EPA Criticized for Skipping Small Business Advice on Rules

Small businesses haven’t been consulted about some high-priority EPA rules as the law requires, leaving the rules more vulnerable to legal challenges, attorneys say.

The Environmental Protection Agency has proposed at least five high-profile rules since June 2021 and certified that none warranted a consultation with small businesses and local government agencies. The consultation process is required before proposing regulations that are expected to have a “significant economic impact on a substantial number of small entities.”

The Small Business Administration, trade associations, and attorneys are criticizing the agency’s decisions. Those protests prompted the EPA in one case to convene an advisory panel later.

“Experience has shown that the panel process results in better rules, better compliance, and reduced litigation,” said Jeffrey Longsworth, a partner with Barnes & Thornburg LLP who served on the panels. “I agree wholeheartedly.”

Failing to convene such panels “leaves the rule vulnerable to being challenged in court if small business concerns are flagged and there’s evidence the [law] wasn’t properly addressed,” said Martha E. Marrapese, a partner with Wiley Rein LLP who specializes in chemical and biobased products regulations.

The EPA said small business advisory panels provide valuable advice, but the regulations didn’t trigger the 1996 Small Business Regulatory Enforcement Fairness Act’s (SBREFA) requirement for them.

Proposed Rules

The five proposed rules triggering the debate would:

  • Designate two per- and polyfluoroalkyl substances (PFAS) as hazardous substances subject to the Comprehensive Environmental Response, Compensation, and Liability Act’s (CERCLA) strict liability provisions;
  • Revise the waters of the US (WOTUS) definition;
  • Increase the precautions companies must take to prevent chemical accidents;
  • Require chemical makers to provide the EPA 10 years of information on PFAS chemicals they’ve produced; and
  • Require companies to tell the EPA if they’ve imported asbestos or products made with it.

Judging Effects

These rules are expected to affect small business’ revenue by less than 1%, so the SBREFA requirement didn’t apply, the EPA said.

SBREFA doesn’t define the terms “significant economic impact” or “substantial” number of small business, said Jonathan Gledhill, who oversaw environmental regulations as a career analyst in the White House’s Office of Management and Budget.

If the EPA estimates a rule will cost 3% or more of firms’ revenue, the regulation is significant, and one of the law’s panel triggers is met, said Gledhill, now president of Policy Navigation Group, a consulting firm. The agency also uses judgment and proportion of impact, he said.

Longsworth said he disagreed with how the EPA characterized direct versus indirect costs.

The CERCLA rule, if final, “will have significant, direct impacts on small businesses and government agencies, and those are significant,” he said.

The EPA’s economic analyses for all five rules don’t square with the effects they’d have on small businesses and government agencies, industry attorneys and consultants said.

The SBA’s advocacy office, IDEX Corp., US Chamber of Commerce, National Federation of Independent Businesses, and law firms were among the parties that already raised concerns about small business impacts for three rules.

The SBA’s advocacy office, which helps the EPA convene the panels, said in an emailed statement that it’s concerned about EPA’s certification that the accident prevention and CERCLA rules don’t warrant the advisory panels. But it hasn’t taken a public position.

Robert F. Helminiak, vice president of legal and government relations at SOCMA, which represents companies that make batches of small chemicals, said he’s concerned by the EPA’s reluctance to convene SBREFA panels.

“SOCMA strongly believes there are often significant—even disproportionate—economic impacts on small businesses,” Helminiak said.

Pushed by Deadlines

Statutory deadlines and court orders are pushing the EPA to proceed with rulemaking without all the information it needs about how small businesses and municipal agencies are affected, Marrapese said.

Plus, both Republican and Democratic administrations want to move quickly “to fulfill the policy pledges they ran on,” Gledhill said.

EPA’s view sometimes is that “the input from small businesses can be achieved through other means than the formal SBREFA process,” such as the public comment process, said Byron Brown, who served as an agency associate deputy general counsel under the George W. Bush and Obama administrations.

“If you can find a way to avoid OMB review or small business review, that can be beneficial in terms of getting the work product out the door,” said Brown, now a senior counsel at Crowell & Moring LLP.

But the agency said court, statutory, or other pressures weren’t affecting its decisions on whether to hold small business panels. “Rulemaking timelines do not alter EPA’s commitment to fulfilling statutory rulemaking obligations,” it said. There has been “sufficient time to conduct a SBREFA panel, if one had been necessary.”

The SBA, which tracks compliance with SBREFA, said there’s been an increase in the number of panels EPA and other federal agencies have held in fiscal 2022 compared to 2021, and a further increase is expected in 2023.

Singular Exception

Marrapese said affected parties should flag their concerns, pointing out that EPA once convened a panel after a rule was proposed.

In that case it responded after public commenters raised concerns about small business impacts of the PFAS data collection rule, the EPA said.

Kevin Bromberg, who worked in the SBA’s advocacy office for 41 years before retiring in 2020 and setting up the Bromberg Regulatory Strategy LLC consulting firm, said the agency reaches out extensively to diverse groups to serve on panels.

But Amit Narang, a regulatory policy advocate with Public Citizen, said environmental justice voices have been missing. The SBA’s advocacy office, which helps convene the panels, “only wants to hear from small businesses that tend to oppose stronger chemical regulations such as those that manufacture or use such chemicals,” and not small businesses in heavily polluted communities, he said.

Stuart Shapiro, a former OMB official and now interim dean of Rutgers University’s School of Planning and Public Policy, said the panels are valuable, but one-sided.

The EPA has gained practical insights from businesses “that know what they’re doing and how the rule will affect them,” he said. “Numerous times it’s made a difference in what’s proposed.”

On the other hand, it “gives a privileged seat at the table to one particular sector. You don’t have labor unions whose members might be affected getting this bite at the apple,” he said. “You don’t have people who might breathe the air or drink the water.”