and health. In effect, regulatory expenditures make society poorer because these °See, for example, the entirety of vol. 8, no. 1(January 1994) of the Journal of Risk and Uncertaintv. 8 TIBR 0007365

expenditures represent a real opportunity cost to society. Society could allocate the cost of regulation, including lower wages, higher prices, and related impacts to other uses, such as more expenditures on medical care, food, housing, and other mortality-related expenditures. Based on the direct relationship between mortality and income, the U.S. Office of Management and Budget's economists Randall Lutter and John Morrall have estimated that for every regulatory expenditure of $9 million-$12 million there is a loss of one statistical life.s Using a quite different methodology linked to the labor market estimates of the value of life, I have estimated that for every regulatory expenditure there is the loss of one statistical life for every $50 million in regulatory costs.s For the purpose of this assessment, I will consequently use $10 million per statistical life as the lower bound and $50 million per statistical life as the upper bound for the analysis. Using these figures and the $8.1 billion cost estimate provided by OSHA, the indoor air quality regulation will lead to the loss of between 162 and 810 lives per year. By almost any standard, this is a substantial impact. Moreover, if one adjusts the risk assessments OSHA prepared for the proposed regulation to reflect the expected effects that the regulation is likely to have, as opposed to a more speculative worst case scenario, then the regulation may lead to more lives lost than will be saved. SSee Randall Lutter and John F. Morrall (1993). 6See W. Kip Viscusi (1994). 9 TIBR 0007366