Chances are you have never heard of the Small Business Administration’s Office of Advocacy. The Environmental Protection Agency would probably prefer it remain that way.
That’s because the watchdog office has repeatedly charged that the EPA has ignored its own findings and “improperly certified” that its new rules comply with federal regulations meant to ensure that new regulations do not harm small businesses.
On at least four occasions since 2009, the SBA office said that the EPA certified that its new rules complied with the Regulatory Flexibility Act when they did not. In two cases this year, the Office of Advocacy said the EPA ignored the results of its own economic analyses when it certified them.
The Regulatory Flexibility Act is a 1980 law, amended in 1996 and 2010, that requires federal agencies to consider the impact of their regulations on small entities, primarily small businesses and local governments, and then make the results public. The Office of Advocacy is an independent body in the SBA, similar to an inspector general, that is tasked with monitoring compliance with the law.
“The Office of Advocacy is there to be the watchdog for small businesses within the government and to be behind the scenes in the rulemaking process,” said Dan Bosch, director of regulatory policy for the National Federation of Independent Business. “Different administrations put different weight on what the office says.”
The office itself cannot invalidate any rules. The law does not prevent, for example, an agency from adopting a regulation that hurts a particular industry. It just requires the agency to be candid about the rule’s effects.
In a statement to the Washington Examiner, the EPA said it views its obligations under the law as “a significant part of the rulemaking process” and in many instances “goes beyond the statutory requirements.”
Nevertheless, the requirement has apparently proved to be problematic for the EPA, which under President Obama has faced considerable pushback from businesses and lawmakers, including centrist Democrats, over its efforts to reduce greenhouse gas emissions and strengthen other agency rules.
In 2009, then-EPA administrator Lisa Jackson certified that three new Clean Air Act rules to regulate greenhouse gases “will not have a significant economic impact on a substantial number of small entities” because they did not directly impose any requirements on them.
Jackson said that for one rule EPA wouldn’t even conduct any of the panels ordinarily required under the law that allow small business representatives to express their concerns because the agency had already found that they wouldn’t be affected.
But in a Dec. 23, 2009 letter, the Office of Advocacy took issue with that stance, saying Jackson’s certifications “lack a factual basis and are improper. The [greenhouse gas] rules are likely to have a significant economic impact on a large number of small entities.” The EPA’s own estimation showed that 6 million facilities would have to apply for new permits under the rules.
“We continue to disagree with EPA about the factual and legal bases of its certification,” said Eric Gulbradsen, spokesman for the office.
The office issued a similar letter on March 12, 2012, saying that the EPA’s claim that a proposed emissions standard rule would not hurt small businesses “lacks a factual basis.”
The letter noted that EPA had based its claim on two studies that didn’t back it up. One didn’t even directly address the issue at hand. “The first study is based on the ability of facilities to meet the current limits, not the proposed stricter limits,” the office said.
The EPA did respond in that case. “It is my understanding that EPA conducted additional analysis to support its certification,” Gulbradsen said.
More recently, the office took issue with the EPA’s claim that a proposed rule to protect agricultural workers from pesticides would affect less than .01 percent of revenues of affected businesses. In an Aug. 18 letter, it said the EPA’s own research came to a different conclusion: the rule would cost about 2 percent of revenues. “EPA’s economic analysis does not support its certification,” the office said.
Less than two months later, the office again said that EPA ignored the results of its own economic analysis in regards to a new rule expanding the definition of waters covered by the Clean Water Act. The EPA had said in an April announcement that “fewer waters will be subject to the CWA under the proposed rule than are subject to regulation under the existing regulations, (so) this action will not affect small entities to a greater degree than the existing regulations.”
The EPA’s economic analysis of the rule said differently, the office noted in an Oct. 1 letter. The rule would increase the amount of waters under the agency’s jurisdiction by 3 percent, which would raise annual permit costs by $20 million to $52 million and mitigation costs by $60 million to $114 million.
“The agencies’ certification and economic analysis contradict each other,” the office said.
The office has not received responses regarding the 2014 cases, but Gulbradsen noted it was still early in the process as the proposed rulemakings are still open for comment.
Gulbradsen said there was no tension between the agencies and even said that EPA “devotes a significant amount of time and resources to its RFA compliance and takes the letter of the RFA very seriously.” The office just doesn’t agree with all of the agency’s certifications.
