March 14, 2006
The Honorable Benjamin Grumbles
Assistant Administrator
Office of Water
U.S. Environmental Protection Agency
1200 Pennsylvania Ave., N.W.
Washington, DC 20460
Dear Assistant Administrator Grumbles:
We are submitting these comments on the proposed Multi-Sector General Permit (MSGP) which covers over 3,656 facilities and may serve as a model for state programs that issue their own permits. The proposed Permit affects facilities in 29 industrial sectors, including mining, logging, manufacturing, transportation and landfills, sixty percent of which we estimate is small business.(1) Although this letter is submitted after the public comment period, the Office of Advocacy is hopeful that our comments will assist the U.S. Environmental Protection Agency (EPA) as it works to finalize the MSGP.
First, the Office of Advocacy believes the issuance of the MSGP constitutes a rulemaking and should proceed with the analytical and public comment requirements, such as the Regulatory Flexibility Act (RFA), of a rulemaking.(2) Second, in response to EPA’s request for comment on analytical monitoring and the benchmarks derived therein,(3) the Office of Advocacy offers the attached Technical Memorandum to assist the agency’s study.(4)
Congress established the Office of Advocacy (Advocacy) under Pub. L. 94-305 to represent the views of small business before federal agencies and Congress. Advocacy is an independent office within the Small Business Administration (SBA), so the views expressed by Advocacy do not necessarily reflect the views of the SBA or the Administration. Section 612 of the Regulatory Flexibility Act (RFA) requires Advocacy to monitor agency compliance with the RFA, as amended by the Small Business Regulatory Enforcement Fairness Act. The RFA requires federal agencies to consider the impacts of their regulatory proposals on small entities, and determine whether there are effective alternatives that would reduce the regulatory burden on small entities.
On August 13, 2002, President George W. Bush signed Executive Order 13272 that requires federal agencies to implement policies protecting small entities when writing new rules and regulations.(5) This Executive Order highlights the President’s goal of giving “small business owners a voice in the complex and confusing federal regulatory process”(6) by directing agencies to work closely with the Office of Advocacy and properly consider the impact of their regulations on small entities. In addition, Executive Order 13272 authorizes Advocacy to provide comment on draft rules to the agency that has proposed the rule, as well as to the Office of Information and Regulatory Affairs (OIRA) of the Office of Management and Budget.(7) Executive Order 13272 also requires agencies to give every appropriate consideration to any comments provided by Advocacy. Under the Executive Order, the agency must include, in any explanation or discussion accompanying the final rule’s publication in the Federal Register, the agency’s response to any written comments submitted by Advocacy on the proposed rule, unless the agency certifies that the public interest is not served by doing so.(8)
I. The Proposed MSGP Should be Considered a Rulemaking and Therefore Meets the Requirements of the Regulatory Flexibility Act (RFA)
While the EPA conducted some analysis and, specifically, documented cost estimates and small business impact,(9) EPA failed to formalize the Regulatory Flexibility Act (RFA) analysis in its MSGP proposal, claiming instead that “[i]ssuance of an NPDES general permit is not subject to rulemaking requirements … and is thus not subject to the RFA requirements.”(10) The purported basis of EPA’s determination that the RFA does not apply is rooted in the Administrative Procedure Act’s (APA) definition of “rules” and “orders.” EPA states that:
The APA defines two broad, mutually exclusive categories of agency action-‘‘rules’’ and ‘‘orders’’. Its definition of ‘‘rule’’ encompasses ‘‘an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of an agency…’’ APA section 551(4). Its definition of ‘‘order’’ is residual: ‘‘a final disposition… of an agency in a matter other than rule making but including licensing.’’ APA section 551(6) (emphasis added). The APA defines ‘‘license’’ to ‘‘include … an agency permit…’’ APA section 551(8). The APA thus categorizes a permit as an order, which by the APA’s definition is not a rule. Section 553 of the APA establishes ‘‘rulemaking’’requirements. The APA defines ‘‘rule making’’ as ‘‘the agency process for formulating, amending, or repealing a rule.’’ APA section 551(5). By its terms, then, section 553 applies only to ‘‘rules’’ and not also to ‘‘orders,’’ which include permits.(11)
Advocacy disagrees with EPA’s conclusion that this action is not a rulemaking and not subject to the RFA.
EPA’s reliance on the definition of “order” is misplaced. The United States Court of Appeals for the District of Columbia Circuit addressed this exact issue in National Association of Home Builders v. Army Corps of Engineers, 417 F. 3d 1272 (D.C. Cir. 2005). Like EPA, the Army Corps of Engineers argued that its permitting action did not constitute a “rule.” It was an “order” because “order” included a “licensing” disposition and a “license” included a “permit.” The court considered the argument an “elaborate statutory construction” and rejected it for a more straightforward one.(12) The court found that the permitting action fit within the APA’s definition of “rule” because each permit was a legal prescription of general and prospective applicability which the Corps issued to implement permitting authority that Congress entrusted to it pursuant to the Clean Water Act. As such, the action constituted a rule because it was an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy.(13)
In addition, the court found that the Army Corps of Engineers action was a legislative rule because the permits authorized the discharge of certain materials, granted rights, imposed obligations, and produced other significant effects on private interests. Accordingly, they were subject to the notice and comment requirements of the APA and to the requirements of the RFA.(14)
Likewise, the EPA’s general permit policy for stormwater discharges is a legislative rule. Like the Army Corps of Engineers, EPA is issuing the rulemaking to implement its permitting authority pursuant to the Water Quality Act of 1987 and the Clean Water Act, which directs EPA to develop a phased approach to regulate stormwater discharges.(15) The EPA’s permits will also grant rights, impose obligations, and produce other significant effects on private interests. Accordingly, the permits being issued by EPA are subject to the requirements of the RFA as were the permits issued by the Army Corps of Engineers.
The RFA requires agencies to consider the economic impact that a proposed rulemaking will have on small entities. Pursuant to the RFA, the agency is required to prepare an initial regulatory flexibility analysis (IRFA) to assess the economic impact of a proposed action on small entities. The IRFA must include: (1) a description of the impact of the proposed rule on small entities; (2) the reasons the action is being considered; (3) a succinct statement of the objectives of, and legal basis for the proposal; (4) the estimated number and types of small entities to which the proposed rule will apply; (5) the projected reporting, recordkeeping, and other compliance requirements, including an estimate of the small entities subject to the requirements and the professional skills necessary to comply; (6) all relevant Federal rules which may duplicate, overlap, or conflict with the proposed rule; and (7) all significant alternatives that accomplish the stated objectives of the applicable statutes and minimize any significant economic impact of the proposed rule on small entities. In preparing its IRFA, an agency may provide either a quantifiable or numerical description of the effects of a proposed rule or alternatives to the proposed rule, or more general descriptive statements if quantification is not practicable or reliable. The RFA requires the agency to publish the IRFA or a summary of the IRFA in the Federal Register at the time of the publication of general notice of proposed rulemaking for the rule.(16)
Pursuant to section 605(a), an agency may prepare a certification in lieu of an IRFA if the head of the agency certifies that the proposed rule will not have a significant economic impact on a substantial number of small entities. A certification must be supported by a factual basis. In this particular rulemaking, EPA determined that a regulatory flexibility analysis was not necessary.
II. Analytical Monitoring
In their current form, the MSGP analytical monitoring requirements may be too costly and burdensome for the incremental information they provide. The Office of Advocacy commends EPA for soliciting comment on analytical monitoring and hopes the attached Technical Memorandum provides valuable information and data to assist EPA’s study.
In the proposed 2006 MSGP, EPA states its intention to conduct further analysis to support development of the 2010 MSGP. The analysis is expected to evaluate the usefulness of the monitoring data to the permittee or permitting authority in determining the adequacy of the Stormwater Pollution Prevention Plan or the potential for water quality standards exceedances. As part of this effort, EPA asserts that it will evaluate the extent to which benchmark exceedances correlate with determinations that corrective action or additional measures to address water quality are needed. Advocacy strongly supports EPA’s plan to conduct these critical analyses.(17)
The attached Technical Memorandum details several shortcomings of analytical monitoring. The Office of Advocacy does not necessarily endorse the Technical Memorandum’s policy recommendation that monitoring be suspended pending the evaluation of EPA-sponsored analysis. However, we hope that EPA recognizes that the 2006 MSGP will be imposing burdensome requirements on approximately 60,000 small facilities. And, according to the attached Technical Memorandum, those analytical monitoring requirements have limited practical utility.
Please feel free to contact me or Kevin Bromberg in my office if we can answer questions that may be prompted by this correspondence. We look forward to working with you on issues like the Multi-Sector General Permit for Industrial Facilities that benefit from a dialogue between small entities and EPA.
Sincerely,
Thomas M. Sullivan
Chief Counsel for Advocacy
Kevin Bromberg
Assistant Chief Counsel
Enclosure: Technical Memorandum, Prepared by E.H. Pechan & Associates, Inc., “Analysis of Multi-Sector General Permit (MSGP) Stormwater Discharge Monitoring Requirements, Technical Memorandum,” (March 2006).
cc: Donald Arbuckle, Acting Administrator, Office of Information and Regulatory Affairs, OMB
ENDNOTES
1. The 29 industrial sectors are listed in Table 2 of the 2006 MSGP Fact Sheet. Although we estimate about 90% of the affected firms are small businesses, large businesses are more likely to own multiple facilities, making the small business share of facilities around 60%.
2. Pub. L. No. 96-354, 94 Stat. 1164 (1980) (codified at 5 U.S.C. §§ 601-612) amended by Subtitle II of the Contract with America Advancement Act, Pub. L No. 104-121, 110 Stat. 857 (1996). 5 U.S.C. § 612(a).
3. 2006 MSGP Fact Sheet at 39.
4. Technical Memorandum was prepared by E.H. Pechan & Associates, Inc. (March 2006).
5. Exec. Order. No. 13272 § 1, 67 Fed. Reg. 53,461 (2002).
6. White House Home Page, President Bush’s Small Business Agenda, (announced March 19, 2002) (last viewed February 8, 2006) http://www.whitehouse.gov/infocus/smallbusiness/regulatory.html.
7. E.O. 13272, at § 2(c).
8. Id. at § 3(c).
9. 2006 MSGP Fact Sheet at 65 and 70.
10. 70 Fed. Reg. 72116, 72120, December 1, 2005.
11. Id.
12. National Association of Home Builders v. Army Corps of Engineers, 417 F. 3d 1272, 1284 (D.C. Cir. 2005).
13. Id.
14. Id.
15. 70 Fed. Reg. 72118.
16. 5 USC §603.
17. Possible suggestions for new analyses of the 2006 MSGP monitoring data (post-MSGP promulgation) are addressed in more detail in the Technical Memorandum.