Moves toward regulatory relief Under the Reagan administration, business hopes for clear, goal-oriented, cost-effective federal rules, but progress in that direction could be blunted by some stiff resistance and significant setbacks “An easing of the regulatory burdens on industry” was one of the main political promises heard during the 1980 presidential campaign. It was repeated after President Reagan took office. Listed as part of his national plan to combat inflation and improve the U S . economy, the proposed approach to “streamlining” federal regulations-including environmental ones-came under the rubric of “regulatory relief‘ or “reform.” According to Reagan and his administration officials, the 1980 election results provided a mandate to bring about such relief. Just what is meant by “regulatory relier? It might be more useful, at the outset, to consider what regulatory relief is not. It is certainly not a proposed elimination of regulation in general or a return to anything approaching the old-fashioned loissezfaire attitude toward regulation. Almost everyone concerned in business, government, academia, the legal profession, and advocacy groups agree to that. They also agree that in the foreseeable future, regulatory compliance will continue to be a business cost and changes in the regulations themselves and in how they are developed are necessary. However, when the above parties begin to discuss what those changes should be, and how or if cost-benefit requirements should be applied, agreement rapidly disintegrates into discord. That is one of several reasons why the road to regulatory relief will not be a smooth one, and why those traveling on it should expect to encounter flak from many quarters.
Is it definitional? “No, regulatory relief is not definitional,” says Thomas Truitt, formerly director of EPA’s Legal Support Di0013-936X/81/0915-0859$01.25/0
vision and now a senior partner of the Washington, D.C., law firm of Wald, Harkrader & Ross. “It can be seen, rather, as a means of evolving regulations based on clear, understandable data, in a manner that moves away from arbitrariness.” he added. Richard Wiechmann of the American Paper Institute (API) has called for close examination of regulations, “in order to ascertain which work and which don’t. Let’s retain what’s useful, and modify or revoke those that are not, or that offer no benefit commensurate with their technial and economic burden.” “Regulation that is clear, unequivocal, aimed only at demonstrably valid goals, and worth its attendant cost’% the hope expressed by Jackson Browning, corporate director for health, safety, and environmental affairs for Union Carbide Corp. Also,
0 1981 American Chemical Society
calls for scientific peer-group review requirements for regulations in environmental and like fields are heard from many organizations, particularly in business and industry. Perhaps, as Monte Throdahl says, such peer-group review would result in the use of “proven and significant data on which to base regulations aimed at the most effective attainment of reasonable goals.” Throdahl is senior vice-president of Monsanto Corp. How do these terse pronouncements by those from the affected businesses and industries compare with the thoughts of officials in a federal regulatory agency such as EPA? None were immediately available; EPA officials were temporarily enjoined from speaking publicly on policy matters, as Thomas Lombardi of Executive Enterprises, Inc. (EEl), New York, learned rather suddenly when he was Volume 15,Number 8. August I981
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organizing EEI’s conference, “Environmental Policy and Regulation Under the New Administration” in June in Arlington, Va. EPA officials declined to speak at the conference, citing the order.
The executive order A fundamental document on regulatory relief is “Federal Regulation,” Title 3 of Executive Order 12291 signed by Reagan on Feb. 17. Pursuant to this order, the Office of Management and Budget (OMB) is charged with oversight of the regulatory process, explains Jim Tozzi, deputy administrator of its Office of Information and Regulatory Affairs. “OMB is very much in charge of the rule-making process these days,” said Alan Farkas, vice-president of Booz-Allen & Hamilton Inc., in a recent “Boardroom Briefing” presented by the company. This supervision may not always be necessary, he added, since many present agency heads themselves believe in regulatory relief. The reasons given for this executive order were not only complaints about existing regulations and their effects, but also the “midnight regulations” phenomenon. Certain federal agencies, EPA included, apparently rushed frantically to establish a tremendous number of regulations before Reagan’s inauguration-reportedly working up until midnight Jan. 19. Public-interest group spokesmen, however, maintain that the stepped-up activity was necessary to help the outgoing Carter administration meet requirements for regulations that were mandated by law
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or by judicial order. The flurry of activity motivated the President to initiate a 60-day freeze on regulatory activity and to set up the Presidential Task Force on Regulatory Relief, chaired by Vice President George Bush. The task force is actually run by OMBs William Miller 111. Under the presidential order, OMB froze about 172 regulations from various agencies which were then examined by the task force. Of these, 37 remain frozen because of continuing policy review. At the time of the freeze, 27 rules from EPA and eight from OSHA were affected. The freeze brought changes, stays, postponements, and revocations of a substantial number of regulations. Among them were 34 automobile industry rules, some Resource Conservation and Recovery Act (RCRA)
reporting provisions, and certain OSHA chemical labeling and in-plant lead standards, as well as some rules concerning noise. Major and minor rules With certain exceptions and exemptions, each regulatory agency is to submit planned major and minor rules to OMB for examination by O M B s agency desk officer, regulatory analysis group, and budget examiner. Regulatory procedures excepted or exempted from this scrutiny are those issued in response to an emergency situation; those whose statutory orjudicial order authority, including deadlines, places them in legal conflict with the terms of E.O. 12291; and those exempted by the OMB director’s order. However, when feasible, OMB wants a review of these exceptions as soon as possible, especially of those issued in response to emergencies. OMB defines a major rule as one deemed likely to result in: an annual effect on the economy of SI00 million or more a major increase in costs or prices for consumers; individual industries; federal, state, or local government agencies; or geographic regions significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of US-based enterprises to compete with foreign-based enterprises in domestic or export markets. In addition, the OMB director can elevate a rule from “minor” to “major.” After the rule-making agency has prepared a regulatory impact analysis (RIA), including a cost-benefit evaluation, the rule is forwarded to OMB for consideration. OMB has 60 days in which to consult further with the agency concerning a major rule. For a minor rule, the consideration period is
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IO days, unless extended. O M B s Tozzi told the EEI conference audience that of 900 rules that came to OMB between the effective date of E.O. 12291 and early June, no more than five were major, and 25 were withdrawn by the agency following consultation with OMB. Another 55 were returned for further consideration. Incidentally, under the executive order, OMB also has the power to examine and recommend changes in existing regulations. Concerning the order’s call for cost-benefit studies, Tozzi acknowledged that it is often very difficult, if not impossible, toquantify benefits in monetary terms. Even indirect costs could be very hard to pinpoint. Adding to the problem is the lack of expertise in preparing RIA cost-benefit evaluations in regulatory agencies. However, plausible figures for a planned rule’s direct costs should be obtainable, and at least a thorough qualitative notion of benefits (even those pertaining to public welfare) and of indirect costs might be possible to evolve. Since OMBs role in regulatory reform is primarily supervisory, an agency head could theoretically reject O M B s requests for reconsideration and promulgate regulations as originally planned. But, the agency might then encounter certain difficulties, Tomi said. For instance, funds for the rule’s enforcement may prove difficult if not impossible to obtain. Or, since most regulations require some sort of reporting forms, OMB could deny the agency budgetary authority to produce these forms, pursuant to the Paperwork Reduction Act of 1980. Establishing dialogws Since this new approach to regulatory procedure permits discussions concerning forthcoming rules between
those affected and regulators prior to the formal proposal stage, “it is very much in an industry’s interest to establish such a dialogue,” says Farkas. An affected company or industry should closely monitor the regulatory agenda, which is required by E.O. 12291, and seek out the knowledgeable agency officials as quickly as possible. When a possible rule appears on the agenda, a business or trade association can then lobby with the agency. The industry can begin this dialogue with the agency early in the process, Farkas says. Or the industry can critique the agency, turn to the Bush Task Force or OMB for possible early intervention, or even go to court. However, Farkas explained that the best course, where at all possible, is for a firm or association to provide good data and sound analysis, rather than rhetoric. “With credibility, you can have good clout with the agency before a rule reaches formal proposal stage,” Farkas says. “Of course, you can comment after proposed regulations come out in the Federal Register, but it’s harder to get them changed then.”
Lawsuits and legislation Use of dialogue, litigation, and contact with the Bush Task Force on Regulatory Relief is the three-pronged approach taken by the API and the National Forest Products Association (NFPA). The two associations were concerned with RCRA Phase I hazardous waste regulations dealing with spent solvents, waste oil, pesticides, and other such materials. Along with 45 other organizations, API/NFPA filed suit against EPA last August. Negotiations with EPA, however, are also ongoing. A number of issues “have been resolved to our satisfaction,”
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API’s Wiechmann told the API/ NFPA Environmental Forum XI in June. API/NFPA also filed suit concerning Phase I1 of the hazardous waste rules. They complained that “EPA failed to distinguish adequately between new and existing hazardous waste facilities, as intended by Congress, and classified any surface impoundment not having a double liner as a land disposal facility.” They also conveyed their concern with these regulations to the Bush Task Force. Through the regulatory relief process, the chemical industry is seeking modifications of certain premanufacturing notification (PMN) regulations under the Toxic Substances Control Act (TSCA). And a Chemical Manufacturers Association (CMA) spokesman has called for Clean Air Act primary standard-setting basis chaoges to “protect public health against unreasonable risk of significant adverse health effects.” However, he said, “reversible health and environmental effects invdlving only short periods of discomfort should not he a basis for setting national standards.” The CMA spokesman also called for “balancing risks, costs, and benefits, and non-air-quality health and environmental impacts and energy requirements” as a rule to be observed by EPA in secondary standard-setting. Many of the concerns that industry and others have with the regulatory system are being addressed in the proposed “Regulatory Reform Act” introduced by Sen. Paul Laxalt (RNev.). Among the bill’s principal provisions is a requirement for the evaluation of direct and indirect costs and benefits in major rule making (proposed Section 551). Other sections, especially 553, amend the Administrative Procedures Act with respect to rule making, and administraVolume 15, Number 8. August 1981 881
tive and judicial review. Enjoying strong support of the business community, the Laxalt bill, if passed, would essentially codify E.O. 12291 and other regulatory reform actions and documents into law.
Public-interest viewpoints Public interest groups have been quick to express unhappiness about this regulatory relief. Using the Clean Air Act as an example, Carl Pope, assistant conservation director for The Sierra Club, told the EEI conference that debates over the act’s future, and regulatory activity attendant thereto, should be restricted to fine tuning. In his view, that should preclude any reopened debate over what U S . clean air go8ls should be, for they “were clearly established by Congress.” According to Pope, any proposal to apply cost-benefit considerations to health protection provisions of the Clean Air Act would be “unacceptable, since protection from unhealthy air is a basic right. The business community must recognize that the people want clean air that not only does not make them sick, but doesn’t make eyes water.” Pope predicted that if efforts in the
name of regulatory relief were made to substantially relax the act or its appurtenant regulations, there would be a broad popular backlash. “Congress would not want to take the heat,” he said, and further public interest litigation would almost surely be initiated. “Business could end up finding itself regulated much more than it would if it offered cooperation to advocacy groups,” Pope warned. He said the goals of regulatory cost-effectiveness and environmental protection, as envisioned when the act was passed, “could be met if each side was willing to accept ‘half a loaf.’ ” On the other hand, Jay Hair, executive vice president of the National Wildlife Federation, noted that “all feel overburdened” by regulations. But given projected increases in environmental stresses by the year 2000-a 33% increase in water needs alone, for instance-“there must be some quite broad-scale regulations,” he said. Hair called for “absolute” regulations for high-risk situations; in other cases he said he could regard some cost-benefit trade-offs as permissible. For example, acid rain is a high-risk matter which, in Hair’s view, would justify very strict, high-cost regulation;
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yet benefits from such regulation “will never be adequately reflected in the benefit column.’’ In addition, he said, competing interest groups should work together with government at early stages of the rule-making process, to promote better understanding among them. He also favored regulations having better scientific and technical data bases. Together, these steps could result in decreased litigation, and other overall advantages.
Expect challenges The near-future scenario seems to be that the business and industry community, with solid Reagan administration support, will push vigorously toward regulatory relief, as set forth in E.O. 12291 and other federal actions and documents. Environmental, OSHA, and many related regulations will be the target of this effort. But the effort is likely to encounter stiff resistance, particularly from advocacy, citizens’, and labor groups. It is quite probable that major challenges to regulatory changes that these groups consider undesirable will be mounted in the courtroom. Examples of these challenges might be found in suits against cost-benefit aspects of
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Regulatory rell The Reacan xhninishtii mav find that its pr&m to bring about-what it believes to be regulatory relief may not 90 smoothly. One ma@ snag is the U.S. Supreme Court's split decision, harded down in June, that cc6-benefit considerations should not be a factor activity oonceming in OSHA mg~latoty cotton dust in thewakplace. while the decision addressed only cotton dust, it may have set a precedent that costbenefitshould not be consideredin any instance in which human health problems are demonstrated. This action might set the s w for numerous addiional lawsuits aimed at settingaside requirements to consider costs of many regulations. if human health is alleged to be a fa&. Ami one may well expect lawsuits. The Siefra Club's Carl Pope told E.% J "The law is the law, and regulations, such as those dealing with clean alr, are oromulaated under the law.
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g e " w . not OMB.If OMk triestodela; or stop such regulatory activity bj withholding funds, forexample, goup. like ours will sue to get that situation changed " Challenges to the regulatoty relief program may receive more ammunition from a recent Libmy of Cmgress report which questions the constiiutionality of E.O. 12291 on two principal gmtmds. First, the repat states thatthe order mlght circumvent procedural safeguards establishedby Congress tc prevent "deals" between regulalcf and regulated industries. Second, through the order, the President may be seen as exceeding his powers through actions that reduce the independence of certain regulatory agencies. What Congress will do with the report is not yet known. However. the d o c m n t could orovide tuel lor futue
regulatory actions, particularly those related to health, safety, and welfare matters. If, for example, the Laxalt bill ever becomes law, one can expect its cost-benefit provisions (Section 551) to be challenged immediately. Furthermore, some substantial legal support for such challenges may have been provided by the June 17 US.Supreme Court decision, which set aside requirements for cost-benefit considerations in OSHA regulations aimed at abating brown-lung disease in the textile industry. Challenges to regulatory relief will also be mounted by interest groups, whose pressureon Congress may gain them concessions, if the "heat" i s strong enough. To that, add regulations that essentially cannot be changed because of statutory-provision or judicial order, as well as myriad state and local government rules. So if there is a bottom line, i t may be that the new administration could make progress toward i t s perceived goals of regulatory relief and reform for business. But it will be slowed and sometimes thwarted by numerous challenges, detours, and frustrations. -Julian Josephson
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