President Trump’s efforts to lighten the load of federal regulation felt by American industry has reached a “strange bedfellows” resistance point. “Bootleggers and Baptists” (interest groups that support the same regulation for entirely different reasons) are beginning to raise a ruckus. In this case, major oil companies and leading environmental groups alike are saying, “Enough, already. We want enforcement of the costly rules that are currently on the books.”
That theory also helps explain why America winds up with expensive, process-oriented regulations — like technology-based rules that strongly favor larger, richer firms — instead of outcome-focused regulations that inspire new and different ways to accomplish a regulatory goal.
As one New York Times writer put it: “The [regulatory] rollback plan is particularly notable because major energy companies have, in fact, spoken out against it—joining automakers, electric utilities and other industrial giants that have opposed other administration initiatives to dismantle climate-change and environmental rules.”
The case in point is the recently announced plan to sharply modify the EPA’s technology-based methane gas rule requiring drillers of gas and oil to capture emissions rather than allow them to escape into the environment.
Methane is a greenhouse gas that may affect global climate change. It is also costly to control, especially for smaller gas producers. Industry members who favor eliminating the rule point out that methane gas is valuable and, accordingly, they have an incentive to capture the gas. Those who favor keeping the rule argue that smaller producers have not kept up technically and that, either way, the risk to climate change is unusually large.
Perhaps eager to raise their smaller rivals’ costs, the major oil companies play the bootlegger role in this story. They have a similar incentive to that of the backyard distiller who wins customers when his county cracks down on legal liquor sales.
Environmental groups, who point to protecting the moral high ground, are the “Baptists” with the more straightforward motivations. In this rendering, the oil companies also have donned Baptist slippers, arguing that they wish to preserve the clean image now enjoyed by their natural gas product.
Whether they succeed together at derailing the Trump administration’s slow-rolling deregulatory locomotive remains to be seen. Finalization of the rule change will require perhaps a yearlong regulatory procedure.
It’s important to recognize that the Bootlegger-Baptist regulation theory also offers an explanation of why particular federal rules have certain features. In the methane case, as well as with other air and water pollution control rules, the regulations often require the installation of costly technologies, equipment that in many cases is already being used by larger and newer industry operators. Thus, the rules sometimes impose no new cost on larger firms, but raise the costs of smaller competitors.
It is noteworthy that the EPA is instructed by Congress to apply technology-based rules and not allowed to use performance standards, which would allow polluters to clean up in any way they desired so long as they achieve an objective environmental goal. Performance standards do not reliably cartelize an industry as technology-based standards do.
So far, the Trump administration has made unusually large strides in slowing the Federal Register’s printing press and eliminating multiple existing rules for each new rule added. But the efforts of the administration’s first few years involved grabbing low-hanging fruit, which means rules that are no longer especially valuable to either bootleggers or Baptists. Things get harder when that fruit is gone.
The methane rule change will ultimately become a test case decided by the courts. Meanwhile, the bootleggers are harmonizing with the Baptists.
Bruce Yandle is a contributor to the Washington Examiner‘s Beltway Confidential blog. He is a distinguished adjunct fellow with the Mercatus Center at George Mason University and dean emeritus of the Clemson University College of Business & Behavioral Science. He developed the “Bootleggers and Baptists” political model.
