[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]



 
                 SMALL BUSINESS ADVOCACY REVIEW PANELS

=======================================================================

                                HEARING

                               before the

                       SUBCOMMITTEE ON REGULATORY
                     REFORM AND PAPERWORK REDUCTION

                                  and

                       SUBCOMMITTEE ON GOVERNMENT
                         PROGRAMS AND OVERSIGHT

                                 of the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

             HEARING HELD IN WASHINGTON, DC, MARCH 11, 1999

                               __________

                            Serial No. 106-4

                               __________

         Printed for the use of the Committee on Small Business



                     U.S. GOVERNMENT PRINTING OFFICE
57-905                       WASHINGTON : 1999


                      COMMITTEE ON SMALL BUSINESS

                  JAMES M. TALENT, Missouri, Chairman
LARRY COMBEST, Texas                 NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado                NORMAN SISISKY, Virginia
DONALD A. MANZULLO, Illinois         JUANITIA MILLENDER-McDONALD, 
ROSCOE G. BARTLETT, Maryland             California
FRANK A. LoBIONDO, New Jersey        DANNY K. DAVIS, Illinois
SUE W. KELLY, New York               CAROLYN McCARTHY, New York
STEVEN J. CHABOT, Ohio               BILL PASCRELL, New Jersey
PHIL ENGLISH, Pennsylvania           RUBEN HINOJOSA, Texas
DAVID M. McINTOSH, Indiana           DONNA M. CHRISTIAN-CHRISTENSEN, 
RICK HILL, Montana                       Virgin Islands
JOSEPH R. PITTS, Pennsylvania        ROBERT A. BRADY, Pennsylvania
MICHAEL P. FORBES, New York          TOM UDALL, New Mexico
JOHN E. SWEENEY, New York            DENNIS MOORE, Kansas
PATRICK J. TOOMEY, Pennsylvania      STEPHANIE TUBBS JONES, Ohio
JIM DeMINT, South Carolina           CHARLES A. GONZALEZ, Texas
EDWARD PEASE, Indiana                DAVID D. PHELPS, Illinois
JOHN THUNE, South Dakota             GRACE F. NAPOLITANO, California
MARY BONO, California                BRIAN BAIRD, Washington
                                     JANICE SCHAKOWSKY, Illinois
                     Harry Katrichis, Chief Counsel
                  Michael Day, Minority Staff Director

           Subcommittee on Government Programs and Oversight

                 ROSCOE G. BARTLETT, Maryland, Chairman
MARY BONO, California                DANNY K. DAVIS, Illinois
MICHAEL P. FORBES, New York          RUBEN HINOJOSA, Texas
PATRICK J. TOOMEY, Pennsylvania      CHARLES A. GONZALEZ, Texas
                                     JANICE SCHAKOWSKY, Illinois
                        Nelson Crowther, Counsel

       Subcommittee on Regulatory Reform and Paperwork Reduction

                   SUE W. KELLY, New York, Chairwoman
LARRY COMBEST, Texas                 BILL PASCRELL, New Jersey
DAVID M. McINTOSH, Indiana           ROBERT A. BRADY, Pennsylvania
JOHN E. SWEENEY, New York            DENNIS MOORE, Kansas
RICK HILL, Montana
            Larry McCredy, Senior Professional Staff Member




                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on March 11, 1999...................................     1

                               WITNESSES

                     Thursday, March 11, 1999

Keith Cole, Swidler Berlin Shereff Friedman, LLP.................     3
Katherine Gekker, Huffman Press..................................     7
Jack Waggener, Resource Consultants/Dames and Moore..............     9
James Morrison, National Association for the Self Employed.......    12

Opening statements:
    Hon. Sue W. Kelly............................................    27
    Hon. Roscoe Bartlett.........................................    27
    Hon. Danny K. Davis..........................................    28
    Hon. Bill Pascrell, Jr.......................................    28

Prepared statements:
    Keith Cole...................................................    29
    Katherine Gekker.............................................    35
    Jack Waggener................................................    42
    James Morrison...............................................    46

Additional Materials:
  Article by Keith Cole, ``The Small Business Regulatory 
    Enforcement Fairness Act and the Regulatory Flexibility Act: 
    Could a Single Word Doom the New NAAQS?'' Tulane 
    Environmental Law Journal, Volume II, Summer 1998, Issue 2...    55
  Letter from Douglas Greenhaus, Director, Environment, Health 
    and Safety, National Automobile Dealers Association, to 
    Subcommittee Chairwoman Sue Kelly............................    73


                 SMALL BUSINESS ADVOCACY REVIEW PANELS

                              ----------                              


                        THURSDAY, MARCH 11, 1999

        House of Representatives, Subcommittee on 
            Regulatory Reform and Paperwork Reduction, 
            Joint With the Subcommittee on Government 
            Programs and Oversight, Committee on Small 
            Business,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:00 a.m., in 
room 311, Cannon House Office Building, Sue Kelly [chairwoman 
of the Subcommittee on Regulatory Reform and Paperwork 
Reduction] presiding.
    Chairwoman Kelly. Good morning ladies and gentlemen.
    I would like to welcome everybody to today's Joint 
Regulatory Reform on Paperwork Reduction Subcommittee and 
Government Programs and Oversight Subcommittee Hearing on 
Improving the Small Business Advocacy Review Panel Process.
    I would like to thank my good friend, Chairman Roscoe 
Bartlett, for agreeing to hold the hearing with me. As many of 
you know, this is an issue that Chairman Bartlett and I have 
been involved with for some time.
    We held two hearings in the last Congress on the Issue. I 
am grateful that he has continued providing oversight over the 
Advocacy Review Panel Process with me. Small Business Advocacy 
Review Panels are a good model for what we should be doing in 
Government.
    Originally created by the Small Business Regulatory 
Enforcement Fairness Act, the panel process has been successful 
because it allows the small business community the opportunity 
to have a real impact on agency rulemakings.
    The key to the success is getting small businesses involved 
in agency rulemaking early in the process. By doing so, 
agencies will have a much better understanding of the unique 
needs of small businesses before the parameters of a potential 
regulation get too firmly defined.
    The Advocacy Review Panels are viewed as a positive process 
by those who actually participate in them as well. From most 
accounts, small businesses indicate that they appreciate having 
the opportunity to provide their thoughts to agencies in this 
type of forum.
    Likewise, the agencies have indicated that they feel they 
benefit from this early input, which in turn can be used to 
produce better regulations. The goal of this hearing today is 
to revisit how the panel process is working generally, as well 
as consider ways in which the process can be strengthened and 
improved.
    The most notable change that we are considering is adding 
the Internal Revenue Service as one of the agencies that is 
covered by the panel process. Small businesses have repeatedly 
described how the IRS simply does not understand the impact 
that many of their rules have on the operation of small 
business.
    By requiring the IRS to convene Advocacy Review Panels, we 
may be able to begin to change this problem. We have an 
excellent panel of witnesses this morning who will be 
testifying.
    All of them have significant experience with the Regulatory 
Flexibility Act and the panel process. I appreciate the time 
that each of them has sacrificed out of their very busy 
schedules for being with us here today.
    In conclusion, the Subcommittee is a very strong supporter 
of the Advocacy Review Panel Process. We are committed to 
taking whatever steps necessary to see that it remains a strong 
part of the regulatory process.
    Now, I would like to turn to my friend, Chairman Bartlett, 
to ask him if he would like to make a statement.
    [Mrs. Kelly's statement may be found in the appendix.]
    Mr. Bartlett. Thank you. Good morning.
    It is a pleasure to welcome you to this joint hearing held 
by the Subcommittee on Government Programs and Oversight, and 
the Subcommittee on Regulatory Reform and Paperwork Reduction, 
Chaired by my colleague, Congresswoman Sue Kelly.
    This hearing is, in many respects, a continuation of joint 
hearings that our two Subcommittees held in April of 1997 and 
March of 1998, in which we addressed the need for common sense 
in rulemaking and the unfair financial burden born by small 
businesses all over this Nation, as a result of unscientific, 
impractical, and unnecessary regulations.
    These same hearings also examined the implementation and 
performance by the Environmental Protection Agency, the EPA, 
and the Occupational Safety and Health Administration, OSHA, of 
the panel process added by the Small Business Regulatory 
Enforcement Fairness Act of 1996, better known as SBREFA.
    The panel process requires these two agencies, EPA and 
OSHA, to consider and to respond fairly to the advice and 
recommendations of small businesses concerning the impact upon 
small businesses of proposed regulations.
    We believe, as we have stated at the previous hearings, 
that the panel process is important. In a study done for 
Committees of both the House and the Senate, the General 
Accounting Office concluded that:
    ``Agency Officials and Small Entity Representatives 
generally agree that the panel process is worthwhile, providing 
valuable insight and opportunities for participation in a 
rulemaking process.''
    For some reason, when the panel process was initiated, only 
two agencies were included; EPA and OSHA. The legislation which 
we will be discussing today adds a third agency, the IRS.
    This addition is long overdue. The difficulty and cost of 
complying with mind-numbing IRS regulations are a major concern 
for small businesses in my District, Western Maryland. I am 
sure they are for all small businesses throughout this Nation.
    Small businesses need the common sense relief that advance 
consultation will provide. There is an old farmer's test for 
measuring costs and benefits. Those of you familiar with me 
will recall, you do not do something if the juice ain't worth 
the squeezing.
    The IRS should be required to make sure the juice is worth 
the squeezing when they design new regulations. Again, thank 
you for coming to this important hearing. We look forward to a 
lively and productive discussion.
    [Mr. Bartlett's statement may be found in the appendix.]
    Chairwoman Kelly. Thank you Mr. Bartlett.
    I want to explain that one of the reasons why we have gone 
ahead and begun this hearing is that I know that our witnesses 
have busy schedules, as do I am sure everyone else in this 
room.
    The Ranking Members have phoned me and told me that they 
have been held up, but they will be here. They are on their way 
and they will be here as soon as they possibly can. So, they 
are comfortable with our going ahead with this.
    I now would like to introduce our witnesses. We have Mr. 
Keith Cole. Mr. Cole is a Partner at the Law Firm of Swidler, 
Berlin, Shereff, and Friedman in Washington, D.C.
    He is a former Senate Small Business Committee Staffer, one 
that we relied on extensively. He has extensive knowledge of 
the Regulatory Flexibility Act and the Advocacy Review Panel 
Process.
    Our next witness is Katherine Gekker. Ms. Gekker is the 
owner of the Huffman Press located in Alexandria, Virginia. She 
was also a small entity representative on the Safety and Health 
Program Advocacy Review Panel that OSHA convened.
    Jack Waggener is our next witness. He is a registered 
professional engineeremployed by the environmental consulting 
firm of Resource Consultants/Dames and Moore located in Brentwood, 
Tennessee. He has participated on a number of advocacy review panels 
that the EPA has convened.
    The final witness is Jim Morrison. Mr. Morrison is the 
Senior Policy Advisor for the National Association For the 
Self-Employed located here in Washington, D.C.
    He also has an extensive knowledge of the Regulatory 
Flexibility Act. We welcome all of you here today and look 
forward to your testimony.
    With that, Mr. Cole, would you be willing to begin?
    Mr. Cole. Certainly.
    Chairwoman Kelly. Thank you.

 STATEMENT OF KEITH COLE, PARTNER, LAW FIRM OF SWIDLER BERLIN 
                SHEREFF FRIEDMAN, WASHINGTON, DC

    Mr. Cole. Madam Chairwoman and Mr. Chairman, members of the 
Subcommittee, my name is Keith Cole. As you mentioned, I am a 
Partner at Swidler Berlin Shereff Friedman here in Washington.
    I very much appreciate the opportunity to testify, once 
again, before the Subcommittee. First, I would like to state 
for the record that I am not testifying today on behalf of my 
firm or any particular client, but solely on my own behalf, 
based on my experiences as Regulatory Affairs Counsel to the 
Senate Small Business Committee when SBREFA was drafted, and my 
experience in dealing with rulemakings where SBREFA panels have 
been convened.
    I believe the SBREFA Panel Process is off to a good start. 
The Office of Advocacy, OMB, and EPA appear be cooperating to 
make the panel process a productive one. I am less sure of the 
experience at OSHA and I will defer to other witnesses on that.
    Overall, we do not need a wholesale revision of SBREFA. 
However, there are a number of ways that Congress could improve 
the panel process, both through oversight, such as today's 
hearing, and through targeted legislative change such as 
contained in the discussion draft. In my view, the key to a 
successful panel is giving the right information, at the right 
time, to the right people. While that is relatively easy to 
say, it is difficult to implement in practice and very 
difficult to legislate.
    I urge the Subcommittee to tread lightly here because too 
much specificity may be counter-productive to the interest of 
small business. As Congress recognized when it passed SBREFA, 
there is a tension between conducting the panel early in the 
rulemaking process, when the data may not be available, and 
conducting the panel when all of the data is available, when 
decisions may have become set in stone.
    In my view, there is some minimum amount of information 
that Small Entity Representatives, or SERs as they have come to 
be called, must have to provide meaningful comments to the 
panel.
    I believe the panel should take place as soon as these 
basic informational needs are met. However, the Subcommittee 
must be careful to ensure that any statutory language on 
minimum informational requirements does not have the unintended 
affect of delaying the panel until just before publication of 
the proposed rule when it becomes only a pro-forma review of 
the agency's decision; a post-hoc review.
    If agencies should convene a panel as soon as the necessary 
information is available, the next question is what is the 
right information?
    The type of data that really empowers the Small Entity 
Representatives, and by extension the panels, is a discussion 
of the pros and cons of the regulatory alternatives that the 
agency is considering. This should include some basic 
comparison data estimating the benefits and costs of the 
regulatory alternatives. This will allow Small Entity 
Representatives and the panel to put the alternatives into 
perspective. The original act does not require this type of 
information, but it may be one of the most productive changes 
this panel could make. However, this does not mean that Small 
Entity Representatives need to see the full economic analysis 
for the proposed rule or even the draft regulatory text. The 
key is looking at information on proposed regulatory 
alternatives and the cost and benefits of moving from one 
alternative to another.
    The next issue is how do we get the right group of people 
to serve as Small Entity Representatives? In my view, we need a 
mix of people who know the SBREFA Panel Process and people who 
know the industry.
    I do not know if the Office of Advocacy should choose Small 
Entity Representatives on its own, but certainly Small Entity 
Representatives should not be chosen over the objection of the 
Office of Advocacy.
    A related issue is whether agencies should be able to pick 
a particular person to serve as a Small Entity Representative, 
or simply pick the organization. In my opinion, the 
organization should be free to select whomever it chooses to 
speak to the panel on its behalf.
    There is also the question of standing. I believe the test 
should be whether the small business will bear the impacts that 
give rise to the benefits of the rule. This extends beyond 
entities who are subject to the rule. This is a critical issue 
we will need to discuss further regarding the scope of Reg 
Flex. I want to come back to that at the end of my statement.
    The next issue I would like to address is when should panel 
reports be released? This has been a contentious issue. My 
experience is that EPA and OSHA have developed different 
practices on this. Frankly, I cannot say which approach is 
better. Early release can provide assurances to small 
businesses about the panel process. On the other hand, I am 
concerned that early disclosure of the panel report can open up 
the agency to additional pressure from outside groups, other 
than small business, to unwind the process made by the panel. 
Perhaps more experience is needed on this issue, but I am sure 
others will have perhaps stronger opinions on this.
    Next I want to turn to the content of the initial Reg Flex 
Analysis. It may seem obvious that the comments of the Small 
Entity Representatives about the impacts of the rules should be 
incorporated into the initial Regulatory Flexibility Analysis. 
My experience with the Industrial Laundries Rule convinces me 
otherwise. Any legislative revision to the panel process should 
clarify that agencies must modify their initial Reg Flex 
analysis to incorporate relevant facts brought to their 
attention during the panel process.
    On the issue of compliance by the IRS, all I can say is one 
word, yes.
    Finally, let me return to one of the biggest problems 
presented by EPA's early implementations of SBREFA. The issue 
is the type of impacts that are to be considered by agencies in 
deciding whether Reg Flex applies and whether to convene 
panels.
    The EPA has taken the position that it only look at impacts 
on entities that are subject to the rule. When EPA issues a new 
rule that directs States to take an action under one of the 
many delegated programs, the EPA has taken the position that it 
can ignore the impacts of that rule, on the theory that the 
small entities are not directly subject to the rule.
    This issue is currently the subject of litigation in the 
D.C. Court of Appeals in a pair of cases entitled The American 
Trucking Association v. U.S. EPA. Oral arguments on this were 
heard December 17th of last year. A decision is expected later 
this spring.
    I urge the Subcommittee to keep a close eye on the decision 
of the Court. Reg Flex and SBREFA Panels should look at the 
impacts on all entities that give rise to the benefits of the 
rule, not just those that are subject to the rule.
    If the Court defers to the EPA on this issue and upholds 
the agency's interpretation, legislation would be urgently 
needed to reaffirm the intent of Congress and prevent the Reg 
Flex from effectively being gutted by one of the primary 
agencies SBREFA was designed to address.
    Thank you very much.
    [Mr. Cole's statement may be found in the appendix.]
    Chairwoman Kelly. Thank you very much, Mr. Cole.
    We have been joined by Mr. Pascrell. Mr. Pascrell, if you 
have an opening statement, would you be willing to give it now?
    Mr. Pascrell. Thank you.
    First, I would like to give my remarks by thanking 
Chairwoman Kelly and Chairman Bartlett for bringing this 
important issue to the attention of both Subcommittees.
    Small businesses are the engines of growth for our Nation's 
economy and are indeed the backbone of our economic system. By 
examining ways to make the regulatory process more efficient, 
we will ensure that this important sector remains vibrant and 
robust. I am committed to that goal.
    As the new Ranking Member of the Regulatory Reform and 
Paperwork Reduction Subcommittee, I believe today's hearing 
which will examine the Small Business Advocacy Review Panel 
Process is of critical importance.
    It is critically important because the relationship between 
our regulatory agencies and our Nation's small businesses must 
be one of mutual understanding, as opposed to mutual disdain.
    Regulations that are promulgated by OSHA and EPA are very 
important with regard to establishing and ensuring a safe work 
place and a clean environment. At the same time, those who 
formulate regulations must be aware of the actual implications 
of those regulations. Very frequently they are not. When we are 
dealing with small businesses, we must keep in mind the fact 
that the cost of regulatory burdens are disproportionate on 
small businesses because of their very size.
    This fact has been confirmed by 27 studies and recognized 
by both the Regulatory Flexibility Act and the Small Business 
Advocacy Review Panel Process. Today, we are going to hear 
testimony.
    We have already started to hear testimony on the 
effectiveness of the process. We have a vote. A process which 
is designed to provide the small businesses community with an 
opportunity to participate in the rulemaking.
    I think that is a tremendous breakthrough, by the way. I 
congratulate the Chairwoman. It is very important that we are 
at the same table, rather than imposing regulations and not 
knowing what those consequences would be because we are not 
familiar with the acumen of the particular business.
    It is my hope that today's hearing will contribute greatly 
to our understanding. I might add, Madam Chairwoman, that I 
totally support your efforts in bringing some other agencies 
under the scrutiny of this process.
    I do not know if you have spoken about that yet. I totally 
support, not only putting IRS into the mix, but I have spoken 
with the Chairwoman and she agrees with me also on INS, which I 
think is the most convoluted agency in the Federal Government. 
I think they need to go under the microscope.
    These are folks that are talking out of both sides of their 
mouths, in terms of regulation, and are affecting people at the 
work place and businesses, and small businesses indeed.
    So, thank you, Madam Chairwoman. You have my total support.
    [Mr. Pascrell's statement may be found in the appendix.]
    Chairwoman Kelly. We do have a vote. We have just had the 
first call. Ms. Gekker, if you are willing to hold within the 5 
minute rule, we might be able to fit you in.

  STATEMENT OF KATHERINE GEKKER, HUFFMAN PRESS, ALEXANDRIA, VA

    Ms. Gekker. I think I can keep it to 5 minutes.
    Good morning, I want to thank the Subcommittee for giving 
me the opportunity to speak to you about my participation on 
the Small Business Advocacy Review Panel convened for OSHA's 
Draft Proposed Rule on Safety and Health Programs.
    I was glad to hear some of you stumble over this too. I 
also appreciate the opportunity to comment on the proposed bill 
to amend the Small Business Regulatory Enforcement Fairness 
Act.
    My name is Katherine Gekker. I am the owner of the Huffman 
Press in Alexandria, Virginia. I am also representing the 
Printing Industries of America. I would like to ask that PIA's 
written testimony be included in the record.
    I have been in business since 1974. The Huffman Press 
specializes in high quality printing for graphic artists and 
corporations. Currently, we have nine full-time employees, 
including myself; and one to two part-time employees, depending 
on the work load.
    Our gross sales should be roughly $1 million to $1.1 
million this year. I found my experience on the Safety and 
Health Program Standard Panel both rewarding and confusing.
    The process forced me to reconsider what my company was 
doing in our own work place and my own need for continued 
vigilance regarding safety and health, and training and 
education of our workers and myself.
    I also found the panel process a remarkable accomplishment. 
Small businesses are important to this Country, both for the 
economic activity they generate in their communities and for 
the income they provide to employees and owners.
    The fact that for the first time small businesses has a 
voice in expressing concerns or commendations about regulations 
they may face is an achievement for which Congress and these 
Subcommittees should be proud.
    My greatest difficulty with the process was the lack of any 
documentation as to why the proposed rule on Safety and Health 
Programs is needed, and why OSHA believes it will improve 
safety and health.
    I believe that the following questions should have been 
answered before any proposed rule was developed, and certainly 
before the panel was convened.
    Is a specific industry's injury and illness experience 
rating low or high?
    Is it increasing or decreasing?
    If rates are getting lower, should safer industries be 
exempted?
    Does the size of the company affect the rates of accidents 
and illnesses?
    Is there actual data to support issuing a new rule?
    Why do we need this rule?
    Will the rule truly improve safety and health?
    Has it been tested at individual states?
    What have been the long-term results?
    How current is any statistical data provided?
    If such statistics do exist, they should have been included 
in the documentation which those of us on the panel received. 
They should have been addressed to the specific industries the 
panelists represented.
    The economic analysis section also seemed incomplete to me:
    When were the numbers developed?
    Based on what?
    What relevance do they have to my industry?
    I found OSHA's lack of a specific outline or format for 
participants' submitted comments confusing. How was the panel 
to compare and assess our responses, if we were not all 
answering the same questions?
    I wish that OSHA would have shared the comments of others 
with us afterwards. A final report was never sent to us. I 
found the tele-conference helpful, although the format made 
participation somewhat difficult; perhaps too many people; 
perhaps tele-conferencing itself is difficult. I was 
particularly shocked to learn that work on the proposed rule 
began many years ago.
    I was also alarmed to realize how many people and how many 
hours had already gone into the review process. I looked back 
in my records and learned that I spent 22 hours participating 
in the review process.
    I do not begrudge those hours at all, but I am a bit 
chagrined to note that I could perhaps have implemented the 
proposed rule in that amount of time.
    It made me wonder if a cooperative consultation program, 
one that would actually improve safety in the work place, could 
not have been implemented and carried out by OSHA during the 
time involved in developing this rule.
    My reaction to Representative Kelly's proposed bill is 
generally favorable. The suggested time limits in getting 
information to the small businesses advocate and to panel 
participants seem reasonable to me.
    While I found the schedule for the review panel adequate, 
in my case, it was not generous. Perhaps a bit more time for me 
would have improved the SBREFA Process.
    I am not sure that oral presentations are necessary, unless 
it would give regulators an opportunity to ask questions to 
clarify comments provided by panel members. Section 6, I 
believe is particularly important.
    Since it is impossible for most small businesses to come to 
Washington, D.C. to inspect an agency's rulemaking record, I 
think it is important that those companies have access and the 
right to know what is happening and what other business owners 
think about a regulation.
    If you require that the comments be printed in a public 
forum, like the Federal Register, it gives any company with 
Internet access the ability to read the comments.
    For purposes of openness in Government and the 
responsibility of regulators to inform the public, I believe 
this is an important step. Yes, I believe IRS should be 
included.
    Thank you for the opportunity to participate today. I will 
be happy to answer any questions.
    [Ms. Gekker's statement may be found in the appendix.]
    Chairwoman Kelly. Thank you very much, Ms. Gekker.
    In light of the fact that we have a vote, I am going to 
adjourn for 15 minutes.
    I assume we will be back at the end of 15 minutes, barring 
the fact that we may have another vote on the floor. Nobody 
seems to be quite sure about that. Otherwise, we are adjourned 
for 15 minutes.
    Thank you.
    [Recess]
    Chairwoman Kelly. Thank you very much for waiting for us. 
It turned out that we had quite a few votes. That is why this 
was longer than a 15-minute break.
    I appreciate having heard the prior testimony. Now we would 
like to hear from Jack Waggener.

  STATEMENT OF JACK WAGGENER, RESOURCE CONSULTANTS/DAMES AND 
                      MOORE, BRENTWOOD, TN

    Mr. Waggener. Thank you. I would like to thank the 
Subcommittee for having me here. It is my pleasure to be here.
    Over the last 25 years, I have been involved in EPA 
rulemakings. I have witnessed SBREFA having a very significant 
and positive impact on the process. I would like to thank the 
Congress really for bringing a breath of fresh air to the 
process, which had gotten pretty stale over the last 20 years.
    My background, again, as indicated earlier, I am a 
Registered Professional Engineer in some 14 States. I work with 
Resource Consultants/Dames and Moore out of the Nashville, 
Tennessee area, where I have resided for some 54 years.
    My company has been involved for many years as an 
environmental engineering consulting firm working for 
industries in helping solve environmental problems. In 1998, we 
had been a small business for all of that time for some 30 
years.
    So, I do understand the problems of small businesses, in 
addition to actually providing services to small businesses. In 
my duties, I have designed many EPA type facilities, waste 
water treatment systems, storm water systems, negotiated 
permits, work with industry to assure compliance, and worked on 
many EPA industrial affluent limitation guidelines.
    Through that grass rooted experience, about 20 years ago I 
started working for many of the Trade Association here in 
Washington, D.C. and scattered around the Country to assist 
them with our technical knowledge of analyzing regulatory 
regulations coming out of the agency; EPA in particular.
    In doing that, I have personally worked on some 20 effluent 
limitation guidelines that have come out of the agency in the 
last 20 years. So, I understand the process very well.
    In 1997 and 1998, I was fortunate enough to be involved in 
several SBREFA Processes as a SER where I represented and 
worked on the Transportation Equipment Cleaning Effluent 
Guidelines, the Centralized Waste Treatment Effluent 
Guidelines, and Storm Water Regulations directly.
    Indirectly, I have provided services on the Industrial 
Laundry Effluent Guidelines and was involved in some of that. 
As a result of the panel process, I have certainly observed 
that the rules that were eventually proposed with regard to 
this process that I have been involved in has resulted in very 
positive things.
    It has given many more regulatory alternatives that would 
never have appeared in the Federal Register if it had not been 
for SBREFA.
    It has been much better economic analysis and much better 
environmental assessments; not perfect, but much better than 
what it was before. I really believe, and I want to make sure 
that I make this point.
    I think the teamwork between the EPA, the Small Business 
Administration, OMB, and the SERs is really what has taken 
place and has made this very successful.
    There has certainly been plenty of disagreements along the 
way, but those disagreements have been worked out in this 
process and has resulted in good things happening from the 
processes that I have personally been involved in.
    So, I do applaud these staffs for their work. I sincerely 
do. Over the last 25 years in working with the regulatory 
process, I have noted it has improved considerably; 
particularly in the last 3 years.
    That, by and large in my opinion, has been due to SBREFA 
and what that has resulted in causing. In my early days in the 
1970s and 1980s representing industry and dealing with the EPA, 
the EPA dealt in a very closed door atmosphere.
    They did everything pretty much in a secretive fashion. As 
a result of that, the industry mistrusted what the EPA was 
doing and the EPA had a definite attitude of not trusting what 
industry did.
    What I have seen happen in the SBREFA Process is that has 
not entirely disappeared, but the negative attitudes, a lot of 
the negative attitudes between the EPA and the regulated 
community have dissipated. Again, not entirely gone away, but 
there has been significant improvement there and much more 
cooperative effort.
    Each SBREFA Process of the four that I have had involvement 
in, what I have witnessed is that each one improves as it goes 
along. The agency understands more of what the SERs need, what 
the SBA needs, and what OMB needs.
    So, there has been a continual improvement. The learning 
effect is what one would hope and expect would happen. Again, 
SBREFA has been working very effectively with small businesses.
    What I would like to see, again, making my comments with 
regard to the bill, there are some modifications being 
considered. I think they should be carefully measured. 
Sometimes even minor changes that seem to be minor could have 
negative impacts on the process which, in general, seems to be 
working very well.
    So, we do not want to impede that process because we have 
made large steps here. The problems that I have personally seen 
and have encountered in dealing with the process is not timely 
receiving all of the critical information.
    Also, it is tied to that, by not timely receiving it, also 
not having enough time to adequately review all of the 
information and come up with alternatives that could be put on 
the table during a discussion. As I said earlier, in the very 
beginning of the SBREFA Process, as I think I was involved in 
maybe the first or second one, the agency did not really know 
what we wanted and visa-versa.
    So, it was a learning process. So, what has happened is I 
have seen that they are much better at doing this. Sometimes 
that is still not the case. So, there really needs to be some 
definition.
    I do not want to over-define it to impede the process as to 
what information is required and make sure we get it to 
everybody on time.
    One thing that I would like to see in the bill, and I think 
would be helpful to us that have served as SERs, is at least 45 
days receiving the critical information, at least 45 days prior 
to the SBREFA Panel convening.
    That would allow enough time. Obviously, we always want 
more time. It would allow, in my opinion, adequate time to 
really review the information and to formulate some ideas 
before convening the panel.
    I would like to see that occur. It also would allow time, 
if you did not receive all of the information you thought was 
necessary, you could identify it and move forward to get that. 
Typically, the information that we have eventually gotten from 
the agency, and I believe what is important is initial 
information that identifies the regulatory alternatives that 
are being considered, the initial economic impact data.
    I am saying data, not some formal report, but the data 
which we can look at. It has enough formality to really look at 
it and analyze it. Information on the cost effectiveness and 
the benefits, information as to what toxics are going to be 
removed by this regulation.
    In other words, what is the benefit of the regulation? That 
must be supplied with adequate detail for us to do our jobs as 
SERs. On the other hand, if we put too much specifics in this 
bill, I believe it could impede the process.
    If we ask for things in a very formal form, that is going 
to take the agency more time to put together, which moves the 
process further along towards the end of the regulatory 
process. It would impede the process.
    One thing in particular I noticed in the bill where it says 
``Drafted Proposed Rules.'' Well, my experience is that rarely 
would anyone ever see a drafted proposed rule or one would be 
prepared by the time the SBREFA Process needed to take place.
    Certainly, the elements of that proposed rule are needed to 
be looked at. But to say in any way or imply in any way that it 
should be a proposed rule, even drafted, I think may be going 
too far. It has been my experience in the other SBREFA 
Processes that we have had at least two meetings in the 60-day 
span; one of an introductory kind of meeting and then one 
following giving ideas.
    I believe that is a very good idea. I think perhaps maybe 
even in the bill that there should be an indication that at 
least two meetings should occur. Even though it has occurred, 
the individuals at the EPA have been very congenial and made 
those things happen.
    People like Tom Kelly, who has been really at the heart of 
this at EPA. He has done a great job of doing that. I would 
like to see something in the bill that says that there must be 
at least a couple of meetings to get our points across.
    Another thing in the bill that I am a little concerned 
about is it indicates that the Chief Counsel will select the 
SERs. I think really the process, in my opinion, should say 
that both SBA and EPA should have somewhat of an equal say so 
in selecting the SERs. There should be some agreement there.
    That generally is what has been occurring. In my opinion, 
it has worked fairly well. Again, not perfect, but it has 
worked fairly well. I do not think it is broken, so why fix it, 
as the old saying goes.
    I believe that in terms of the panel members, it is 
important to say that--obviously all of the panel members 
represent small businesses and their interests. I think it is 
important to have small business owners on the panel and their 
representatives or other representatives which are very 
knowledgeable of the process of small businesses.
    Most small business operators and owners know very little 
about how regulations are developed, the basis of them, and 
frankly how to critique those in this process. They certainly 
know how things impact their business.
    What I have found, again, as a consultant and being on 
these panels, since I have worked for some 25 years in the 
regulatory community, I understand how the regs are put 
together.
    I understand the technical aspects of it. I think the 
combination of that experience has been invaluable in coming to 
a successful SBREFA conclusion.
    So, again, the people who are on these panels, there needs 
to be really a diverse group as to what is there where they can 
really get to the meat of the issue and come up with real, 
workable, regulatory alternatives that really help small 
businesses.
    The ones I have been involved with, I believe actually 
have. So, I am very pleased about that. In conclusion, again, I 
think SBREFA, honestly, has been a success story for this 
Congress, for EPA, for OMB, and all of the parties involved, at 
least in the three or four that I have been involved in. So, 
again, this makes a minor adjustment to tweak the process, but 
let us do not do anything that may impede it.
    Thank you very much.
    [Mr. Waggener's statement may be found in the appendix.]
    Chairwoman Kelly. Thank you very much, Mr. Waggener.
    Mr. Morrison, our last, but not our least witness.

 STATEMENT OF JAMES MORRISON, SENIOR POLICY ADVISOR, NATIONAL 
       ASSOCIATION FOR THE SELF-EMPLOYED, WASHINGTON, DC

    Mr. Morrison. Representatives Bartlett and Kelly, good 
morning. I am James Morrison the Senior Policy Advisor to the 
National Association for the Self-Employed.
    On behalf of the NASE's 330,000 members, we thank you for 
taking up this important subject. NASE strongly supports the 
Review Panel Process. We believe it is one of the most 
successful innovations in SBREFA.
    It has helped to build a more fair and rational regulatory 
process. Certainly, there is work to be done at both EPA and 
OSHA. Other witnesses this morning have discussed that.
    I would like to focus, if I may, on another aspect of the 
draft legislation that the Subcommittees are considering: 
adding the Internal Revenue Service to the Review Panel 
process.
    The NASE strongly favors this. But adding IRS could be even 
more effective with further changes in the Regulatory 
Flexibility Act.
    IRS' regulations reflect its daunting task: to deal with a 
big, complex country that has a very big and complex tax code, 
and bring in the money necessary to keep the Government 
running.
    Many of us believed that explicitly putting most IRS rules 
under the Reg Flex Act, which SBREFA did in 1996, was the kind 
of change that might eventually be welcomed by the IRS. That 
has not happened.
    Few IRS rules formally opt out of the Act.
    Fewer still contain Reg Flex Analyses. Even those that do 
are extremely limited in scope. Why is this happening? Well, 
when the original Reg Flex Act was passed in 1980, quite a few 
agencies asked Congress to let them out from under it. IRS was 
one of those.
    No such exemptions were ever contemplated, let alone 
enacted. Still, when the law was passed, several agencies, 
including the IRS, looked for legal technicalities they could 
use to avoid it.
    When Congress took up SBREFA in 1996, a top priority was 
bringing all rules significantly affecting small entities under 
the Act, including all IRS rules. IRS also opposed this.
    One of the main points that IRS made then was that the 
diversity of its rulemaking, which includes revenue procedures, 
private letter rulings, and so on, would prevent the agency's 
rules from being brought under the Act.
    So, SBREFA set-up a trigger for IRS compliance, which is 
whenever an IRS rule requires a ``collection of information.'' 
That occurs when IRS requires 10 or more people to gather 
information, including any records they must keep.
    Unfortunately, three major problems have emerged with this 
trigger. To make any IRS Review Panels work better, I believe 
they should be addressed.
    First, IRS frequently overlooks the record keeping part of 
the trigger.
    The Service seems to assume that if it is not requiring 
taxpayers to fill out some new form, then it is not collecting 
any information. For example, when IRS proposed to change the 
tax treatment of limited partnerships, it set the tax base at 
500 hours of annual participation in the partnership. Of 
course, calculating that would require record keeping. Yet, the 
Service insisted it was not collecting any information. So, it 
refused to do a Reg Flex Analysis, despite the major small 
business impact. In that case, unfortunately, Congress had to 
step in.
    Second, IRS interprets the trigger to mean that very little 
analysis is required.Here we have a dispute over words. I 
believe that Section 603(a) of the Reg Flex Act says, in effect: ``IRS, 
if your rule requires any record keeping or reporting, do a Reg Flex 
Analysis.''
    That is not how the IRS sees it. They seem to believe that 
the same section says: ``if there is a paperwork requirement, 
analyze only that paperwork impact.'' If one takes the IRS' 
view, then the RFA becomes, in effect, a second Paperwork 
Reduction Act.
    This raises questions: Why would Congress impose two 
Paperwork Reduction Acts on the IRS? Why just the IRS and not 
any other agency? For that matter, why would Congress ask every 
other agency to analyze the economic impact of their actions, 
but not ask the IRS to do so?
    A few weeks ago, IRS published proposed and final rules on 
COBRA continuation health insurance coverage. The IRS said 
there was no major small entity impact because the cost of 
filling out the forms would only be $5 or $6 per employer 
annually.
    But surely, this is not the only economic impact of 
changing COBRA rules. What about implementation costs for 
employers? What about impacts on small insurance companies, 
small hospitals, small non-profits, small governments? IRS' 
narrow focus on paperwork costs inevitably leads to such absurd 
outcomes.
    All this means is there will not be as many Advocacy Review 
Panels at IRS as necessary, unless the analysis requirements 
are made clearer.
    Third, even if the analysis requirements are fixed, the 
trigger still needs to cover more rules. Sometimes rules have a 
major impact on small entities, but have no collection of 
information requirement.
    One recent IRS rule, for example, dealt with the auditing 
guidelines for partnerships that have been modified. Some other 
recent rules dealt with the hearings that IRS convenes before 
imposing liens and levies. A lot of small entities have 
potentially big stakes in these rules.
    Since there is no collection of information requirement in 
any of these rules, there is no Reg Flex Analysis for any of 
them. In these cases, too, having Advocacy Review Panels would 
be hampered by the language of the existing law.
    Finally, there are also rules with indirect, but 
significant small business impact. Consider IRS' proposed rule 
on deductions for interest paid on education loans. True 
enough, this deductibility directly affects only student 
borrowers, who would not fall under the RFA.
    But what about indirect affects on the lending institutions 
that make the loans? On the small colleges that use them to 
attract students?
    I would make two suggestions to the Subcommittees.
    First, make a technical correction in the Regulatory 
Flexibility Act. Make it clear that while information 
collection triggers the analysis, paperwork costs are not the 
sole point of the analysis. In my written testimony, I offer 
some possible wording for doing this.
    Then, add IRS to the covered agencies for the review 
panels.
    If the technical fix still ends up omitting too many rules, 
Congress may need to change the trigger altogether, making it: 
``any regulatory action by IRS that significantly impacts small 
entities.''
    Secondly, give both the SBA Office For Advocacy and the IRS 
the resources they need to make the resulting analysis and 
panels work. Advocacy has been stretched very thin, even as it 
has been assigned ever greater responsibilities. This has to 
end and now is the time to end it.
    The IRS also needs adequate resources to comply. No doubt, 
resource concerns have been a factor in the Service's past 
reluctance to deal fully with the RFA. I hope the IRS will 
eventually come to see this change as an enhancement to their 
commendable new customer service orientation, as a way to 
better involve small entity customers in IRS rulemaking.
    Such involvement would lead to better IRS rules which are 
easier to implement and enforce, and which draw a far more 
positive reaction from small entities and from Congress.
    That concludes my testimony. I would be happy to take any 
questions at this time.
    Thank you for asking me to appear here.
    [Mr. Morrison's statement may be found in the appendix.]
    Chairwoman Kelly. Thank you very much, Mr. Morrison.
    I have just a few questions. With Congressman Bartlett's 
indulgence, I am in a mark-up in two other committees. So, I am 
going to ask my questions first and let him take over and 
finish up here.
    I would like to start with you, Mr. Cole. In my opinion, 
Section 609 is currently unclear as to which agency is 
responsible for identifying Small Entity Representatives.
    Our draft bill clarifies that it is the SBA's 
responsibility to name them, although it would not preclude SBA 
from getting input from the covered agency. What are your 
thoughts about this change?
    Mr. Cole. The Act, as originally drafted, is a bit unclear 
on this. The best way that I can describe how I think the Act 
currently works is something like this: Chief Counsel For 
Advocacy kind of nominates individuals to serve on the panels, 
then the agency selects and notifies those individuals. I see 
value in placing responsibility in one agency. It will assist 
your oversight function in the future if you do not have 
divided responsibility and the agencies pointing fingers at one 
another.
    I think it is an important issue. The question is how much 
of a fight is this going to provoke down at the agencies? There 
is a lot of good in this bill, but I fear this is going to 
trigger a bit of a turf fight between EPA and SBA, between OSHA 
and SBA. I would hate to see that stand in way of the rest of 
the bill. So, in my mind, it is not the most important change 
to put this in SBA. I think there are some alternatives in the 
middle such as EPA has to select the Small Entity 
Representatives with the concurrence of Advocacy. That way, EPA 
could not select Small Entity Representatives over the 
objections of Advocacy.
    In the end, this is something that is going to be up to the 
Subcommittee. I would not want to see this stand in the way of 
the rest of this bill passing.
    Chairwoman Kelly. All right. Let me just go to another 
question. Your broader comments about Reg Flex were very 
helpful. Do you think the agency should use the panel process 
to help them determine whether rules should be certified as not 
having a significant effect on small businesses?
    Mr. Cole. Certainly, that is one function of the panels. If 
during the panel process you can identify regulatory 
alternatives which really resolve the problems for small 
businesses, then the outcome could be that by the time the 
proposed rule comes out, there is no need to have a Reg Flex 
Analysis because you have taken care of the problem prior to 
the proposed rule.
    That is a factual determination. In that scenario, it is a 
question of analyzing how do the regulatory alternatives affect 
small entities, and the SBREFA Panel Process can be very 
helpful.
    The problem that we have at EPA is the disagreement over 
whether entities that are not subject to the rule still suffer 
the impacts of the rule. That issue is not really addressed by 
the panel process. In other words, we have to resolve the 
threshold jurisdictional issue before we can decide whether a 
panel is necessary. Actually, this is the basis of a lot of the 
arguments between SBA and EPA over what types of small entity 
representatives should be invited.
    EPA is taking this very restrictive view that only the 
small entities that are directly subject to the rule should be 
invited to be members of the panel. The Office of Advocacy 
recognizes what I think was Congress' original intent in this. 
In the Reg Flex Analysis, you are to look at those entities 
which are reasonably impacted by the rule; whether they are 
subject to the rule or the impacts flow through, for instance a 
state is often the mediating entity. SBA wants to include this 
larger group of small businesses as Small Entity 
Representatives. If we resolve this threshold issue, there are 
going to be less arguments over which entities should be 
invited and less arguments over who should be on the panel 
between EPA and SBA.
    Chairwoman Kelly. Has EPA ever conducted a panel only to 
certify the rule under Reg Flex upon its completion, that you 
know of?
    Mr. Cole. I do not believe so. EPA and OSHA have conducted 
15 panels todate; 13 at EPA. Seven of those have had proposed 
rules. Of those 7, each had an initial Regulatory Flexibility Analysis 
prepared. So, I do not believe that they have certified after having 
done a panel.
    Chairwoman Kelly. Thank you very much.
    Ms. Gekker, you posed a number of questions in your 
testimony relating to your concerns about OSHA's Safety and 
Health Program rule. Did you ever get a response that was 
adequate?
    Ms. Gekker. No. In fact, when I asked the question during 
the tele-conference, I had the feeling that there were no 
answers from the responses I got.
    Chairwoman Kelly. Were any of your questions addressed in 
the panel's final report?
    Ms. Gekker. I believe not. It has been awhile. We did not 
get the final report for quite awhile. It was only because I 
was appearing here that I did get it. So, I do not believe so.
    Chairwoman Kelly. That is interesting.
    Do you feel that you got it as a consequence of your 
willingness to appear here?
    Ms. Gekker. It was the only time I received it.
    Chairwoman Kelly. Okay. Thank you very much.
    I think that is a shame.
    Ms. Gekker. I did too.
    Chairwoman Kelly. That was not the intent of this law. Was 
a copy of the panel's final report provided to you? It 
obviously was not from what I understand, and I just want to 
clarify this. You feel that it was not timely when it was 
provided to you.
    Ms. Gekker. No. I should clarify. It was provided to me by 
the Printing Industries of America who asked me to appear 
before you.
    Chairwoman Kelly. Do you think it should have been made 
public in a more timely manner?
    Ms. Gekker. I would have liked to have seen it within 4 or 
5 weeks while it was still fresh in my mind.
    Chairwoman Kelly. I appreciate that. I think that is 
something we will have to take a look at because there is no 
point in having this if we cannot have some kind of a timely 
response from the agencies.
    I want to go to Mr. Waggener next. Mr. Waggener, you 
indicate that the current process for Small Entity 
Representatives works fairly well for the EPA, and I agree.
    However, I also think that there is significant ambiguity 
in the statute over whose responsibility it ultimately is, EPA 
or SBA. Let us assume that other agencies are added to the 
process.
    Let us assume that there is not as good a working 
relationship between this new agency and the SBA. In this case, 
who do you think should have the ultimate responsibility of 
naming the Small Entity Representatives, the new agency or the 
SBA?
    Mr. Waggener. I can only speak from my experiences. What I 
have seen happen, EPA, first of all, has been dealing with the 
industries that are impacted by the regulation, more so than 
SBA, during the regulatory process.
    So, the initial names that they bring to the table is 
normally from their experience of dealing with those individual 
entities. Then SBA adds names to the list that they believe 
should be on there.
    There is usually a debate about who that should be. Then 
they come to a conclusion. As I have stated here, I do believe 
that before the process goes on, there should be an agreement 
between both SBA and EPA or the other agency, whoever that may 
be. My experience is with EPA.
    That these are the Small Entity Representatives that we are 
going to use. They do represent small businesses. So, there 
should be some agreement as to that is what I want the result 
to be because I think that works.
    Chairwoman Kelly. What if there is not an agreement? What 
if these agencies do not get along; the agency and the SBA? 
Then what? Who do you think should have that ultimate 
responsibility?
    Mr. Waggener. I think that SBA should have the final word 
on it.
    Chairwoman Kelly. Do you have any thoughts on when the EPA 
should make a panel report available to the public? What are 
your thoughts on what timeliness is, in terms of making it 
available?
    Mr. Waggener. My experience has been, first of all, the 
panel report was always published right at about the time of 
the proposed rule. It came out within a month or so earlier 
than the proposed rule.
    It may not have shown up until the proposed rule. It is 
always discussed in the preamble. What has occurred is that it 
has not been made available until then. However, the results 
have been discussed with the Small Entity Representatives by 
EPA and the SBREFA individuals, such as Tom Kelly.
    So, we have been made aware of what was in the document as 
it was going forward to be completed. That has seemed to work 
fairly well. I do not really see a strong need, actually, if 
that takes place and the process takes place; making it 
available to the public in a reasonable amount of time, which 
may be, I do not know 4 months, 5 months or something down the 
line, or when the rule is proposed, I think is adequate.
    Chairwoman Kelly. Well, obviously, we have just heard from 
Ms. Gekker that it did not work that way with the OSHA. So, 
there may be some area there for concern.
    Mr. Waggener. I think I did hear that it was perhaps 
provided to the people that served as the Small Entity 
Representatives. Is that incorrect?
    Ms. Gekker. No. I was a Small Entity Representative. It was 
not provided to me, except in this round about way.
    Mr. Waggener. That is bad. That needs to be corrected.
    Chairwoman Kelly. One would think that if you take your 
time--all of you are busy. If you take your time to serve as 
Small Entity Representatives, you ought to be entitled to have 
a timely response with that report.
    It seems to me that Ms. Gekker did not get that from OSHA. 
Well, you did because you were a part of the working process on 
the final report from the EPA. So, it is obvious that the 
interaction between the SBA and the agencies is different with 
each agency. We may need to have a look at that.
    I thank you very much. I just want to ask Mr. Morrison a 
couple of questions. Mr. Morrison, it seems as if you feel that 
without the underlying changes to make the IRS better comply 
with the Reg Flex Act, adding them to the panel process will 
not make any difference.
    However, you also indicate that this is a problem that has 
never been able to be fixed. If we have the opportunity to add 
the IRS to this panel process, should we not take it and 
continue to work on the underlying problems that you have 
outlined?
    Mr. Morrison. Yes. Let me clarify what I am saying on that. 
I am glad you asked. First of all, I think it is useful to add 
IRS to the review process, per se.
    It is useful for two reasons. Number one, it will spotlight 
some of the problems that I have been talking about here. It 
will make those problems much more visible.
    Number two, in those instances in which the IRS does 
concede that its rules fall within the Reg Flex Act, having the 
panel process in place will get them used to convening panels.
    I think doing so will eventually reduce their opposition to 
having more of the panels and probably, in time, reduce their 
opposition to broadening the scope of the Act to more 
activities they undertake.
    So, yes, I think putting IRS under the panel process now 
makes sense. I guess what I was trying to say with the 
testimony: is if you want to capture more of their rules, and 
therefore have more review panels, there probably needs to be 
some additional technical changes in the Act.
    Chairwoman Kelly. Good. Maybe we can work with you on 
thinking that through. I think having the IRS at least attempt 
to convene Advocacy Review Panels will help with the whole 
culture of the agency.
    I think it has worked, definitely with the EPA. I think it 
is beginning to work with OSHA. It seems to me, as you have 
said, it might work with that culture. I hate to see us impose 
mandates in ways on agencies because I think they need todo 
their job.
    On the other side of the coin, we have a problem here with 
the IRS that you have pointed out with the culture of the 
agency. What do you think about at least our trying to convene 
them?
    Mr. Morrison. I think it is useful to do. I suspect that if 
you sat down and talked to Mr. Rossotti about it, the IRS 
Commissioner, he might even agree with you. He represents the 
effort by a lot of people in Congress and the Administration to 
change that culture.
    I think he is very sincere about trying to do it. And I 
think culture change certainly was the thrust of the IRS 
Restructuring Act Congress passed last year. So I think there 
is a lot of movement in that direction.
    Maybe in the case of agency's General Counsels and a few 
people a little farther down the ladder, it may not have sunk 
in. But I think that we are at a point right now where there is 
much more receptivity to these kinds of changes at IRS.
    Chairwoman Kelly. I thank you very much.
    Now, I am going to have to turn the panel over. I have a 
vote in another committee. I apologize. I really do thank the 
four of you for coming in today. Your testimony has been very, 
very helpful on this.
    Chairman Bartlett [presiding]. Thank you. Least I forget at 
the end, let me state now that we will hold the record open for 
a number of days so that those members whose duties prevented 
them from being here can ask questions for the record.
    So you may expect some questions from some of the other 
members who were not here. Mr. Cole, you spoke about the timing 
of the draft proposed rule and the problems that, that might 
impose.
    If they already had drafted a rule that they would then 
have a mind set that the hearings would not matter much because 
they have already kind of committed themselves.
    Yet, it is not being productive to have hearings when you 
do not know what you are talking about. Is there not some 
middle ground here where they could simply indicate the nature 
of the proposed rule or the problem they are trying to solve?
    I understand your concern about actually drafting a rule. 
They now have pretty much committed themselves. It is going to 
be a tough call to get them to change it.
    Mr. Cole. I think there is a middle ground. The key to 
finding that middle ground is having the panel occur at the 
point at which regulatory alternatives have been identified, 
and where there is at least some data about the benefits and 
costs, and the pros and cons of those regulatory alternatives.
    You do not need the lawyerly text about what is going to be 
in the Federal Register. That can occur later on in the 
process. The panel should occur before we get down to the 
lawyers drafting the fine points of the rule.
    The most productive discussions that I have seen in the 
panels occur at the phase where you have economic data. You may 
not have the economic analysis-- that is a term of art for the 
document that is required by Executive Orders to be in the 
Federal Register Notice.
    You may not have the draft proposed rule. I think Jack said 
it very well. He talked about initial economic data, cost 
effectiveness data, and data on the benefits; in EPA's case, 
toxics removed, or in OSHA's case, worker injuries avoided. 
That, to me, is the key informational requirement. Jack, you 
have had more experience with this.
    Mr. Waggener. I would agree with that. Again, that is it. 
It is a middle ground. That is a middle ground what has been 
being provided. It is this initial, what are the regulatory 
alternatives, 1, 2, 3, 4, and 5, which typically is laid out in 
the SBREFA Process.
    This is what the economics would be. Then here is another 
batch of data that says what the toxics are being removed. It 
is a piecemeal thing to get all of the data that you need. It 
is not a formal written document. I think that is what you were 
saying there.
    We just need to know what the intent of the rule would be 
so that you can make a fair assessment of the impact on small 
business.
    Mr. Cole. Writing this into the statute would be an 
advance. When SBREFA was originally drafted, it references 
answering the specific questions in the initial Reg Flex 
Analysis. That direction kind of misses the point because 
SBREFA does not mention regulatory alternatives in the data to 
be provided. So, writing this in would be a big advance.
    I just want to mention one additional point. EPA has 
published interim guidance on implementing SBREFA in 1997. In 
that interim guidance, it directs the agency to give the panel 
members, not the Small Entity Representatives, not the small 
business folks, but the members of the panel, the EPA, 
Advocacy, and OMB an outline describing the important 
components of the rule and any significant regulatory 
alternatives.
    The guidance goes on to talk about what is going to be 
provided to the Small Entity Representatives. They only get 
enough information about the rule for them to be able to judge 
the likely impacts of the rulemaking.
    I think in this guidance we have the kernel of what is 
really important here. It is what the EPA's guidance was 
originally going to provide only to the panel members and what 
they are now providing to the Small Entity Representatives as 
well. That is an outline describing the important components of 
the rule, any significant regulatory alternatives, and data on 
the pros and cons, data on the costs and benefits of those 
different alternatives so that you can compare them. The best 
thing that happens is a panel where you can lay out a couple of 
regulatory alternatives and people can see that getting the 
extra molecule increases the cost dramatically to small 
businesses.
    What are you getting for that marginal increase in cost? 
When you have data that can answer that question, you will have 
a successful panel.
    Chairman Bartlett. Why should not the Small Entity 
Representatives get as much information as the panel members?
    Mr. Cole. I believe they should. I have just quoted you the 
language from EPA's interim guidance in 1997. My understanding 
in talking to the folks at EPA is that they now provide the 
same information to both the Governmental Officials on the 
panel and the Small Entity Representatives.
    I believe that we have to have everyone having the same 
information so we can have a cooperative conversation about the 
impacts of the rule.
    Chairman Bartlett. There has been some discussion of the 
selection of the panelists and whether the affected industries 
have an adequate voice there. Do you think that we need some 
legislative language?
    Apparently, with EPA it has been working okay, but that is 
just because there has been a good cooperative relationship 
that would not necessarily obtain with all agencies.
    Do you think that we need some definitive legislation that 
would indicate a meaningful role for the affected entities in 
choosing the panelists? Let the record show that their heads 
are nodding.
    Mr. Cole. On the issue of selecting representatives, there 
is this threshold jurisdictional issue as to what the word 
``impacts'' means in the context of the whole Reg Flex Act. 
Does it just mean impacts on entities that are subject to the 
rule, or does it mean something more?
    I used the example of there are some Clean Water Act rules 
and some Clean Air Act rules where the person who actually has 
to comply with the rule is the state. EPA tells the state write 
these numbers into your permits or EPA tells the state you have 
to achieve this quality air. Then it is up to you to go after 
the small businesses to get it. EPA hides behind that structure 
to avoid bringing in the small entities that are going to bear 
the brunt of that regulation, and whose actions are going to 
lead to the benefits EPA claims will be achieved by that 
regulation.
    As I mentioned in my testimony, this issue is under 
litigation right now. The ruling of the Court could come down 
any time this spring. I think the Subcommittee should look very 
closely at this. If the Court comes down the wrong way, by 
deferring to EPA's interpretation, legislation is urgently 
needed to ensure that all small entities who are going to be 
affected by the rule, that have some reasonable nexus between 
the rulemaking and the impact on the small entity, should have 
the opportunity to participate as small entity representatives.
    Chairman Bartlett. Does this not remind you a little of the 
defense of the Mafia Don who says it was really the hit man who 
committed the crime?
    Mr. Cole. That is exactly the defense that EPA has raised 
here.
    Chairman Bartlett. I agree. We probably need to address 
this in specific legislation. Ms. Gekker, you mentioned that 
OSHA appeared to be about making rules for problems that, as 
far as you were concerned, were essentially non-existent.
    That reminded me of the testimony of my dentist who said 
that OSHA came into his office, required procedures that 
increased his cost of doing business 21 percent, which he then, 
of course, dutifully passed onto me, because that is what 
happens with all of these regulations.
    They get passed onto the ultimate consumer. His testimony 
was that there had never been in his office, nor in any dental 
office he knew, a single instance that would justify any of 
these onerous regulations that were piled onto them.
    There is an old saying, if it ain't broke, don't fix it. 
When an agency comes in imposing regulations to fix problems 
that are not there--do you think that what OSHA is really 
trying to do is justify its existence?
    Ms. Gekker. I feel very hesitant to answer that. I have no 
idea. Perhaps the comments by somebody else who was on the 
Small Entity Representatives tele-conference with me will 
suffice.
    He would be covered by this rule; his office would. He is a 
head hunter firm, I believe he was. He said, the only dangers 
in his company are if one of them happens to climb on a ladder 
to change a light bulb. So, he would be required to come up 
with pages and pages of documentation of all of the hazards 
that exist in his office.
    The only one that he could think of was if one person 
pulled that ladder out of the closet to change the light bulb 
that is on the ceiling. I work in a dangerous industry. So, 
there are some needs for safety concerns and for some 
regulations.
    I try to abide by everything I am aware of. I do not want 
anyone to be hurt when they are on my premises. These are 
people I care about. We work side-by-side. If one of them is 
out, it means that I have to work longer, as does everybody 
else there.
    We cannot replace them quickly. We care about them. We know 
their families. So, there is no benefit in my ignoring the need 
for their safety and their health, none at all, to my business 
or to me.
    Chairman Bartlett. I appreciate those comments. I, in 
another life, was a small business person. I ran a land 
development, home construction company.
    When one of my employees, most of whom were my friends, by 
the way, when one of my employees got hurt and could not be on 
the job, that left a big hole in our team. I could not fill 
that hole by just going down and hiring a temporary.
    It really impacted the productivity of our company. So, I, 
more than any person in OSHA, was concerned about the safety of 
my employees. Now, I would have welcomed a Government agency 
coming in and reviewing with me my safety procedures, because 
there might have been things that I could be doing that I was 
not aware of.
    But to come in to me in an adversarial kind of a position; 
you know, I have talked with a lot of our contracting people 
across our District. They are more terrorized by a visit from 
OSHA than they are an audit by the IRS.
    Now, when you are more terrorized by some Government agency 
than you are an audit from the IRS, clearly I think we need to 
take a look at what is happening there.
    Mr. Waggener, you were talking about this SBREFA influence 
on openness and we are observing this, because of this 
legislation, there is now more openness. Has the adversarial 
relationship diminished?
    I know when these regulations first started that all of 
them were implemented because of agreement with one or both of 
two assumptions. The one assumption is that every manufacturer, 
every employer is inherently evil, and greedy, and are going to 
hurt the public, or hurt their employees.
    Therefore, you have to make sure they do not do that. The 
other assumption is that every consumer and every employee is 
incredibly stupid and they are going to hurt themselves unless 
Big Brother protects them. I fundamentally reject both of these 
hypothesis, which means I see very little need for most of our 
regulations.
    But because this was the mind set of, I believe, the 
Congress and certainly the early agencies here, there was 
clearly an adversarial relationship between the agencies and 
those that they were regulating. Has that diminished?
    Mr. Waggener. Yes, it has. It is still there. Again, in the 
1970s when I started this in the 1970s and 1980s, it was a very 
adversarial process. I mean, it was like go away. Leave me 
alone. I am doing my job. I am here to protect you and 
everybody else.
    I have really witnessed, truly and sincerely witnessed, 
that particularly in some parts of the agency that I deal 
mostly in, that there is still certainly a realm of that type 
of thing occurring.
    There are still some old timers around that still possess 
that. As things go along, we have got a younger group of 
people. They certainly possess some of that. But they are much 
more cooperative.
    In dealing with people like myself and the other 
industries, we have many more meetings, sit down meetings, 
talking about where the regs are going. They come and give 
presentations to groups to talk about where the regs are going 
and what they are doing. That was totally unheard of back in 
the 1970s and 1980s. I particularly, as I have said earlier, I 
have seen this really occur.
    I have said this to a number of people before this in the 
last 2 or 3 years. I think the fact that SBREFA has now forced 
the industry, EPA, OMB, SBA, to come together and sit down at a 
table, and that is also another point.
    I said I wanted at least two meetings because that is a 
minimum that allows you to have that eye contact; talk about 
your problems. I think that has gone a long way to reduce that 
adversarial situation. It is still there, but just not as much 
as it used to be.
    Chairman Bartlett. I know from the perspective of the head 
of these agencies that they recognize that they need to change. 
I think the problem is filtering down change from Washington to 
the field where there are some people there who have been there 
for a long time who still have the older mind set. I am glad 
that it is changing.
    Mr. Morrison, do you think that there is any legislation 
that we can write that can require a non-cooperating IRS to 
comply?
    Mr. Morrison. Well, you could actually. Certainly, there 
are ways to compel agencies to do things they do not want to 
do.
    Chairman Bartlett. Are they now using rather obtuse 
reasoning to justify their non-compliance with regulations that 
they ought to be complying with, relative to this small 
business world?
    Mr. Morrison. I think a lot of people would say that. It is 
possible that we have an honest disagreement about the meaning 
of some terms in the Regulatory Flexibility Act. But they have 
a long history of not wanting to comply. So, you have to take 
it in that context.
    Chairman Bartlett. Mr. Archer, the Chairman of Ways and 
Means, has a solution to that problem that I concur with. He 
would like to have a flat tax on consumption. He says that the 
IRS is an evil weed that you need to pull out by its roots.
    So, he would like to repeal the 16th Amendment. One of you 
in your testimony talked about the enormous complexity of the 
IRS code. It is so complex that even IRS, itself, does not know 
what that code is.
    I understand now if you get the name of the person who 
gives you advice that IRS will at least absolve you from 
penalty, if you comply with that advice and it turns out to not 
be the right advice.
    Let me just ask all of you one final question. I notice 
that the present legislation uses the terminology ``has a 
significant economic impact on a substantial number of small 
entities.''
    What does that mean? The IRS could rationalize that if only 
50 percent of the small businesses went belly-up, or OSHA, or 
EPA, could rationalize that if only 50 percent of small 
businesses went belly-up because of this regulation that, that 
was not a significant economic impact on a substantial number 
of small entities.
    Do you not think that we need some terminology that is a 
little more restricting? This could be interpreted any way one 
wished, and apparently is, by some of the agencies.
    Mr. Cole. One of the issues at the IRS is a threshold issue 
of what regulations fall under Reg Flex. Jim Morrison mentioned 
this. IRS has regulations, interpretive regulations, revenue 
rulings; a whole series of ways in which it imposes 
requirements on the small business community. Only some of 
those are captured under the Act. SBREFA tried to expand that 
to include interpretive rules. The IRS is still finding ways to 
circumvent that.
    I think another area where additional Congressional action 
to clarify the Act would be appropriate is to say that rules 
that pose significant economic impacts on small entities should 
be covered, regardless of whether that impact is positive or 
negative. If you go back to the 1980 debates, there is 
legislative history to the point that agencies should look at 
both regulatory and deregulatory actions that have a 
significant impact on small entities. Unfortunately, agencies 
have largely taken the position that it is only regulatory 
actions that should go through Reg Flex. So, if there is a rule 
that they claim is deregulatory, they say Reg Flex does not 
apply at all. If you are doing a deregulatory action, the 
opportunity for additional regulatory relief is still present 
in that rulemaking. That rulemaking should go through Reg Flex 
analysis.
    I cannot define what ``significant impact'' means; 
substantial number of entities. I think there is guidance at 
EPA. They have a methodology on how to do this. My belief is 
that we should direct the agencies to work together to come up 
with guidance. Perhaps we should direct OMB to come up with 
some agency-wide guidance on what constitutes ``significant 
impact'' and what constitutes a ``substantial number of small 
entities.''
    It is very, very difficult. That is a different question in 
the EPA world than it is in HICFA. It is very different there 
than it is in the telecommunications world. That is why SBA has 
pages and pages of regulations defining what small business 
means. It is very difficult to have one across the board set of 
numbers, for example, to apply to all agencies. The closest I 
can think of is a suggestion to direct OMB to come up with some 
guidance. Then from that guidance, agencies to come up with 
specific tests that they would apply.
    Ms. Gekker. I work in a industry that is an increasingly 
mature industry; the printing industry. We have collected 
figures on profit in our industry for many years. The average 
printing company in America earns 3.6 percent profit on its 
sales.
    That means a company my size, a million on average, and 
thank Heavens we are not average, on average earns $36,000 in a 
year of profit. I like to think of profit as the ability to 
continue. It is the thing that buys you the ability to continue 
the next year, and the next year, and the next year.
    If a rule requires $10,000, even only a one-time expense, 
that is a major amount. That is 30 percent of that profit that 
that printing company has earned. I have a dentist like yours. 
He is able to pass along cost increases to me.
    I have not had a price increase in my business since 1989. 
I cannot pass along the cost of raises. I cannot pass along the 
cost of increased material costs. I cannot do it. The 
marketplace is mature. They are not willing to pay more at this 
point.
    Chairman Bartlett. Because of competition?
    Ms. Gekker. Partly, yes; I guess for the most part.
    Mr. Cole. If I could just amend my comments. You brought up 
a very important point and that is that there is a problem with 
some of the tests that EPA has used where it looks at impacts 
on revenue, as opposed to the impacts on net profitability. In 
some of the discussions in rulemakings about what are the 
impacts, the EPA seems to discount impacts on industries that 
work on a very narrow profit margin. Congress could clarify 
that you are to analyze impacts on the profitability of small 
businesses, not just the impact on net revenues.
    Chairman Bartlett. Thank you for your comments.
    It just appeared to me that the wording ``significant 
economic impact on a substantial number of small entities'' 
could be interpreted a great many different ways. That there 
might be a lot of inconsistency within one agency from time-to-
time and certainly between agencies.
    I do not know whether this can be tied down with 
legislative language or if we would require the agencies to 
submit their definitions of this terminology to the Congress 
for approval before implementation.
    It just seems to me that this is open to very divergent 
interpretation. Rules like this or legislation like this, which 
is so non-specific just creates opportunities for mischief that 
we do not need to create.
    We need to tighten it up, I think.
    Mr. Morrison. Mr. Bartlett, I think you have raised some 
important points there. But I would note with respect to one 
piece of that problem, which is the definition of ``small 
entities,'' there is some additional language in the Reg Flex 
Act which helps narrow the definition down.
    The Act also says that the agencies have to take SBA's 
definition of what a small business is, unless they define it 
themselves through a regular notice and comment rulemaking 
process. So, I think with respect to that particular term, 
``small business,'' the Act still has a bit more precision. I 
take your point about the imprecision of other parts of the 
Act.
    Chairman Bartlett. But the ``significant'' and the 
``substantial'' are very qualitative adjectives that could be 
defined in very different ways.
    Mr. Waggener. If I may, I would like to comment to what 
Keith Cole said. A lot in the passing on of the impact of the 
regulations, a lot of the regulations that I have talked about 
this morning that I was involved in, the agency has taken the 
philosophy that you can pass all of those costs on to the 
people you are working for.
    These are service industries. They are also extremely 
competitive; commodity type service industries, where the fact 
is they cannot pass on all of those costs. I do not know how 
you legislate this. There are truly flaws in the economic 
analysis that are still there that we are having to deal with 
on a day-to-day basis, where those types of assumptions are 
made.
    Chairman Bartlett. Unless we are regulating the factory in 
Sri Lanka, you cannot be assured that all of those costs are 
going to be passed on. Well, thank you all very much for your 
testimony. It has been very useful.
    The Subcommittee now stands adjourned.
    [Whereupon, at 12:45 p.m., the committee was adjourned.]
                            A P P E N D I X

                               __________

           Prepared Statement of Representative Sue W. Kelly

    Good morning, ladies and gentlemen. I would like to welcome 
everyone to today's joint Regulatory Reform and Paperwork Reduction 
Subcommittee and Government Programs and Oversight Subcommittee hearing 
on improving the small business advocacy review panel process.
    I would like to thank my good friend, Chairman Roscoe Bartlett, for 
agreeing to hold this hearing with me. Many of you know that this is an 
issue that Chairman Bartlett and I have been involved with for some 
time. We held two hearings in the last Congress on this issue, and I am 
grateful that he has continued providing oversight over the advocacy 
review panel process with me.
    The Small Business Advocacy Review Panels are a good model for what 
we should be doing in government. Originally created by the Small 
Business Regulatory Enforcement Fairness Act, the panel process has 
been successful because it allows small business community the 
opportunity to have a real impact on agency rulemakings. The key to 
this success is getting small businesses involved in agency rulemakings 
early in the process. By doing so, agencies will have a much better 
understanding of the unique needs of small businesses before the 
parameters of a potential regulation get too firmly defined.
    The advocacy review panels are viewed as a positive process by 
those who actually participate in them, as well. From most accounts, 
small businesses indicate that they appreciate having the opportunity 
to provide their thoughts to the agencies in this type of forum. 
Likewise, the agencies have indicated that they benefit from this early 
input, which in turn can be used to produce better regulations.
    The goal of this hearing today is to revisit how the panel process 
is working generally, as well as consider ways in which the process can 
be strengthened and improved. The most notable change that we are 
considering is adding the Internal Revenue Service as one of the 
agencies that is covered by the panel process. Small businesses have 
repeatedly described how the IRS simply does not understand the impact 
that many of their rules have on the operation of small businesses. By 
requiring IRS to convene advocacy review panels, we may be able to 
begin to change this problem.
    We have an excellent panel of witnesses that will be testifying. 
All of hem have significant experience with the Regulatory Flexibility 
Act and the panel process. I appreciate the time that each of them has 
sacrificed out of their schedules by being here today.
    In conclusion, this Committee is a very strong supporter of the 
advocacy review panel process. We are committed to taking whatever 
steps necessary to see that it remains a strong part of the regulatory 
process.
                                 ______
                                 

        Prepared Statement of Representative Roscoe G. Bartlett

    Good morning. It is a pleasure to welcome you to this joint hearing 
held by the Subcommittee on Government Programs and Oversight and the 
Subcommittee on Regulatory Reform and Paperwork Reduction, chaired by 
my colleague Congresswoman Sue Kelly.
    This hearing in many respects is a continuation of joint hearings 
the two subcommittees held in April 1997 and March 1998 in which we 
addressed the need for common sense in rulemaking and the unfair 
financial burdens borne by small businesses all over this Nation as a 
result of unscientific, impractical and unnecessary regulations.
    These same hearings also examined the implementation and 
performance by the Environmental Protection Agency (EPA) and the 
Occupational Safety and Health Administration (OSHA) of the panel 
process added by the Small Business Regulatory Enforcement Fairness Act 
of 1996--better known as SBREFA. The panel process requires these to 
agencies--EPA and OSHA--to consider and to respond fairly to the advice 
and recommendations of small businesses concerning the impact upon 
small businesses of proposed regulations.
    We believe--as we stated at the previous hearings--that the panel 
process is important. In a study done for Committees of both the House 
and the Senate, the General Accounting Office concluded that: ``Agency 
officials and small entity representatives generally agreed that the 
panel process is worthwhile, providing valuable insight and 
opportunities for participation in the rulemaking process.''
    For some reason when the panel process was initiated only two 
agencies were includes--EPA and OSHA. The legislation which we will be 
discussing today adds a third agency--the IRS. This addition is long 
over due.
    The difficulty and cost of complying with mind-numbing IRS 
regulations are a major concern for small businesses in my district--
Western Maryland--as I am sure they are for all small businesses 
through out this nation. Small businesses need the common sense relief 
that advance consultation will provide.
    There's an old farmer's test for measuring costs and benefits. 
Those of you familiar with me will recall--you don't do something if 
the juice ain't worth the squeezing. The IRS should be required to make 
sure the juice is worth the squeezing when they design regulations.
    Again thank you for coming to this important hearing. We look 
forward to a lively and productive discussion.
                                 ______
                                 

          Prepared Statement of Representative Danny K. Davis

    Thank you Chairwoman Kelly, Chairman Bartlett, Ranking member 
Pascrell.
    For years small businesses have complained about unfair regulations 
and burdens imposed by Government agencies. As a result, the 104th 
Congress passed legislation named the Small Business Regulatory 
Enforcement Fairness Act to make federal government regulators more 
accountable to small businesses. The Small Business Regulatory 
Enforcement Act expanded the jurisdiction of the courts by including in 
the review process the regulatory appeals brought by small entities and 
requiring OSHA and EPA to consult with small businesses before 
publishing the proposed rules.
    Later, the Office of Advocacy testified before our committee on the 
accomplishments of SBRFA and found that because of the early 
involvement of small entities in the development of rules there was 
better data collection and efficient, fair regulatory provisions. Many 
agree that progress has been made but significant work remains to be 
done.
    As a result today we have called a form to discuss a bill to 
improve the conditions of small businesses. I believe what you do, 
poorly or well, can never be erased. Therefore I want to do the best 
job here on this committee for our nation and or nation's small 
businesses.
    I am delighted to see our witnesses and welcome their testimonies.
                                 ______
                                 

        Prepared Statement of Representative Bill Pascrell, Jr.

    Good morning. I would like to begin my remarks today by thanking 
Chairwoman Kelly and Chairman Bartlett for bringing this important 
issue to the attention of both subcommittees. Small businesses are the 
engines of growth for our nation's economy and are indeed the backbone 
of our economic system. By examining ways to make the regulatory 
process more efficient, we will ensure that this important sector 
remains vibrant and robust. I am committed to that goal.
    As the new ranking Member of the Regulatory Reform and Paperwork 
Reduction subcommittee, I believe today's hearing, which will examine 
the Small Business Advocacy Review Panel Process, is of critical 
importance. It is critically important because the relationship between 
our regulatory agencies and our nation's small businesses must be one 
of mutual understanding as opposed to mutual disdain.
    Regulations that are promulgated by OSHA and EPA are very important 
in regard to establishing and ensuring a safe workplace and a clean 
environment. But at the same time, those who formulate regulations must 
be aware of the actual implications of regulations. And when we are 
dealing with small businesses we must keep in mind the fact that the 
costs of regulatory burdens are disproportionate on small businesses 
because of their very size. This fact has been confirmed by 27 studies 
and was recognized by both the Regulatory Flexibility Act and SBREFA, 
which created the panel process.
    Today we are going to hear testimony on the current effectiveness 
of the Review Panel Process--a process which was designed to provide 
the small business community with an opportunity to participate in the 
rulemaking process, which allows small businesses to express their 
opinions on the effectiveness and practicality of proposed regulations 
before they are finalized.
    It is my hope that today's hearing will contribute greatly to our 
understanding of the Review Panel Process--and how to improve it. We 
need to reduce unnecessary regulations, improve those elements that 
work, and use common sense as our guide.
    Thank you.
                                 ______
                                 

                       Testimony of Keith N. Cole

    Mr. Chairman, Members of the Committee: My name is Keith Cole, and 
I am a Partner at the law firm of Swidler Berlin Shereff Friedman LLP. 
I appreciate the opportunity to testify at today's hearing on the Small 
Business Advocacy Review Panels (Panels) established under the Small 
Business Regulatory Enforcement Fairness Act of 1996 (SBREFA).
    I would like to state for the record that I am not testifying today 
on behalf of my law firm, or any particular client, but solely on my 
own behalf. My testimony is based on my expertise as former Regulatory 
Affairs Counsel to the Senate Committee on Small Business, and my 
experience in the private sector since leaving Capitol Hill. While in 
the private sector, I have followed closely the implementation of the 
SBREFA Panel process out of both personal and professional interest. In 
1998, I prepared written comments on the Panel process in the EPA's 
Proposed Industrial Laundries rule on behalf of the Textile Rental 
Service Association.
    At earlier hearings before this Committee, I have testified about 
the need for SBREFA; some of the expectations Congress had for the Act; 
and the early implementation of the Act. Today, I want to testify as to 
my experience with rulemakings where SBREFA panels were used, and my 
assessment of how the Panel process has worked in other rulemakings 
based on discussions with numerous participants. I also want to provide 
the Committee with comments on the discussion draft and the proposed 
changes to the Panel process.
                      background on sbrefa panels
Small business advocacy review panels
    SBREFA amended the existing requirements of section 609 of the 
Regulatory Flexibility Act (5 USC Sec. 601 et seq) (Reg Flex) for small 
business participation in the rulemaking process at the Environmental 
Protection Agency and the Occupational Safety and Health 
Administration. For proposed rules with a significant impact on a 
substantial number of small entities, EPA and OSHA must now collect 
advice and recommendations from small business to better inform the 
agencies' initial Reg Flex analyses. The findings of the Panel and the 
comments of small business representatives are, at a minimum, made 
public as part of the rulemaking record when the proposed rule is 
published.
    SBREFA established Small Business Advocacy Panels to provide small 
businesses with an early opportunity to better inform EPA and OSHA 
about the impacts of soon-to-be proposed rules in an arena especially 
dedicated to address small business impacts. As federal agencies 
themselves recognize, small businesses have an inadequate voice in the 
development of regulations, particularly at the early stages of 
regulatory development. By the time regulations are published in the 
Federal Register, the ability of small businesses to have their 
concerns meaningfully addressed appears to be compromised in some way. 
The goal of this process is not special access, but to provide a remedy 
for the disproportionate regulatory burdens born by small businesses.
    Just as the Members of the Committee are taking testimony from 
today's witnesses, the federal employees on the Panels are expected to 
receive testimony and comments from small business representatives. 
While SBREFA does not mandate that this process occur with the 
formality of a congressional hearing, the legislative history of SBREFA 
suggests that the usual procedure would involve at least the 
opportunity for a face-to-face meeting of the Panel and small 
businesses. The remedial and right-to-know purposes of the Reg Flex Act 
and SBREFA require, in my opinion, that the usual procedure for the 
Panels at EPA and OSHA should be to meet with small business 
representatives before issuing their reports.
    The Committee should note, however that the requirement to convene 
a Panel is not absolute. SBREFA provides a mechanism to waive the Panel 
requirement where convening a Panel ``would not advance the effective 
participation of small entities in the rulemaking process.'' While the 
elements of this test are not spelled out in the statute, one scenario 
that the Committee might wish to consider as suitable for a waiver is 
when EPA or OSHA have successfully completed a regulatory negotiation 
prior to proposing a regulation. I recommend that the Committee work 
with SBA, EPA, and OSHA to develop suitable guidelines for when the 
Panel requirement should be waived.
                    implementation of sbrefa panels
    EPA and OSHA have completed a total of 15 SBREFA Panels; 13 at EPA 
and 2 at OSHA. These totals continue to grow. EPA has seven Panels 
scheduled in the next six months including the Panel for the Arsenic in 
Drinking Water rule which is just about to start. OSHA began the SBREFA 
Panel on the Ergonomics rule just last week, and has scheduled an 
additional Panel on Permissible Exposure Limits for later this year.
    Based upon my review of the Panels completed to date, the verdict 
on SBREFA Panels is that the law appears to be working to allow greater 
participation by small businesses in the rulemaking process. It also 
appears that the Panel process can succeed in reducing the regulatory 
burden on small businesses, although the verdict is less clear on this.
    My first observation is that the Small Business Office of Advocacy, 
OMB and EPA appear to be cooperating to make the Panel process a 
productive one. And for this, each of these agencies deserve credit for 
making an honest effort to make the Panels work. They are reaching out 
to the small business community and identifying companies who can act 
as small entity representatives or SERs. They are providing information 
to the SERs, and while it is clear that there has been a learning curve 
for all of the agencies concerned, that information has helped the SERs 
to provide meaningful input to the agencies at a critical juncture in 
the rulemaking process. From the Panel reports completed to date, it 
also appears that the agencies have been listening. Each of the reports 
contains meaningful suggestions on how the proposed rules might be 
changedto minimize the burdens on small businesses. I am less sure of 
the experience at OSHA and will defer to other speakers on that issue.
    At this point, we have less data on whether EPA and OSHA will 
actually put all the good work of the Panels to use by changing their 
proposed rules. Only seven of the EPA rules that have gone through the 
SBREFA Panel process have been published as proposed rules. At OSHA, 
only one rule has been published in proposed form, although the Safety 
and Health Programs rule is scheduled to go shortly to OMB in draft 
form. While some of the EPA rules clearly have benefitted from the 
Panel process, my personal experience with the Industrial Laundries 
rule, suggests to me that more could be done to incorporate the 
comments of the SERs and the recommendations of the Panel into the 
proposed rule and the Initial Regulatory Flexibility Analysis.
    Overall, I believe SBREFA is off to a good start. We don't need 
wholesale revision of the Act. However, there are a number of ways that 
Congress could improve the SBREFA Panel process both through oversight, 
and through targeted legislative change. I am very encouraged that the 
Committee is continuing to take seriously its oversight 
responsibilities by holding today's hearing, and that the Committee is 
beginning to address the need for legislative change through the 
discussion draft now being circulated. I believe the draft contains 
positive proposals, but there are a number of specific issues that the 
Committee should consider as it moves towards introducing legislation 
to revise the Panel process.
                   sbrefa panels: legislative issues
    In a nutshell, the record to date demonstrates that the key to a 
successful SBREFA Panel is giving the right information at the right 
time to the right people. The data must be available, it must be 
provided early and it must be meaningful. The people who advise the 
Panel must be knowledgeable enough about the specific industry affected 
by the rule to be able to identify opportunities to meet regulatory 
goals more efficiently, and knowledgeable about how the Panel process 
can be most efficiently used to change agency decision making. While 
that is relatively simple to say, it is difficult to implement in 
practice, and difficult to legislate. I urge the Committee to tread 
lightly here, because too much specificity may be counterproductive to 
the interests of small businesses.
Getting information at the right time
    As Congress recognized when it passed SBREFA, there is a tension 
between conducting the Panel early in the rulemaking process, when key 
decision have yet to be made, and conducting the Panel when all of the 
data is available, when decisions may be set in stone. Congress chose 
not to set any firm deadlines for when a Panel should occur, leaving 
that decision to be worked out between the various agencies. In earlier 
testimony to this Committee, I said that we simply did not know enough 
to fix a time for the panels. I also said that the Committee should 
monitor the situation as it develops in upcoming rulemakings. Now that 
we have more experience with SBREFA Panels, I think we can take the 
next step and reach some conclusions about the best timing of panels.
    In my view, it is becoming clear that there is some minimum amount 
of information on the proposed regulatory alternatives that is 
necessary before the SERs can provide meaningful comments to the 
Panels. I believe the record shows that the right time for the Panel to 
occur is best described as being as soon as this minimum amount of 
information is available. This means that the Panel should take place 
whenever the informational needs are met in the process of rule 
development. If the SERs have the data to make a strong case for 
changes in the rule, the Panel can effect changes in the rule, even if 
it is relatively later in the process. However, the Committee needs to 
ensure that any statutory language on minimum information requirements 
does not have the unintended effect of delaying the Panel until just 
before publication of the proposed rule.
Getting the right information
    If the answer to the timing issue is ``whenever the necessary 
information is available,'' the next question is, what is the right 
data? EPA's Interim Guidance for implementing SBREFA distinguishes 
between the information provide to the Panel members and the 
information provided to the SERs. It directs the agency to give the 
Panel members an ``outline describing the important components of the 
rule and any significant regulatory alternatives.'' However, the SERs 
are only to get ``enough information about the rule for them to be able 
to judge the likely impacts of the rulemaking.'' It is my view that the 
SERs should be informed about regulatory alternatives under 
consideration by the agency so they can put the anticipated impacts 
into context and gauge their reasonableness.
    The type of data that really empowers the SERs, and by extension 
the SBREFA Panels, is a discussion on the pros and cons of regulatory 
alternatives the agency is considering, and how the alternatives stack 
up against one another. This should include some basic comparison data 
estimating the benefits and costs of the regulatory alternatives that 
will allow SERs and the Panel to look at what additional benefits will 
be provided by more costly regulatory alternatives. This does not mean 
that the SERs need to see the final economic analysis for the proposed 
rule, or even a completed draft, but it means that there is some 
initial estimates of the tradeoffs being considered by the agency. If 
the SERs have this basic information, I do not believe the SERs needs 
actual draft regulatory language, or the final economic analysis of the 
proposed rule. However, the members of the Panel should have access to 
what ever draft economic analyses and draft regulatory language are 
available at the time the Panel convenes.
    The data provided to the SERs should be developed by the agency 
proposing the rulemaking in consultation with OMB and the Office of 
Advocacy. Discussions between the agencies on the adequacy of data 
should be completed with adequate time for the SERs to have digested 
the data when the Panel convenes. This suggests that there should be 
some informal scoping communications between the agencies involved in 
Panel. However, I do not believe thatthis informal process to create 
the informational packet should be written into statute. Rather, the 
agency proposing the rule should start the process by determining that 
the necessary data is available after consultation with OMB and the 
Office of Advocacy.
    SERs should be provided the data with some minimum time for review, 
but it is not necessary to create a statutory window of 15 to 45 days. 
A 30 day minimum period should suffice, unless court ordered deadlines 
require a shorter period.
Getting the right people
    The first issue is getting the right group of people to serve as 
SERs is to get a good mix of people who know what to expect from the 
SBREFA process and people who know the industry. Thus, SERs could be 
owners of small businesses, employees whose job it is to make sure the 
business complies with agency regulations, employees of industry trade 
organizations who might provide compliance assistance to small 
businesses throughout the country, or even technical experts familiar 
with the affected small businesses. Ideally, the Panel would hear from 
different SERs with each of these backgrounds.
    The second issue in choosing SERs is who gets to decide. I think 
for the Panel to have legitimacy, the SERs must be seen by the affected 
elements of the small business community as truly representing their 
interests, and the Office of Advocacy's approval of the SERs is very 
helpful to obtaining that legitimacy. I do not know if the Office of 
Advocacy should choose SERs on its own, but SERs should not be chosen 
over the objection of the Chief Counsel for Advocacy. Thus, SERs could 
be chosen by the agency proposing the rule, as provided under current 
law, but with the concurrence of the Office of Advocacy.
    A third issue in choosing SERs is whether the government entity, be 
it the agency or the Office of Advocacy should be allowed to pick a 
particular person in a given company or organization. I think the 
better approach is for small businesses, or their trade organizations, 
or companies with expertise in a particular industry to be selected as 
SERs. The selected business or organization should then be free to 
select whomever it chooses to speak to the Panel.
    A final issue in choosing SERs is which businesses or organizations 
have standing to before the Panel. The best answer is that Panels 
should hear from small businesses and organizations with a direct nexus 
to the rule. I believe the test should be whether the small business 
will bear the impacts of the rule. This extends beyond the entities who 
will be ``subject to'' the rule and includes those entities who will 
bear the burdens giving rise to the benefits of the rule. Other types 
of small businesses and other types of small entities should not be 
allowed to use the Panels simply to file objections to the rule. Trade 
associations may have members whose size exceeds the limits of a 
``small business concern,'' but this fact alone should not prohibit the 
organization from commenting, provided that they focus their comments 
on the impacts of the rule on small business.
Timing of public release of panel reports
    As with many issues today, there are conflicting tension 
surrounding the timing of public release of Panel reports. This is not 
an issue of whether the report will be made public. The report will 
always be included in the public rulemaking record when the rule is 
proposed. However, the questions arises when many months pass between 
the completion of a SBREFA Panel and the publication of the proposed 
rule.
    My experience is that EPA and OSHA have developed different 
practices on this, with OSHA releasing its reports at the completion of 
the Panel and EPA releasing its reports only when the rule is 
published. Based on the data to date, I cannot say which approach is 
better. Early release can assure small businesses that their concerns 
have been heard by the Panel and included in the Panel recommendations. 
On the other hand, early disclosure of the Panel report can open the 
agency up to additional pressures form outside groups to unwind the 
progress made by the Panel. On this issue, I believe more data is 
needed.
Incorporating SER comments into the IRFA
    It may seem obvious that the comments of the SERs about the impacts 
of the rule should be incorporated into the Initial Regulatory 
Flexibility Analysis description of impacts, but my experience with the 
Industrial Laundries rule convinces me otherwise. In that rulemaking, 
the Initial Reg Flex Analysis omitted key information about the nature 
and extend of the small business impacts of the rule, even though the 
EPA had ready access to that information in the Panel Report. It was as 
if the Reg Flex analysis was written before the Panel ever met, and 
never looked at again.
    When Congress passed SBREFA, one of its original goals was to 
improve the quality of Reg Flex analyses. Part of the solution was to 
make Reg Flex subject to judicial review. Another part of the solution 
was to provide the agency personnel direct access to the people who 
could best understand the impacts of a proposed regulatory alternative 
on small businesses, and communicate those impacts to the agency 
personnel responsible for preparing the Reg Flex analysis. Section 
609(b)(6) directs the agency to modify the Initial Reg Flex Analyses 
where appropriate, but it doesn't state the obvious that the Reg Felx 
analysis should always incorporate relevant facts brought to the 
agencies attention during the Panel process by the SERs.
IRS compliance with SBREFA panels
    Yes.
                            other key issues
    While the focus of today's hearing is on the SBREFA Panel process, 
there are someimportant related issues that apply more broadly to the 
Reg Flex Act. The key issue here is what rules are subject to the Reg 
Flex Act and hence subject to the SBREFA Panel requirement. If federal 
agencies interpret the statute in a way that exempts from Reg Flex 
whole classes of important regulatory actions, we will never have a 
chance to see the benefits of the Panel process, or any other benefits 
of Reg Flex.
What types of impacts are covered by the Reg Flex Act?
    The biggest problem presented by EPA's early implementation of 
SBREFA goes to the threshold issue of determining when a Reg Flex 
analysis is required. At issue is the type of impacts that must be 
considered by agencies in deciding whether Reg Flex applies and 
conducting a Reg Flex analysis. For example, when EPA is issuing a new 
rule that directs states to take action under its many delegated 
programs, it takes the position that it can ignore the impacts of that 
rule on small businesses.
    EPA's approach to revising the National Ambient Air Quality 
Standards (NAAQS) for ozone and particulate matter (PM) illustrates the 
problem. EPA has taken the position that these proposed rulemakings do 
not require either a Reg Flex analysis or a Small Business Advocacy 
Review Panel. Instead of conducting a Reg Flex analysis and convening a 
Review Panel, EPA has chosen to make a certification under section 605 
of the Reg Flex Act. The 605 certification states that these rules 
``will not have a significant economic impact on a substantial number 
of small entities.''
    SBA's Chief Counsel for Advocacy, Mr. Jere Glover, wrote to EPA on 
November 18, 1996, stating that, ``considering the large economic 
impacts [of the ozone rule] suggested by EPA's own analysis that will 
unquestionably fall on tens of thousands, if not hundreds of thousands 
of small businesses, this would be a startling proposition to the small 
business community.'' In fact, EPA's own regulatory impact analysis 
(RIA) indicates that ``at least one or more small establishments in up 
to 30 or 40 percent of affected industries . . . may experience 
potentially significant impacts'' from the PM rule. For the ozone rule, 
the RIA indicates that ``small establishments in up to 18 percent of 
affected industries . . . may experience potentially significant 
impacts.''
    How does EPA reach the conclusion that these rules ``will not have 
a significant economic impact on a substantial number of small 
entities,'' in spite of the findings of its own RIA? In the rulemakings 
to revise the ozone and PM NAAQS, EPA has taken the position that the 
scope of a Reg Flex analysis is limited only to an assessment of the 
impacts on small entities that are ``subject to'' the rulemaking, and 
that other impacts are to be ignored, even if those impacts would not 
exist, but for the rule. In the case of the Clean Air Act, the ambient 
levels of the NAAQS are designed to be achieved through State 
Implementation Plans (SIPs). Small entities are subject to legal 
requirements in the SIPs which will be modified as a direct result of 
the ozone and PM rules, but no one will ever be ``subject to'' the 
NAAQS. In other words, the impacts of the rule flow directly from EPA 
through the states to small businesses whose actions give rise in part 
to the benefits of the rule.
    According to EPA's reading of the statute, States are the only ones 
subject to the NAAQS, and no small entity will feel any impact of the 
ozone and PM rules, much less the ``significant impact on a substantial 
number of small entities'' required by the Reg Flex Act. Since SBREFA 
requires that EPA convene a Small Business Advocacy Review Panel only 
when an initial Reg Flex analysis is required, EPA's narrow reading of 
the application of Reg Flex has the effect of (1) denying small 
businesses the special opportunity for input that the Panels were 
designed to create, (2) denying small businesses the special 
opportunity for input that the Panels were designed to create, (2) 
denying small businesses their right to know about how they are likely 
to be impacted by the new regulations, and (3) hiding those impacts 
from the sunshine of full public disclosure.
    EPA's argument is that it need only concern itself with the impacts 
on small entities that are ``subject to'' a proposed regulation has no 
support in the statute. Nowhere in Reg Flex is the key phrase, ``a 
significant impact on a substantial number of small entities,'' limited 
by a requirement that the entities be ``subject to'' the rule. Clearly, 
Congress could have written such a limitation into the Reg Flex Act, 
but it did not.
    Of course, any change in regulations could have potentially 
infinite impacts throughout the economy and the analysis must be cut 
off at some point. In deciding whether to certify out of the Reg Flex 
Act and in conducting a Reg Flex Analysis, the agency must apply a rule 
of reason to distinguish between the foreseeable impacts that are 
directly attributable to the rulemaking and those highly speculative 
impacts that are only indirectly attributable to the rulemaking. 
However, nothing in the Reg Flex Act or SBREFA suggests that Congress 
intended to limit the analysis so narrowly as to cover only the impacts 
on small entities that are subject to the rule. While lawyers can 
always disagree with one another over how exactly to interpret a 
statutory requirement, EPA's interpretation appears at odds both with 
the plain language of the statute and the underlying purposes of both 
the Reg Flex Act and SBREFA.
    This issue is currently the subject of litigation in the DC Court 
of Appeals in the cases entitled American Trucking Association v. US 
EPA. Oral arguments were heard on December 17, 1998, and a decision is 
expected later this Spring. I urge the Committee to keep a close eye on 
the decision of the court. If the court affirms the original intent of 
Congress and overturns EPA's interpretation, no further action on your 
part will be necessary. However, if the court gives EPA deference and 
upholds the agency's interpretation, legislation would be urgently 
needed to reaffirm the intent of Congress and prevent the Reg Flex from 
effectively being gutted by one of the primary agencies SBREFA was 
designed to address.
When does an IRS rulemaking involve a collection of information 
        requirement?
    The committee should carefully assess how the Internal Revenue 
Service is implementing the new provisions of SBREFA clarifying that 
Reg Flex applies to IRS interpretative rulemakings to the extent they 
involve a collection of information requirement. I believe that the 
clear intent of Congress was to bring most IRS interpretative 
rulemakings within the ambit of Reg Flex. However, in recognizing that 
some IRS interpretative rulemakings may have no relationship to the 
forms that must be filed with the IRS or the paperwork that small 
businesses must maintain to document their compliance with IRS rules, 
Congress included a limited exemption to the general proposition that 
Reg Flex applies.
    The Committee should carefully examine the IRS's interpretation of 
when a rule ``involves a collection of information requirement.'' The 
Committee should ensure that the IRS does not limit the application of 
Reg Flex simply to the text of its forms. The term ``collection of 
information requirement'' is defined in SBREFA, as in the Paperwork 
Reduction Act, to include ``recordkeeping requirements.'' Thus, Reg 
Flex applies to all IRS interpretative rulemakings that in any way 
involve or relate to any change in the records or other paperwork that 
a small business must prepare or maintain to demonstrate compliance 
with the tax laws. Any interpretation by the IRS that seeks to narrow 
this definition would, in my view, violate the text and intent of 
SBREFA.
Are agencies complying with the regulatory review plans they adopted 
        under section 610?
    Section 610 of the Reg Flex Act requires that federal agencies 
adopt a plan to review all of their regulations within 10 years of 
adoption and to publish an annual list of the regulations the agency 
intends to review during the following year. However, this section has 
not received much attention in well over a decade. Shortly after the 
Act was enacted, over 15 years ago, nearly all federal agencies adopted 
plans for the periodic review of existing regulations and for a few 
years, some agencies complied with their plans and annually reviewed 
and modified existing regulations. But for over a decade, most federal 
agencies have ignored their own plans and forgotten their obligation 
under section 610 to review existing regulations. SBREFA sought to 
change this by allowing for the judicial review of agency compliance 
with section 610.
    Several recent GAO reports indicate that there is still significant 
non-compliance with section 610. The current Unified Agenda identifies 
only a relative handful of periodic reviews under section 610, and many 
of these reviews have been ongoing for over a year. The Committee 
should look into agency compliance with the requirement to have a plan, 
to comply with that plan, and to annually notify small entities about 
the rules to be reviewed in the coming year. If the Committee reports 
legislation to revise the Panel process, it should consider including 
amendments to close the loopholes allowing agency to continue to ignore 
the requirements of section 610.



[GRAPHIC] [TIFF OMITTED] 57905.001

[GRAPHIC] [TIFF OMITTED] 57905.002

[GRAPHIC] [TIFF OMITTED] 57905.003

[GRAPHIC] [TIFF OMITTED] 57905.004

[GRAPHIC] [TIFF OMITTED] 57905.005

[GRAPHIC] [TIFF OMITTED] 57905.006

[GRAPHIC] [TIFF OMITTED] 57905.007

[GRAPHIC] [TIFF OMITTED] 57905.008

[GRAPHIC] [TIFF OMITTED] 57905.009

[GRAPHIC] [TIFF OMITTED] 57905.010

[GRAPHIC] [TIFF OMITTED] 57905.011

[GRAPHIC] [TIFF OMITTED] 57905.012

[GRAPHIC] [TIFF OMITTED] 57905.013

[GRAPHIC] [TIFF OMITTED] 57905.014

[GRAPHIC] [TIFF OMITTED] 57905.015

[GRAPHIC] [TIFF OMITTED] 57905.016

[GRAPHIC] [TIFF OMITTED] 57905.017

[GRAPHIC] [TIFF OMITTED] 57905.018

[GRAPHIC] [TIFF OMITTED] 57905.019

[GRAPHIC] [TIFF OMITTED] 57905.020

[GRAPHIC] [TIFF OMITTED] 57905.021

[GRAPHIC] [TIFF OMITTED] 57905.022

[GRAPHIC] [TIFF OMITTED] 57905.023

[GRAPHIC] [TIFF OMITTED] 57905.024

[GRAPHIC] [TIFF OMITTED] 57905.025

[GRAPHIC] [TIFF OMITTED] 57905.026

[GRAPHIC] [TIFF OMITTED] 57905.027

[GRAPHIC] [TIFF OMITTED] 57905.028

[GRAPHIC] [TIFF OMITTED] 57905.029

[GRAPHIC] [TIFF OMITTED] 57905.030

[GRAPHIC] [TIFF OMITTED] 57905.031

[GRAPHIC] [TIFF OMITTED] 57905.032

[GRAPHIC] [TIFF OMITTED] 57905.033

[GRAPHIC] [TIFF OMITTED] 57905.034

[GRAPHIC] [TIFF OMITTED] 57905.035

[GRAPHIC] [TIFF OMITTED] 57905.036

[GRAPHIC] [TIFF OMITTED] 57905.037

[GRAPHIC] [TIFF OMITTED] 57905.038

[GRAPHIC] [TIFF OMITTED] 57905.039

