Small federal agency gears up to take down Biden regs

By Kelsey Brugger | 06/29/2021 12:24 PM EST

Small Business Administration headquarters in Washington. SBA

A federal agency formed to champion small-business interests has morphed into what critics call an anti-regulatory mouthpiece, and it has sights on President Biden’s agenda.

The Small Business Administration’s Office of Advocacy tends to ramp up during Democratic administrations, seeking to influence federal environmental and workplace regulations so they are more amenable to companies like small refiners and tanneries.

The office has already rebuffed Biden energy standards and critical habitat proposals, after four years of being all but silent under former President Trump.

“It was almost dormant under Republican administrations, and then it springs into action under Democratic administrations,” said Amit Narang, an analyst at left-leaning Public Citizen, which has been critical of the office. “This could emerge as an issue for EPA as it did under the Obama administration.”

Originally created by Congress in 1976, the office was designed “to be the independent voice for small business within the federal government.”

It is run by the chief counsel for advocacy, a political appointee, but the small agency is independent and insulated from the president’s views.

Its role is twofold.

Internally, the office convenes panels on rules determined to have a significant impact on small entities, as mandated under the Small Business Regulatory Enforcement Fairness Act (SBREFA).

The panels are “public” but closed to the press, according to the SBA website. The law requires EPA, the Occupational Safety and Health Administration and the Consumer Financial Protection Bureau to participate in the roundtables.

Externally, the office comments on the impacts of all kinds of federal actions, with a pro-business and generally anti-regulatory proclivity, hoping to secure exemptions or other kinds of breaks.

Supporters say the SBREFA — often pronounced sub-ree-fa — panels lead to sturdier rules, even if they may slow down the rulemaking process.

“We measure our success in savings that we can attribute to having agencies reexamine or redefine regulations to lessen the cost of compliance,” said Major Clark, who has served as the advocacy office’s acting chief counsel for the past five years.

“We do a fairly decent job,” said Clark, who was acting because Trump never nominated anyone to head the agency.

Critics charge that the office is a taxpayer-funded anti-regulatory operation burrowed in the federal government that relies heavily on the U.S. Chamber of Commerce and other trade groups that represent big business to fight federal regulations.

James Goodwin, a regulations advocate at the Center for Progressive Reform, helped craft a report in 2013 detailing how the American Chemistry Council — which represents companies like DuPont and W.R. Grace & Co. — influenced an SBREFA panel over an OSHA rule on silica, which can be dangerous at high levels.

The report found that a quarter of representatives who participated in the review panels were nominated by advocates linked to the trade group. And a third of the specific points the SBA office raise mirrored points ACC had made.

A new report from the Congressional Research Service explored similar issues with the Office of Advocacy, including lack of clarity around the definition of small entities, partisan and ideological disputes, and limited funding.

The office’s responsibilities have expanded over time, the report notes, and there has been a legislative push from Republicans to expand it further.

But Narang said the office has relied for years on now-debunked studies by economists Nicole Crain and Mark Crain. According to one of their claims, the annual cost of federal regulations spiked to more than $1.75 trillion in 2008.

The Government Accountability Office and other scholars have questioned the Crains’ work because it focused on old rules from the 1980s and ’90s and ignored benefits like air and water quality or food and medical safety.

Still, Narang said, the Crains’ research “just got into the bloodstream, and it turned into a talking point from hell.”

Action on DOE, Interior rules

During much of the last administration, the SBA Office of Advocacy hosted zero EPA panels, save for one in November 2020 on standards for the cancer-causing air pollutant ethylene oxide.

The office provided comment on just two rules in 2017, compared with 36 during 2009, former President Obama’s first year in office.

Clark attributed the drop-off to Trump’s deregulatory inclinations and his executive order directing all federal agencies to toss two regulations for every new one established.

“There was a period of time in which the regulatory pipeline was relatively empty,” he told E&E News during an interview.

But now that pipeline is beginning to fill up. And the office has come out swinging against a Department of Energy rule.

In a letter to Energy Secretary Jennifer Granholm, the agency said many small businesses have complained “about how a lack of predictability in agency actions can gravely impact their operations.”

The DOE proposal would undo Trump administration changes dealing with product testing for efficiency standards. Environmentalists said the previous administration gave business unneeded breaks.

In another case, in May, the SBA office argued that the Interior Department’s Fish and Wildlife Service ignored input from small businesses like electric cooperatives when finalizing a critical habitat designation for the northern Mexican garter snake.

And in April, the office convened a panel on EPA’s regulation of 1-bromopropane, a solvent used in dry cleaning.

Brittany Bolen, who ran EPA’s Office of Policy under Trump, agreed that the SBA would be more active during the Biden administration, “given the ambitious regulatory agenda under the administration.”

“I think it’s hard to tell at this stage how much of their feedback will influence these rules,” said Bolen, now a senior policy adviser at Sidley Austin LLP.

‘Never found a rule that EPA didn’t screw up’

Tom Sullivan, who served as the Office of Advocacy’s chief counsel during the George W. Bush administration, called the office “extremely important,” though its success, he said, might be best measured by the stuff you don’t read about in the press.

“If you look past the headlines, there is an enormous desire by federal agencies to get legitimate input from small businesses in rulemakings,” he said, adding, “Publishing it on Reginfo.gov just ain’t going to cut it.”

In recent years, the office’s budget has grown steadily, with the Biden White House proposing $9.62 million for fiscal 2022, a modest increase.

And some of the office’s harshest critics think it should actually have more money so it can do its job correctly.

Goodwin argued that the office’s existing 55 staffers are not enough to adequately go around the country to truly get to know thousands of small businesses and help them comply with rules.

Kevin Bromberg, who was SBA’s assistant chief counsel for environmental policy, rebutted the idea that the office’s reliance on trade groups is a problem.

He said the current methodology is necessary to reach a large swath of the country. After all, he argued, “small businesses are busy running their businesses.”

Bromberg and his colleagues would joke that as a part of their process, they would call up a small business to see if they laughed at a proposed rule, he said.

“They always laughed,” he said. “I never found a rule that EPA didn’t screw up one way or another.”

Bob Perciasepe, EPA’s deputy administrator during the Obama years, said EPA often did try to gather input from small businesses in the early stages of drafting a proposal.

For example, when the agency was working on de-sulfuring gasoline, he said, small refiners told it that larger operations were buying up all of the construction companies that built the units.

So EPA decided to delay the implementation of the rule for small refiners for a year, an accommodation determined to have a negligible impact on the environment.

Other rules have not had such an easy fix. Disagreements boiled over Obama’s Clean Water Rule to clarify what wetlands and streams received automatic Clean Water Act protection.

Perciasepe said EPA could have done a better job on the front end by trying to get buy-in from people about federal environmental regulations — for example, by ensuring that small farmers understood that normal agriculture activities would continue to be exempt.

“I think it’s not inappropriate to think through how a rulemaking can be impacting on different populations of not only people, but also on businesses, and look for ways to take that into account and be transparent about that,” he said. “My experience is if you do those things and bring them in early and are transparent, it doesn’t impact the environment.”

He added: “I’m not saying that process can’t be abused by, let’s say, a large company that puts forward their trade association to raise a ruckus.”

But Perciasepe said he doubts the SBA panels give way to any more abuse than other parts of the regulatory process.

What’s a small business, anyway?

More broadly, though, Goodwin argued that there is “a kind of zealous worship of small businesses in the U.S. that feels almost theological, as opposed to, you know, grounded in concrete reality.”

They “have become highly romanticized, almost mythological concept among the public and policymakers alike,” he argued in the 2013 report, “evoking images of small ‘mom and pop’ stores lining the idyllic Main Street of some quaint village.”

And no politician, Republican or Democrat, wants to be seen as hostile. Two weeks ago, during a vote on environmental disclosure legislation, H.R. 1187, lawmakers from both parties took to the House floor to speak at length about the potential impact on small businesses.

But as Goodwin and others pointed out, the government defines a small business as any business with fewer than 500 employees. That means small businesses make up 99.9% of all firms.

“The definition of small business is actually kind of insane,” Goodwin said. “If everyone is a small business, then no one is a small business.”