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IFL Defends Small Business’ Light Duty Vehicles from Onerous EPA Proposal

Published Tuesday, December 1, 2009 7:00 am

 

November 27, 2009

 

The Honorable Lisa Jackson

Administrator

U.S. Environmental Protection Agency

c/o Air & Radiation Docket

Washington, DC

 

Attention Docket ID No. EPA-HQ-OAR-2009-0472

 

Submitted via e-mail to:  a-and-r-Docket@epa.gov

 

Re: Proposed Rulemaking to Establish Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards[1]

 

Administrator Jackson:

 

On behalf of the millions of small-businesses in the United States, thank you for the opportunity to comment on the proposed rulemaking to reduce greenhouse gas (GHG) emissions from cars.  While we appreciate your effort to engage the public through notice-and-comment rulemaking, we fear that EPA’s lack of attention to the proposal’s impact on small business will lead to unintended consequences and will severely harm the U.S. economy.  We respectfully urge for EPA to withdraw this rule, for EPA to detail how the agency’s regulatory agenda for reducing GHG emissions will impact small entities, for EPA to develop alternatives that minimize the impact on small business while reducing GHG emissions, and, if necessary, for EPA to reissue a proposed rulemaking that benefits from this information.

 

 

Institute for Liberty 

 

The Institute for Liberty (IFL) is a non-profit, 501( c)(4) advocacy organization, focused primarily on executive branch policy.  Specifically, we provide a small-business perspective in the public policy debate, and take a particular interest in the impact of the federal regulatory state on small business.  IFL believes that small businesses are the engine of the American economy, and that the federal government's role is to promote, and not hinder, the creation and growth of these small businesses.  Andrew Langer, IFL's President, has been an advocate for small business for nearly a decade.  Before joining IFL, he served as the Senior Manager for Regulatory Affairs at the National Federation of Independent Business, the nation's largest small business association.  While there, he worked closely with federal officials to craft policies that were small-business friendly, analyzing proposals and making recommendations on how best small businesses could be served, while at the same time offering initiatives aimed at getting career civil servants to better understand the day-to-day operations of small businesses.  He spent the early part of his career analyzing land-use regulations like the ESA, assessing their impact on private property rights.  Thomas Sullivan, IFL's Senior Fellow in Regulatory Policy, served as Chief Counsel for Advocacy at the U.S. Small Business Administration from 2002-2008.

 

 

Importance of Small Business Input

 

Small business owners are the fabric of many communities.  They are the softball coaches, school board members, and neighborhood watch participants.  Beyond their social and community importance, small businesses play an important economic role.  Small firms represent 99.7% of all employer firms. They account for over half of our country’s GDP and they employ over half of our private sector employees.  As innovators, names like “Google,” “Hewlett Packard,” and “Ben and Jerry’s,” tell the story of successful entrepreneurs who started small businesses.  As a group, small businesses innovate at a rate 12%-14% more than larger research and development firms.[2]

 

Right now, as our economy struggles to recover from the recession, we are looking to small business as the force behind job creation.  Startups with fewer than 20 employees account for 86.7% of net job creation.[3]  In 2006, more than 800,000 small businesses were created in the United States.[4]  Of those, more than 642,000 had fewer than 20 employees.[5]

 

Given the importance of small business to the economic strength of the United States, it is important that government proceed carefully before imposing new regulatory mandates on small business.  The need for special consideration of the regulatory impact on small firms becomes even more apparent with the realization of how small firms disproportionately bear the burden of federal regulations.  Small businesses with fewer than 20 employees face a 45% larger burden to comply with federal regulations than their larger-business competitors.[6]  For those small businesses, the annual cost per employee is $7,747 to comply with federal regulations overall.  For compliance with environmental regulations, the cost is much higher.  Small firms with 20 employees spend four times more per employee to comply with environmental requirements than businesses with 500 or more employees.[7] 

 

 

Regulatory Flexibility Act

 

The disproportionate impact of federal environmental regulations on the small business sector led President Clinton to support the 1996 Small Business Regulatory Enforcement Fairness Act (SBREFA).[8]  Among other things, SBREFA amended the Regulatory Flexibility Act of 1980 to require a panel of government officials (made up of employees from the EPA, the U.S. Small Business Administration’s (SBA) Office of Advocacy, and the Office of Management and Budget’s Office of Information and Regulatory Affairs) and representatives of small entities to examine regulatory proposals and suggest less burdensome alternatives that would meet EPA’s underlying environmental protection objectives while minimizing impact on small entities.[9] These panels, entitled, “Small Business Advocacy Review Panels,” issue a report that is published in conjunction with a proposed regulation.  That way, the EPA benefits from sensitivity towards its impact on small business and the public benefits from a more transparent disclosure of benefits, costs, and potential alternatives.

 

 

The Need for EPA to Convene a Small Business Advocacy Review Panel

 

Unfortunately, the EPA did not avail itself of the Small Business Advocacy Review Panel process prior to proposing this rule.  This is unfortunate, especially since the U.S. Small Business Administration, Office of Advocacy, twice advised the EPA to convene the small business panel well before EPA issued its proposal.[10] 

 

In its June 23 letter to EPA Administrator Lisa Jackson, the Office of Advocacy is critical of using the Clean Air Act to GHG emissions from mobile sources.  The letter states:

 

 "EPA's s endangerment finding would likely also result in new regulatory requirements for on-highway motor vehicles, as well as non-road vehicles and equipment.  These GHG
requirements would be imposed in addition to the renewable fuel standards contained in
the Energy Independence and Security Act of 2007 (EISA), which requires 36 billion
gallons of renewable fuel to be blended into the nation's gasoline and diesel fuel supply
by 2022.  To a large degree, the goal of EISA was to address GHGs from mobile sources.
Small businesses are concerned that regulating GHGs from mobile sources under the
Clean Air Act would have serious adverse impacts on small companies that must rely on
vehicles and equipment.  On-board GHG control measures such as speed limiters would
have a major impact on small entities that operate trucks or other vehicle fleets.  Other
requirements designed to limit the use of vehicles will similarly impact small businesses
that depend on being able to pick up and deliver goods, or to travel to and from their
clients.  These requirements could be a particular hardship for trucking companies, and
the numerous small communities that depend entirely on long-haul trucks for delivery of
their food supplies and other goods.”[11]

 

In the same letter, SBA’s Office of Advocacy advised EPA to solicit small business input through the Small Business Advocacy Review (SBAR) process prior to issuing rules to control GHG emissions.  The letter states:

 

"To avoid creating severe unintended consequences from "one-size-fits-all" GHG
regulations, EPA must adequately consider the probable impacts on small entities. 
SBAR Panels provide EPA with on-the-ground, real world, experienced views
from small business representatives.  Poorly designed approaches and unintended
consequences are filtered out of proposed regulations with the help of small
entities and government officials. These changes are accomplished without
compromising valuable protections for human health and the environment."[12]

 

 

Recommendation

 

We agree with the SBA Office of Advocacy’s recommendation for EPA to convene a Small Business Advocacy Review Panel, not only for this proposal, but for every GHG regulatory proposal and the agency’s overall GHG regulatory framework.  We believe that EPA will improve the transparency of its effort to reduce GHG emissions if it conducts a complete analysis of how all of the agency’s GHG regulatory proposals work together, their benefits and costs, and how alternatives within the overall GHG regulatory approach can minimize impacts on small entities.

 

We respectfully request that EPA to withdraw this rule.  And, we further request that EPA convene a Small Business Advocacy Review panel under section 609 of the Regulatory Flexibility Act.  These recommendations, if followed, will allow for EPA to develop alternatives that will minimize the impact on small business while reducing GHG emissions.  Our recommendations come at a time when sensitivity towards small business not only makes sense; it is of vital importance for our country’s economic recovery.

 

 

While we are critical of the proposal’s potential impact on small business and of EPA moving forward without adequate small business input, we appreciate the opportunity to comment.  If you have any questions, or require any additional information, do not hesitate to contact us.  We can be reached by phone (202) 261-6592 or via e-mail at Andrew.Langer@instituteforliberty.org.

 

                                                            Sincerely,

 

 

            Andrew Langer,                                               Thomas Sullivan,

            President                                                          Senior Fellow, Regulatory Policy

 


[1] 74 Federal Register 168, 4954 (September 28, 2009).

 

[2] U.S. Small Business Administration, Office of Advocacy, Frequently Asked Questions (September 2009), available at:  http://www.sba.gov/advo/stats/sbfaq.pdf .

[3] See Stefan Fölster, “Do Entrepreneurs Create Jobs,” Small Business Economics 14 (2000): 137-148; David B. Audretsch, Max C. Keilbach, Erik Lehman, Entrepreneurship and Economic Growth (Oxford University Press, 2006).

[4] Statistics on the change in U.S. Business Employment are available at http://www2.census.gov/econ/susb/data/dynamic/0506/us_state_totals_emplchange_2005-2006.xls .

[5] Ibid.

[6] W. Mark Crain, the Impact of Federal Regulations on Small Firms, funded by the U.S. Small Business Administration, Office of Advocacy (2005).

[7] Id.

[8] Pub. L. No. 104-121, 110 Stat. 857 (1996).

[9] See sec. 609 of the Regulatory Flexibility Act, 5 U.S.C. Sec. 609.

[10]  Letter from U.S. Small Business Administration, Office of Advocacy, to EPA (November 28, 2008) http://www.sba.gov/advo/laws/comments/epa08_1128.pdf  and Letter from U.S. Small Business Administration, Office of Advocacy, to EPA (June 23, 2009). http://www.sba.gov/advo/laws/comments/epa09_0623.pdf .

[11] June 23 letter.

[12] Id.

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