Is the EPA Failing Small Businesses?
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Congress passed the Regulatory Flexibility Act (RFA) in 1980 to give small entities a voice in the federal rulemaking process. Put simply, the RFA requires federal agencies to assess the economic impact of a planned regulation on small entities, and if a rule is determined to have a “significant economic impact on a substantial number of small entities,” (SEISNOSE), the agencies must consider alternatives that would lessen those impacts.
Since 1996, EPA has also been required to conduct Small Business Advocacy Review Panels when a planned rule is likely to have a SEISNOSE. Small entity representatives—who speak for the sectors that are likely to be affected by the planned rule—advise the panel members on real-world impacts of the rule and potential regulatory alternatives. The panel process is the best opportunity for EPA to get face-to-face interaction with small entities and get a sense of the ways that small entities differ from their larger counterparts in their ability to comply with regulatory mandates. Because the panel occurs early, before the planned rule is publicly proposed, it also represents the best opportunity for small entities to have real input into the final design of a rule.
I have seen EPA do a good job meeting both the letter and the spirit of the panel requirement. When there is a useful exchange of information and regulatory alternatives, both the small entity representatives and EPA came away with something valuable. By putting its cards on the table up front and honestly exchanging information, EPA learns about the weaknesses in its planned rule and can then find alternatives that still meet its goals without needlessly damaging small businesses. Small entities get a rule that they can live with, that takes their particular concerns into account. EPA gets a rule that is more likely to be accepted and complied with by small entities, not a rule that will be fought in the courts for years.
Unfortunately, since at least 2009, there have been serious problems with EPA’s management of panels:
EPA Refuses to Hold A Panel When A Panel Is Warranted. In 2008 and 2009, EPA was asked to convene a panel on its planned greenhouse gas rules but determined that a panel was not needed. EPA was also asked in 2009 to hold a panel to consider its Coal Ash Rule, but determined on its own that potential new coal ash disposal costs for small utilities would not be significant.
EPA Agrees to a Judicial Or Other Deadline That Doesn’t Allow Enough Time To Conduct A Panel. In recent years, EPA often engages in out-of-court settlements with environmental advocacy groups that result in agreements to issue particular rules on a specific timetable. Very often, these timetables do not allow enough time to go through the panel process. In extreme cases, there may not be enough time to conduct a panel at all. In other situations, EPA may not have adequate time to prepare itself, other panel members, or small entity representatives.
EPA Ignores the Recommendations of A Panel. Even where EPA takes the time to properly conduct a panel, occasionally the agency will simply choose to ignore the recommendations of the panel members. For example, the Boiler MACT panel strongly recommended that EPA (1) include a health-based compliance alternative in the rule or provide the legal rationale for excluding such an alternative, and (2) identify additional boiler subcategories, such as limited-use and seasonal units. EPA declined to adopt either recommendation. Both of these regulatory alternatives would have saved regulated small entities considerable amounts of money and time without compromising the environmental objective of the Boiler MACT rule.
This recent trend is quite unfortunate because panels are extremely valuable tools in the rulemaking process when they are conducted properly. While they require an investment of time and other agency resources, panels yield improved rulemakings.
EPA needs to build the time and resources into the rulemaking process so that it can conduct thorough, meaningful panels. In a regulatory environment where multi-billion dollar rules are more and more common, it should not be asking too much of EPA to approach the Panel process as a valuable learning experience, not merely a check-the- box exercise.
The author is Legal Policy Counsel at the U.S. Chamber of Commerce and former Assistant Chief Counsel in the Office of Advocacy of the Small Business Administration. He testified on this issue before the House Small Business Committee on June 27, 2012.