A New Direction for EPA Under Scott Pruitt?

By at 19 December, 2016, 10:32 pm

Small businesses want their voices to be heard

by Raymond J. Keating-

Under President Obama, the Environmental Protection Agency (EPA) has seriously ramped up its regulatory activity, which has threatened and negatively impacted small businesses, investment, economic growth and job creation. President-elect Donald Trump’s choice of Oklahoma Attorney General Scott Pruitt signals a potential sea change that should be celebrated by small business owners and their employees.

Regulatory Overreach and the Obama EPA

First, there’s the Clean Power Plan whereby the federal government regulates greenhouse gas emissions from power plants. SBE Council’s Center for Regulatory Solutions (CRS) published an analysis that warned about the various ways that the CPP would inflict harm on U.S. small businesses, including higher electricity costs, killing jobs, threatening U.S. manufacturing, and reducing electrical grid reliability.

Second, consider the EPA’s mandates for a stricter ground-level ozone standard. Again, SBE Council issued a series of reports on how this regulatory morass would negatively affect small businesses and regional economies. For example, a CRS analysis noted that the EPA’s ozone regulation costs will be significant for small businesses and the U.S. economy, not to mention the health costs tied to lost GDP.

Third, in August of this year, 14 states and assorted industry groups went to court noting that the EPA has exceeded its statutory authority with its Methane Rule relating to new, reconstructed and modified oil and gas wells that use hydraulic fracturing. As noted in this SBE Council analysis, “Indeed, the increased costs of complying with these regulations will have a negative impact on investment and on consumers. As widely reported, the EPA projects higher costs of $530 million in 2025, while other studies point to annual costs of $800 million… For good measure, these and other EPA costly and misguided regulations imposed on the oil and natural gas industry fall heavily on the small businesses that overwhelmingly populate the energy sector. Consider, for example, that 90.7% of employer firms among oil and gas extraction businesses, 78.1% of drilling oil and gas wells businesses, and 81.5% of firms among support activities for oil and gas operations businesses have less than 20 workers.”

Fourth, in its Waters of the U.S. (WOTUS) rule, the EPA has moved to place local waterways – from streams and wetlands, temporary bodies of water and even ditches – under its jurisdiction. The rule would enact a federal permitting scheme that will impose hefty news costs and red tape on small businesses. The intent of WOTUS is to clarify the Clean Water Act, but in practice it will mean greater uncertainty, more litigation, higher compliance costs, and lost jobs. The rule will extend federal bureaucrats’ reach into every corner of the American economy, affecting small businesses of every type, including those involved in, among many others, oil and gas production, mining, homebuilding, and agriculture. Thankfully, a court issued a stay on WOTUS in October of 2015 and EPA’s various legal maneuverings in response have come up short, although the rule continues to be litigated. Again, at issue for small business is federal overreach into an area that has been successfully dealt with by states and localities and how a new layer of federal rules will impede new projects and drive up costs. Even the EPA’s own regulatory analysis found that the new rule will drive costs higher for small businesses, but incredibly EPA regulators certified that it would not.

Impact on Small Businesses

Over eight years, the Obama EPA has been unconcerned that its hyper-regulatory activity has inflicted and will inflict significant harm on the U.S. economy. And make no mistake, those costs fall most heavily on small businesses.

In a September 2014 study titled “The Cost of Federal Regulation to the U.S. Economy, Manufacturing and Small Business,” written by economists Nicole V. Crain and W. Mark Crain and published by the National Association of Manufacturers, it was reported that the per employee costs of federal environmental regulations fall much heavier on small firms, with the per employee costs for firms with less than 50 workers running 89 percent higher than the cost for all firms, and 252 percent higher than the per employee costs for firms with 100 or more workers. For manufacturing firms, the differences were striking as well, with the per employee costs of environmental regulations running 94 percent higher for firms with less than 50 workers versus the cost for all manufacturing firms, and 226 percent higher compared to firms with 100 or more workers.

But there’s real hope that things at the EPA will change dramatically with Trump’s choice of Scott Pruitt.

Consider that Pruitt has been working against EPA overreach in his role as Oklahoma attorney general. As The Washington Post reported that Pruitt, “joined a coalition of state attorneys general in suing over the agency’s Clean Power Plan, the principal Obama-era policy aimed at reducing U.S. greenhouse gas emissions from the electricity sector. He has also sued, with fellow state attorneys general, over the EPA’s recently announced regulations seeking to curtail the emissions of methane, a powerful greenhouse gas, from the oil and gas sector.”

In a piece for on May 17, 2016, Pruitt and his co-author wrote:

“President Obama’s Clean Power Plan is a particularly noteworthy example. This EPA regulation, one of the most ambitious ever proposed, will shutter coal-fired power plants, significantly increase the price of electricity for American consumers, and enact by executive fiat the very same cap-and-trade system for carbon emissions that Congress has rejected. The Clean Power Plan was promulgated without any consultation with Congress. No bills were debated, no votes were taken, and the representatives of the American people had no opportunity to object or offer their own suggestions. The checks and balances built into our system of government were simply ignored as inconvenient impediments to the president’s agenda.”

How about an EPA that actually abides by the constitutional separation of powers, follows the law, and takes into consideration the full ramifications of its rules and regulations? All federal regulatory agencies need to do that, including the EPA. That would be an ideal change welcomed by small businesses, and it seems like this real change just might be coming to the EPA under Mr. Pruitt.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP: The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.


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