A practice known as "sue and settle" used by the Environmental Protection Agency to enact controversial regulations cost taxpayers $68 billion since 2005 and has an annual cost of $26 billion, according to a new report.

The American Action Forum found that "sue and settle," killed this month by EPA Administrator Scott Pruitt, also dumped millions of hours of red tape on industries.

Related: Trump's EPA sets precedent by becoming first agency to end 'sue and settle' practice

EPA Administrator Scott Pruitt signs a directive to end sue and settle practices within the agency. (Credit: EPA)

Pruitt ended the practice last week. During the Bush and Obama years, it was used by government activists and outside influence groups to force through new and costly regulations without the normal transparency required when rules are properly developed.

"Here's how it works," said Dan Bosch, the director of regulatory policy at AAF. "An interest group sues a federal agency alleging that the agency has not fulfilled its responsibility under the law. Rather than contest the lawsuit, the agency settles and enters into an agreement to initiate and/or expedite a rulemaking, complete with a legally binding deadline to promulgate."

He looked at the most expensive 23 regulations that went through the backdoor process and put a price tag of $67.9 billion on them. They also have $26.5 billion in annual costs. And, he added, "16 of these rules imposed a paperwork burden of more than eight million hours."

Opinion: Trump administration ending 'sue and settle' is an important first step

Businesses have cheered Pruitt's decision. When he made it, Pruitt said, "The days of regulation through litigation are over." He added, "We will no longer go behind closed doors and use consent decrees and settlement agreements to resolve lawsuits filed against the agency by special interest groups where doing so would circumvent the regulatory process set forth by Congress. Additionally, gone are the days of routinely paying tens of thousands of dollars in attorney's fees to these groups with which we swiftly settle."

The move was just the latest by the administration to target rules and regulations imposed by the Obama administration. Pruitt has been quick to put the brakes on EPA regulations he was handed and other agencies, notably the Interior Department, are also scrutinizing old rules.

Bosch said Pruitt's move will improve transparency.

"The October 16th directive issued by Administrator Pruitt aims to address sue and settle abuses at EPA by establishing procedures designed to make the settlement agreement process more transparent. The procedures include publishing notices online when the EPA has received a lawsuit, directly notifying affected states and regulated industries of the complaint within 15 days of receiving it, preventing the EPA from committing to a specific outcome, and allowing a public comment period or public hearing on whether to enter into the proposed consent decree or draft settlement agreement," he wrote.

And, he said, Pruitt's decision could bolster legislation targeting the practice. "The EPA directive also provides a good test case that could bolster efforts to pass legislation that would limit sue and settle across the federal government. The Sunshine for Regulations and Regulatory Decrees and Settlements Act, introduced in both houses of Congress in 2017, includes many of the provisions in the EPA directive, but goes further which gives these provisions more teeth, and codifies such policies that could otherwise be subject to reversal under a different administration. If the EPA's directive is effective at improving rules initiated through lawsuits, it would provide momentum to expand the practice beyond the EPA."

Paul Bedard, the Washington Examiner's "Washington Secrets" columnist, can be contacted at pbedard@washingtonexaminer.com