03-20035. Science Advisory Board Staff Office; Request for Nominations for an Ad Hoc Science Advisory Board Panel on Illegal Competitive Advantage Economic Benefits

AGENCY:

Environmental Protection Agency (EPA).

ACTION:

Notice.0

SUMMARY:

The Environmental Protection Agency (EPA) Science Advisory Board (SAB) Staff Office announces the formation of a new SAB advisory panel to provide advice to the Agency regarding economic benefit recapture issues, to be referred to as the “Illegal Competitive Advantage (ICA) Economic Benefit (EB) Advisory Panel” (ICA EB Advisory Panel) and is soliciting nominations for members of the panel.

DATES:

Nominations should be submitted no later than August 27, 2003.

ADDRESSES:

Nominations should be submitted in electronic format through the Form for Nominating Individuals to Panels of the EPA Science Advisory Board provided on the SAB website. The form can be accessed through a link on the blue navigational bar on the SAB Website, http://www.epa.gov/​sab. To be considered, all nominations must include the information required on that form. Anyone who is unable to submit nominations via this form any contact Dr. K Jack Kooyoomijan, Designated Federal Office (DFO), as indicated below.

FOR FURTHER INFORMATION CONTACT:

Any member of the public wishing further information regarding this Request for Nomination may contact Dr. K. Jack Kooyoomijan, (DFO), U.S. EPA Science Advisory Board, 1200 Pennsylvania Ave., NW., (1400A), Washington DC, 20460, by telephone/voice mail at [phone], by fax at [phone]; or via e-mail at [e-mail].

For technical information pertaining to the Agency's White Paper and the supporting background documents, please contact Mr. Jonathan Libber the U.S. EPA, Office of Enforcement and Compliance Assurance (Mail Code 2248A), by telephone/voice mail at [phone], by fax at [phone]; or via e-mail at [e-mail].

SUPPLEMENTARY INFORMATION:

Summary

The Environmental Protection Agency (EPA) Science Advisory Board (SAB) Staff Office is announcing the formation of a new Advisory Panel to review and provide advice to the Agency concerning the White Paper addressing the “illegal competitive advantage” (ICA) issues related to EPA's policy of recapturing violator's economic benefit from environmental noncompliance. Most of the Agency's cases involving economic focus on the financial gain that arises from relatively straightforward delayed and/or avoided pollution control costs, and the Agency's “BEN” (Benefits) computer model calculates the economic benefit in those situations. Where ICA issues arise, the economic benefit derived from scenarios that do not fit the BEN model's simplified paradigm of avoided and/or delayed expenditures may or may not apply. The SAB is soliciting nominations to establish the members of the new Panel to be known as the Illegal Competitive Advantage (ICA) Economic Benefit (EB) Advisory Panel (ICA EB Advisory Panel).

The ICA EB Advisory Panel is being formed to provide advice to the Agency, as part of the EPA SAB's mission, established by 42 U.S.C. 4365, to provide independent scientific and technical advice, and recommendations to the EPA Administrator on the technical bases for EPA decision making. The Board is a chartered Federal Advisory Committee, which reports directly to the Administrator.

Background

A cornerstone of EPA's Office of Enforcement and Compliance Assurance (OECA) civil penalty program is recapture of the economic benefit that a violator may have gained from illegal activity, whenever EPA can effectively measure that gain. Recapture helps level the economic playing field, discouraging and preventing visitors from obtaining an unfair financial advantage over their competitors who made timely and necessary investments in environmental compliance. Since 1984, EPA's policy has been to recapture a violator's economic benefit from violating the law (See document entitled “Policy on Civil Penalties,” specifically at page 3 and its companion document, A Framework for Statute-Specific Approaches to Penalty Assessments at pages 6-11. EPA's Office of Enforcement and Compliance Assurance (OECA) has taken lead to develop these approaches to capture the economic benefits. Both of the above documents, which describe such policies, can be found at the following URL http://www.indecon.com.

In some, but not all ways, the analysis is similar to the field of commercial damages, comparing a hypothetical “but-for” scenario to the actual state of the world. Often the violations involve the failure to install pollution control equipment in a timely fashion and the consequent failure to incur operational and maintenance costs during the period of noncompliance. In most of these cases, a safe assumption is that all other aspects of the company's operations are identical in both the compliance (i.e., “but for”) and noncompliance (i.e., “actual”) scenarios. Based on this assumption, the analysis becomes a relatively straightforward net present value calculation, focusing on the cost savings from delayed installation and avoided operation of the pollution control equipment. In the mid-1980s, EPA developed the “BEN” computer model to allow lay persons to perform the necessary present value calculations in these cases. In other situations that may involve deliberations in a courtroom setting, the Agency may rely for its economic benefit calculations upon an expert witness, who employs whatever analytical tool the expert deems most suitable for application to that particular case. That tool may sometimes be the BEN model, but the expert would be using BEN only if its analytical framework fit the expert's approach for that particular case. BEN's application in such a courtroom setting would therefore be similar to using a straight-forward spreadsheet application similar to the use of expert testimony for the basis of the expert's calculations. As a practical matter since 1995, the Agency has been mitigating civil penalties when violators agree to perform supplemental environmental projects (SEPs).

Proposed Charge to the Panel

The Agency is asking the SAB's ICA EB Advisory Panel to review and provide advice on a White Paper entitled “Identifying and Calculating Economic Benefit that Goes Beyond Avoided and/or Delayed Costs.” Specific charge questions include the following:

(a) Are there any categories of cases that would be useful for the Agency to consider in calculating the ICA economic benefit, other than those that are identified in the White Paper? Should any of these categories be combined?

(b) How can the Agency more accurately characterize the types of cases that are described in the White Paper? Have any of the examples and counter-examples in the White paper been misidentified with regard to whether they are amenable to the BEN model's simplifying paradigm?

(c) Are there any suggestions for modifying the described analytical approach to calculate the economic benefits and;

(d) The Agency's proposed approach strives to avoid any double-counting of the benefit by laying out all the relevant cash flows stemming from the violations, as opposed to simply adding on the additional calculations to a BEN run. What additional measures (if any) should the Agency put in place to avoid such potential double-counting?

Document Availability

The White Paper entitled “Identifying and Calculating Economic Benefit That Goes Beyond Avoided and/or Delayed Costs” to be reviewed by the Panel can be obtained from the EPA Web site at: http://www.epa.gov/​Compliance/​civil/​programs/​econmodels/​index.html. For further information regarding the White Paper, please contact Mr. Jonathan Libber at the address provided earlier in this notice. The following informational background documents are also provided under http://www.indecon.com, and include the following: BEN Computer Model Version 2.0; BEN Users Manual dated September 1999, Policy on Civil Penalties; and A Framework for Statute-Specific Approaches to Penalty Assessments.

It is the Peer Review White Paper entitled “Identifying and Calculating Economic Benefit That Goes Beyond Avoided and/or Delayed Costs” that is the focal point of this upcoming advisory. The other documents serve as background information for the ICA EB Advisory Panel and the interested public. Additional information will be made available at the SAB Web site at: http://www.epa.gov/​sab where the SAB will post notices when it develops the narrow cast list of candidates, lists the biosketches of the shortlist candidates, receives comments on the shortlist candidates, makes the final selection of the ICA EB Advisory Panel, posts copies of the Federal Register notices of upcoming meetings, posts agendas of the ICA EB Advisory Panel, and posts any other related information specific to the SAB Advisory on this topic.

SAB Staff Office Request for Nominations

Any interested person or organization may nominate qualified individuals for membership on the Panel. Individuals should have expertise in one or more of the following areas: (a) Financial Economics, which includes Corporate Finance, (b) Economic Benefit Recapture Issues, (c) Business/Commercial Damages, which includes Anti-Trust Law, Torts and Economics, (d) Business Economics and Competitive Strategy, which includes aspects of Statistical Decision-Making and Game Theory, as well as Competitive Effects of Vertical Integration, and Quantitative Economics, and (e) Industrial Organization, in the context of environmental regulations and their enforcement, as well as Environmental and Regulatory Economics, Environmental Ethics and Sustainability in this context.

Process and Deadline for Submitting Nominations

Any interested person or organization may nominate qualified individuals to add expertise in the above areas for the Pane. Nominations should be submitted in electronic format through the Form for Nominating Individuals to Panels of the EPA Science Advisory Board provided on the SAB website. The form can be accessed through a link on the blue navigational bar on the SAB Web site, http://www.epa.gov/​sab. To be considered, all nominations must include the information required on that form.

Anyone who is unable to submit nominations using this form may contact Dr. K. Jack Kooyoomjian at the mailing address in the section above entitled, For Further Information Contact: Nominations should be submitted in time to arrive no later than August 27, 2003. Any questions concerning either this process or any other aspects of the notice should be directed to Dr. Kooyoomjian.

The EPA Science Advisory Board Staff Office will acknowledge receipt of the nomination and inform nominators of the panel selected. From the nominees identified by respondents to this Federal Register notice (termed the “Widecast”), SAB Staff will develop a smaller subset (known as the “Short List”) for more detailed consideration. In addition to the expertise listed above in Item #5, criteria used by the SAB Staff in developing this Short List are given at the end of the following paragraph. The Short List will be posted on the SAB on the SAB Web site at: http://www.epa.gov/​sab,, and will include, for each candidate, the nominee's name and their biosketch. Public comments will be accepted for 21 calendar days on the Short List. During this comment period, the public will be requested to provide information, analysis or other documentation on nominees that the SAB Staff should consider in evaluating candidates for the Panel.

For the EPA SAB, a balanced advisory panel is characterized by inclusion of candidates who possess the necessary domains of knowledge, the relevant scientific perspectives (which, among other factors, can be influenced by work history and affiliation), and the collective breadth of experience to adequately address the charge. Public responses to the Short List candidates will be considered in the selection of the panel, along with information provided by candidates and information gathered by EPA SAB Staff independently on the background of each candidate (e.g., financial disclosure information and computer searches to evaluate a nominee's prior involvement with the topic under review). Specific criteria to be used in evaluating an individual subcommittee member include: (a) Scientific and/or technical expertise, knowledge, and experience (primary factors); (b) absence of financial conflicts of interest; (c) scientific credibility and impartiality; (d) availability and willingness to serve; and (e) ability to work constructively and effectively in committees.

Short List candidates will also be required to fill-out the “Confidential Financial Disclosure Form for Special Government employees Serving on Federal Advisory Committees at the U.S. Environmental Protection Agency” (EPA Form 3110-48). This confidential form, which is submitted by EPA SAB Members and Consultants, allows government officials to determine whether there is a statutory conflict between that person's public responsibilities (which includes membership on an EPA Federal advisory committee) and private interests and activities, or the appearance of a lack of impartiality, as defined by Federal regulation. The form may be viewed and downloaded from the following URL address: (http://www.epa.gov/​sab/​pdf/​epaform3110-48.pdf). The Panel members will likely be asked to attend up to two public face-to-face meetings and several public conference call meetings over the anticipated course of the review.

Dated: July 31, 2003.

Vanessa T. Vu,

Director, EPA Science Advisory Board Staff Office.