government
REGULATORY REFORM DEBATE PICKS UP There is no middle ground about the two reform bills now being considered in Congress Bette Hileman C&EN Washington
V
iews about the value of regulatory reform are perhaps as far apart as they can get over a legislative issue. Most business interests contend that current rules are too onerous. They agree with Rep. David M. Mcintosh's (R-Ind.) recent statement that regulations cost $688 billion in 1997—$6,875 for a typical family of four—and that this cost is rising dramatically. They believe the regulatory reform bills now before Congress will lead to fewer or more carefully crafted rules that will help reduce those economic impacts. Public interest groups, on the other hand, argue that the current regulatory system is working reasonably well. Rather than create more hurdles that could slow the process by which agencies put new regulations into place, these groups would like to speed up the rulemaking process. They note that according to the White House Office of Management & Budget (OMB), the quantifiable benefits
Rushing: S. 981 would slow rulemaking
30 MARCH 23, 1998 C&EN
of health, environment, and safety regulations amount to at least $300 billion annually, but that the regulations' annual cost is roughly $200 billion. They point to the strength of the U.S. economy as evidence that regulations are not stifling economic growth. If the regulatory reform bills now before Congress were enacted into law, the groups contend, they would make rulemaking slower, more difficult, and less protective of health and the environment. Two major regulatory reform bills are now wending their way through Congress. The lesser known bill, H.R. 1704, would create a new office in Congress to do cost-benefit analyses of all major rules. It was approved by the House Judiciary Committee and is now being considered by the House Subcommittee on National Economic Growth, Natural Resources & Regulatory Affairs. Industry groups say H.R. 1704 would strengthen the regulatory process, but OMB Watch, a nonprofit research and advocacy organization, says the bill is unworkable and unnecessary. The other bill, S. 981, would revamp the federal rulemaking process as carried on by the agencies. It was approved 8 to 4 by the Senate Governmental Affairs Committee on March 10. The Clinton Administration and many public interest groups are strongly opposed to S. 981. The Natural Resources Defense Council considers it the single largest environmental threat the U.S. faces right now. The Chemical Manufacturers Association (CMA) generally supports it. H.R. 1704 would create the Congressional Office of Regulatory Analysis (CORA), whose director would be chosen by the Speaker of the House. CORA would assess whether agencies have conducted cost-benefit analyses properly, a function that now resides in the General Accounting Office (GAO). Also, it would "conduct its own regulatory impact analyses of major rules"—those with an annual economic impact of $100 million or
more. The analyses would consist of describing the potential benefits and costs of rules, describing alternative approaches that could achieve the same regulatory goals at lower cost, and explaining why such alternative approaches could not be adopted. All of this would have to be accomplished in 45 days after a rule is published in the Federal Register. Rep. Sue W. Kelly (R-N.Y.), who introduced the bill last July, says the legislation is necessary because, since the Congressional Review Act was enacted, Congress has not taken advantage of its authority to challenge a single new regulation. CORA would enable Congress to carry out that function, she says. Furthermore, agencies often supply biased information to Congress, and CORA would provide a thirdparty check on those data, she explains. Mcintosh agrees. Congress cannot carry out its responsibility under the Congressional Review Act, "because it has neither all of the information it needs to carefully evaluate regulations nor sufficient staff for this function," he says. In contrast, Gary D. Bass, executive director of OMB Watch, argues that H.R. 1704 is not needed. A wealth of information is already made available to Congress, he says, and most, if not all, members know exactly how they feel about various rules. Currently, all proposed rules are submitted to the leadership in each chamber, he says. In addition, GAO prepares a report on each rule and submits it to the appropriate congressional committee. These reports are also available on the Internet at http://www.gao.gov. Further questions can be aired with hearings, Bass adds. The
Solyst: more right to know with S. 981
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government reason Congress has not struck down any rules under the Congressional Review Act is not a lack of information but a fear of being "branded antienvironment or antiworker," he says. Apart from this, there are several reasons why CORA is simply not needed, Bass says. One is that "it would create a costly new government apparatus that would duplicate functions already performed by OMB and individual agencies." Last year, OMB reviewed 502 agency rules. The bill states that Congress must have reliable information. This is true, Bass says, but there is no reason to believe that information from CORA would be more reliable than that from the agencies, GAO, or OMB. Bass estimates that, rather than the $5 million stipulated in the bill, CORA would need upwards of $60 million to perform all the studies required of it. Another unrealistic expectation is that CORA would conduct its own cost-benefit analyses of each major rule in 45 days, Bass says. Because cost-benefit analyses are extremely time consuming, often taking years, CORA would be reduced to two choices: copy agency findings or "use analyses produced by the regulated community," he says. S. 981, the Regulatory Improvement Act of 1998, was introduced by Sens. Carl Levin (D-Mich.) and Fred Thompson (R-Tenn.) last June; a revised version was unveiled in February. Most observers believe that because S. 981 has been approved by the Governmental Affairs Committee, it would pass the Senate. The bill would require regulatory agencies to conduct in-depth risk assessments and cost-benefit analyses for major rules and to determine whether the benefits of the rules justify the costs. It would also require agencies to set up individual peer review panels—one for the risk assessment and another for the costbenefit analysis—for each of the 50 to 60 major rules proposed each year. In addition, whenever new data become available, agencies would be required to revise the risk assessments for rules already on the books. One goal of the legislation is to make the rulemaking process transparent so that the public would have a better understanding of the decisions agencies make and why, according to Thompson and Levin. Environmental and labor groups have strong objections to this legislation. First, they say, with so much emphasis on cost-benefit analysis, S. 981 would ele32 MARCH 23, 1998 C&EN
Some regulatory reform already enacted In the past three years, Congress passed 21 reforms to the regulatory process. These require agencies to complete cost-benefit analyses for proposed rules and to justify any decision not to choose the least costly option. They also require that when rules are written, consideration is given to impacts on small businesses. In addition, they grant Congress expedited authority to disapprove agency rules. Following are a few of the major changes: • Before a rule can take effect, an agency must submit a copy to Congress along with a cost-benefit analysis and information showing compliance with regulatory flexibility requirements. Congress has 60 days to pass a joint resolution disapproving the rule. • All federal agencies that regulate the activities of small businesses must establish a program to provide for the "reduction and, under appropriate circumstances, for the waiver," of penalties for violations of health and safety protections and environmental safeguards. • An agency issuing a rule must publish a guide to explain what actions the rule requires businesses to take. • If an agency's rule will cost a state or local government more than $100 million annually, the agency must estimate the extent to which the costs will be paid with federal funds. • Agencies are required to submit to the White House Office of Management & Budget the costs and benefits of all their regulatory programs, and OMB must submit to Congress an annual report on the total annual costs and benefits of all federal regulations.
vate cost considerations above public protection. Second, they argue, the bill would slow down the rulemaking process, especially with its requirement for peer review panels. Because 50 to 60 major new rules are proposed each year, twice that many panels would have to be set up each year, says Reece Rushing, project coordinator at OMB Watch. Because agency personnel are excluded from the panels and there is no requirement that the panels be balanced, industry people are likely to dominate them, says Karen Florini of the Environmental Defense Fund. Industry sci-
entists are essentially the only ones who have time to serve on so many panels, she says. Another objection that environmental groups have is that the cost-benefit analyses and risk assessments can be used as litigation fodder, unlike under the executive order that the bill would replace. "The [bill's] language is vague and does leave open the possibility that courts could review the contents of the risk assessments and cost-benefit analyses," Rushing says. During the markup, Sen. Joseph I. Lieberman (D-Conn.) offered language that would clearly exclude the content of these analyses from judicial review, but it was voted down. Environmental groups also question why regulations governing security and banking and the introduction of new drugs were excluded from S. 981, if indeed the bill would not slow down rulemaking. Sens. Max S. Baucus (D-Mont.) and John H. Chafee (R-R.I.) object to the bill, noting especially that "the requirement for revision of risk assessments threatens an endless and costly analytical process reopened with each new study that would provide additional fodder for protracted litigation." In contrast, CMA's James M. Solyst, senior director for regulatory improvement and information, says S. 981 is a very reasonable, moderate bill that is definitely needed. Largely, it simply codifies the President's executive order 12866, he says. The bill would result in "more openness, more right to know" about the rulemaking process, he contends. The bill would not allow risk assessments and cost-benefit analyses to become fodder for lawsuits, Solyst claims. "Only in a tortured translation of the judicial review language in this bill could you assume that it would lead to mischief [lawsuits over content]," he says. Also, S. 981 would not slow the development of new regulations, Solyst contends. "It would not be in industry's best interest to see regulations slowed down. This bill would hopefully lead to better regulation and better understanding of how the regulations were determined," he says. It remains to be seen if S. 981 will be brought up on the Senate floor this year. Some speculate that in this risk-averse Congress, Senate Majority Leader Trent Lott (R-Miss.) will be reluctant to allow such a controversial bill to be considered. H.R. 1704 was originally thought to have very little chance of passage, but now, Rushing says, "it seems to have legs."^
