'Burden of Over-Regulation' Examined by House Committee

Witness says regulators are not adhering to the Small Business Regulatory Enforcement Fairness Act, placing costly burdens on small businesses.

Regulators are not adhering sufficiently to the Small Business Regulatory Enforcement Fairness Act, and costly burdens on small businesses are not being eased as the act intended, says a representative of one company that has been impacted by a proposed Environmental Protection Agency (EPA) regulation.

"During the past three years, we have spent an inordinate amount of time and an extraordinary amount of money to oppose a proposed rule to establish an allocation system for controlling hydrochlorofluorocarbons (HCFC) production, import and export in the United States," Jeff Gibson, director of Support Operations for the Halotron Division of American Pacific Corp., told the House Small Business Committee at a hearing yesterday.

American Pacific Corp. employs 220 people in Utah and Nevada who manufacture specialty chemicals used in the space shuttle and Department of Defense solid rocket motor programs. Recently, the company diversified into the air bag and fire protection chemical market.

Gibson bemoaned efforts by EPA to adhere to the Montreal Protocol on Substances that Deplete the Ozone Layer, which established a limit on the combined production and import of hydrochlorofluorocarbons (HCFCs) for industrialized countries. The protocol went into effect in 1996, and a phaseout schedule was created. The phaseout schedule includes: a 35 percent reduction from the limit in 2004; a 65 percent reduction in 2010; a 90 percent reduction in 2015; a 99.5 percent reduction in 2020; and a total phaseout in 2030. The parties to the protocol decided in 1999 to establish a separate limit on production to take effect in 2004 and continue at that allocated level.

To ensure that the United States achieves the required reductions in production and import of HCFCs in the protocol, EPA developed a marketable allowance system. According to the agency, the system was the most "economically efficient system of all the methods considered, being market-based and relatively simple to administer. The allowance system will retain the flexibility for industry to continue to operate efficiently, while ensuring the United States does not violate the parameters agreed to as a party to the protocol."

Under the proposed regulation, when a company produces or imports each type of HCFC, they would expend an allowance for each kilogram of the HCFC produced or imported. If a producer expends allowances to make HCFCs, then exports those HCFCs, the producer receives allowances for the amount exported. The system is based on the need to ultimately balance the global output of HCFCs.

"This rule proposes an allocation system for a key ingredient in our fire protection chemical, which is also used in a wide variety of other products, from foam insulation to commercial chillers," Gibson continued. "We believe that the EPA has not performed the required due diligence in weighing the rule''s negative impact to small businesses against the potentially minimal environmental gain."

Gibson claims the allocation system will create a commodity market for HCFCs that would hurt many small businesses through increased costs due to contrived shortages.

Worrying about the "survivability" of his employer, Gibson added, "As a small business, we are reminded daily of the onerous and unintended effects regulations can have on our and other small businesses."

by Sandy Smith ([email protected])

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