[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]


                         MIDNIGHT REGULATIONS:
                  EXAMINING EXECUTIVE BRANCH OVERREACH

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

                                HEARING

                               BEFORE THE

              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                           February 10, 2016

                               __________

                           Serial No. 114-60

                               __________

 Printed for the use of the Committee on Science, Space, and Technology
 
 
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              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

                   HON. LAMAR S. SMITH, Texas, Chair
FRANK D. LUCAS, Oklahoma             EDDIE BERNICE JOHNSON, Texas
F. JAMES SENSENBRENNER, JR.,         ZOE LOFGREN, California
    Wisconsin                        DANIEL LIPINSKI, Illinois
DANA ROHRABACHER, California         DONNA F. EDWARDS, Maryland
RANDY NEUGEBAUER, Texas              SUZANNE BONAMICI, Oregon
MICHAEL T. McCAUL, Texas             ERIC SWALWELL, California
MO BROOKS, Alabama                   ALAN GRAYSON, Florida
RANDY HULTGREN, Illinois             AMI BERA, California
BILL POSEY, Florida                  ELIZABETH H. ESTY, Connecticut
THOMAS MASSIE, Kentucky              MARC A. VEASEY, Texas
JIM BRIDENSTINE, Oklahoma            KATHERINE M. CLARK, Massachusetts
RANDY K. WEBER, Texas                DON S. BEYER, JR., Virginia
JOHN R. MOOLENAAR, Michigan          ED PERLMUTTER, Colorado
STEVE KNIGHT, California             PAUL TONKO, New York
BRIAN BABIN, Texas                   MARK TAKANO, California
BRUCE WESTERMAN, Arkansas            BILL FOSTER, Illinois
BARBARA COMSTOCK, Virginia
GARY PALMER, Alabama
BARRY LOUDERMILK, Georgia
RALPH LEE ABRAHAM, Louisiana
DARIN LaHOOD, Illinois
                            
                            C O N T E N T S

                           February 10, 2016

                                                                   Page
Witness List.....................................................     2

Hearing Charter..................................................     3

                           Opening Statements

Statement by Representative Lamar S. Smith, Chairman, Committee 
  on Science, Space, and Technology, U.S. House of 
  Representatives................................................     6
    Written Statement............................................     8

Statement by Representative Eddie Bernice Johnson, Ranking 
  Member, Committee on Science, Space, and Technology, U.S. House 
  of Representatives.............................................    10
    Written Statement............................................    12

                               Witnesses:

Ms. Karen Kerrigan, President and CEO, Small Business & 
  Entrepreneurship Council
    Oral Statement...............................................    15
    Written Statement............................................    17

Mr. Jerry Bosworth, President, Bosworth Air Conditioning
    Oral Statement...............................................    26
    Written Statement............................................    28

Ms. Kateri Callahan, President, Alliance to Save Energy
    Oral Statement...............................................    34
    Written Statement............................................    36

Mr. Sam Batkins, Director of Regulator Policy, American Action 
  Forum
    Oral Statement...............................................    47
    Written Statement............................................    48
Discussion.......................................................    61

             Appendix I: Answers to Post-Hearing Questions

Ms. Karen Kerrigan, President and CEO, Small Business & 
  Entrepreneurship Council.......................................    86

Ms. Kateri Callahan, President, Alliance to Save Energy..........   108

Mr. Sam Batkins, Director of Regulator Policy, American Action 
  Forum..........................................................   109

            Appendix II: Additional Material for the Record

Letter submitted by Representative Eddie Bernice Johnson, Ranking 
  Member, Committee on Science, Space, and Technology, U.S. House 
  of Representatives.............................................   112

Documents submitted by Representative Gary Palmer, Committee on 
  Science, Space, and Technology, U.S. House of Representatives..   124

Slide submitted by Representative Eric Swalwell, Committee on 
  Science, Space, and Technology, U.S. House of Representatives..   140

Documents submitted by Representative Lamar S. Smith, Chairman, 
  Committee on Science, Space, and Technology, U.S. House of 
  Representatives................................................   142

 
                         MIDNIGHT REGULATIONS:
                  EXAMINING EXECUTIVE BRANCH OVERREACH

                              ----------                              


                      WEDNESDAY, FEBRUARY 10, 2016

                  House of Representatives,
               Committee on Science, Space, and Technology,
                                                   Washington, D.C.

    The Committee met, pursuant to call, at 10:06 a.m., in Room 
2318, Rayburn House Office Building, Hon. Lamar Smith [Chairman 
of the Committee] presiding.
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    Chairman Smith. The Committee on Science, Space, and 
Technology will come to order. Without objection, the Chair is 
authorized to declare recesses of the Committee at any time.
    Welcome to today's hearing entitled ``Midnight Regulations: 
Examining Executive Branch Overreach.'' I'll recognize myself 
for five minutes and then the Ranking Member for her opening 
statement.
    President Obama has rushed through many costly and 
burdensome regulations over the last seven years. These include 
the ozone National Ambient Air Quality Standards, the Waters of 
the United States, and the Clean Power Plan. The Obama 
Administration shows no signs of slowing down and no doubt will 
continue to pursue its partisan and extreme agenda, regardless 
of the price to the American people.
    The speed at which these regulations are being finalized 
provide little certainty that these rules are based on a sound 
and transparent review of the underlying scientific data and 
analysis. The President's regulatory overreach will cost 
billions of dollars, cause financial hardship for American 
families, and diminish the competitiveness of American 
employers, all with no significant benefit to climate change, 
public health, or the economy.
    According to the American Action Forum, regulatory costs 
topped $197 billion in 2015. This is a cost of over $600 for 
every American citizen. From 2016 alone, the Obama 
Administration has proposed another $98 billion in regulatory 
costs. According to AAF's analysis, my home State of Texas is 
one of the hardest hit by these burdensome regulations.
    Despite heavy and growing public opposition to these 
proposals, the Obama Administration is actively willing to 
commit the United States to costly new regulations that will do 
nothing to improve the environment but will negatively impact 
economic growth. The Clean Power Plan and the Waters of the 
United States rule are just more of the EPA's attempts to 
expand its jurisdiction and increase its control over 
Americans. Congress voted against these rules through the 
Congressional Review Act last month. And the governors of most 
states continue to challenge overreaching regulations in court.
    Yesterday, the Supreme Court blocked the Administration's 
rules to limit greenhouse gas emissions from power plants. The 
Court's ruling confirms that this rule overreaches EPA's 
authority.
    But nothing seems to deter President Obama from achieving 
his extreme and unconstitutional climate agenda. Now, in an 
attempt to solidify his legacy before he leaves office, the 
President plans to rush through even more regulations. In the 
past year, the Department of Energy proposed 15 new energy 
efficiency standards, compared with just five energy efficiency 
standards proposed between 2009 and 2012. The DOE now works to 
issue costly energy efficiency rules on everything from 
household appliances to vending machines, including ceiling 
fans, air-conditioning and heating equipment, and residential 
boilers.
    We should all be concerned about the process the EPA uses 
to reach their regulatory conclusions. The agency rushes to 
enact environmental regulations without thorough, public review 
of the data used to justify these rules. This hearing provides 
yet another example of why legislation like the Secret Science 
Reform Act and the Science Advisory Board Reform Act are 
important checks on regulatory overreach. We should require 
more fairness, transparency, and public engagement in the 
rulemaking process. The President should not rush scientific 
analysis to appease his political supporters.
    We all support energy efficiency and a clean environment. 
The air we breathe is significantly cleaner and will continue 
to improve due to the development of new technologies. Basic 
research and development will continue to lead the way to 
energy solutions. This research should be allowed to mature so 
the private sector can transition new technologies into the 
market before the federal government sets new energy efficiency 
and environmental standards. There may be serious economic 
consequences if the EPA and the DOE rush forward with these 
proposed regulations. The cost is certain but the benefits are 
not.
    Today's witnesses will discuss how regulatory burdens fall 
disproportionately upon small businesses and negatively impact 
economic productivity. Small businesses, like individual 
Americans, ultimately pay for these regulations. Higher prices 
for goods and services, combined with reduced economic 
activity, hinder private sector innovation and cause businesses 
to struggle to stay open.
    These proposed regulations will have an even greater 
adverse impact on those who live on fixed incomes, such as the 
elderly and the poor, who are the most vulnerable to increases 
in the price for basic necessities like electricity and heat. 
More should be done to hold this Administration accountable. We 
must cut regulatory red tape and put America back on a path to 
growth and prosperity.
    For this reason, I am pleased that the Speaker has selected 
the Science Committee to help lead a taskforce to reduce costly 
and unnecessary regulatory burdens. Rushed regulations in a 
President's last year are bad for the American economy and the 
American people. We can't afford to rush through regulations 
with little substantive environmental benefit and heavy costs 
to our economy.
    [The prepared statement of Chairman Smith follows:]
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    Chairman Smith. That concludes my opening statement. And 
the Ranking Member, the gentlewoman from Texas, is recognized 
for hers.
    Ms. Johnson of Texas. Thank you very much, Mr. Chairman.
    This hearing is unfortunately not a surprise. It fits a 
clear and constant and consistent pattern on this committee, 
one that ignores the important work that actually falls under 
the Committee's jurisdiction and instead attacks the Federal 
Government's legitimate and necessary role in helping to ensure 
that the citizens of the Nation are protected from public 
health threats and environmental dangers.
    It may be fruitless to remind us of this, Mr. Chairman, but 
the Committee has little if no jurisdiction over the 
regulations likely to be discussed today. And, while you and 
your colleagues may disagree with me, I think our time would be 
better spent on hearings that advance the Nation's research, 
innovation, and manufacturing enterprises.
    Nevertheless, today, we will undoubtedly hear again the 
same tired rhetoric from the majority dismissing the need and 
value of regulations. The notion that Federal regulations are 
not necessary because private industry would never harm the 
financial interests or health of the public is simply false. 
Federal regulations protect us from public health hazards, and 
our children from unsafe products, communities from 
environmental dangers, and families from financial collapse. 
Federal regulations have played an important role in curbing 
the tobacco industry's past practices of marketing their 
knowingly harmful products to children, and Wall Street 
investment practices led to the 2008 financial crisis with dire 
economic consequences for millions of Americans.
    Federal regulations are not necessary or appropriate in 
every instance or for every issue. However, I believe they are 
a critical tool in many instances in helping to improve our 
health, make our children safer, and prevent deadly disasters. 
For example, the lead contamination crisis in Flint, Michigan, 
is a clear example of the need for rigorous implementation of 
federal regulations and standards, not pulling back.
    Similarly, an ongoing massive methane gas leak in 
California is continuing to foul the environment and endanger 
the safety of the public's health. No federal regulation 
currently addresses the identification or repair of methane gas 
leaks across this country, but perhaps federal regulations 
could have helped prevent the Southern California Gas Company's 
leak or the 1,724 significant natural gas incidents that have 
claimed the lives of 79 people and injured 396 others between 
2010 and 2015.
    I believe that the regulations proposed by this 
Environmental Protection Agency and the Department of Interior 
to help detect and repair of methane leaks are a positive first 
step. I hope we can agree that issues like the methane gas leak 
in California should be thoroughly investigated to identify 
measures to prevent them from occurring in the future.
    That is why I am asking GAO, the Government Accountability 
Office, to investigate the Southern California Gas Company leak 
where the continuing release of methane has forced thousands 
from their homes and posed a significant threat to public 
health. There are serious unanswered questions surrounding this 
leak and the safety and operation of these pipelines in 
general, which are far more worthy of this committee's time and 
consideration than today's hearing.
    In particular, this committee has a role to play in the 
technical standards and pipeline safety research governing the 
country's natural gas infrastructure. Mr. Chairman, I hope you 
will join me in requesting this review.
    In closing, I look forward to the day when this Congress 
and this committee will step back from its counterproductive 
opposition to efforts by EPA and DOE and other federal agencies 
who are just trying to carry out their statutorily mandated 
missions. They may not always get everything exactly right, nor 
do we, but trying to prevent them from doing their job at all 
is not a good use of our time. Instead of seeking to score 
political points by undermining their important work, we should 
come together in a productive way to advance our economy, a 
cleaner environment, and a healthier public.
    [The prepared statement of Ms. Johnson of Texas follows:]
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    Ms. Johnson of Texas. And finally, Mr. Chairman, before I 
yield back, I'd like to enter into the record a letter from 600 
physicians, nurses, and other health professionals who support 
EPA's proposed rule to reduce methane emissions.
    Chairman Smith. Okay. Without objection, that will be part 
of the record.
    [The information appears in Appendix II]
    Chairman Smith. And I thank you----
    Ms. Johnson of Texas. Thank you very much. And I must say 
that I will be departing the Committee for a markup in another 
committee.
    Chairman Smith. Okay. Thank you, Ms. Johnson.
    Let me introduce our witnesses today. And our first one is 
Ms. Karen Kerrigan, President and CEO of the Small Business and 
Entrepreneurship Council. Ms. Kerrigan's leadership and 
advocacy for nearly a quarter of a century have helped foster 
U.S. entrepreneurship and global small business growth. She has 
been appointed to numerous federal advisory boards, including 
the National Women's Business Council. In addition, she is a 
founding member of the World Entrepreneurship Forum and is a 
board member of the Center for International Private 
Enterprise. In 2009, Ms. Kerrigan was awarded the Small 
Business Advocate of the Year by the New York Enterprise 
Report. Ms. Kerrigan received her bachelor's degree in 
political science from the State University of New York System.
    I will now yield to the gentleman from Texas, Mr. Weber, to 
introduce our next witness, Mr. Jerry Bosworth.
    Mr. Weber. Thank you, Chairman Smith. I'm pleased to 
introduce our third witness and fellow Texan Mr. Jerry 
Bosworth, President of Bosworth Air Conditioning and Vice 
Chairman of the Air Conditioning Contractors of America. 
Bosworth Air Conditioning is a family-owned and -operated 
business of ten employees, which was founded in 1959. Jerry was 
just a young whippersnapper back then. Bosworth A.C. 
specializes in both installation and service and replacement of 
both residential and commercial systems. Jerry served as 
Chairman of ACCA, Air Conditioning Contractors Association, and 
of the Members Services Committee. Prior to being elected to 
the National Board, he donated his time and energy as a member 
of the local contracting association, TACCA, or we would call 
it also Houston's Air Conditioning Contractors Association, and 
served on the board of his state contracting association.
    Mr. Chairman, we are very grateful to have you here today. 
He's got one of the oldest and, I might add, finest air-
conditioning companies next to Weber's Air and Heat on the Gulf 
Coast. So I'll----
    Chairman Smith. Waiting for that.
    Mr. Weber. So a free plug now, but, Jerry, I'll send you an 
invoice later. Welcome. We're glad to hear.
    Chairman Smith. Thank you, Mr. Weber.
    Our next witness is Ms. Kateri Callahan, President of the 
Alliance to Save Energy. Ms. Callahan also serves as a board 
member for the Keystone Energy Board and the Business Council 
for Sustainable Energy. She also serves on advisory councils to 
the U.C. Davis Policy Institute on Energy, Environment, and the 
Economy; and Duke University's Center for Energy Development 
and the Global Environment. Prior to joining the Alliance, Ms. 
Callahan served as the President of the Electric Drive 
Transportation Association. She received her bachelor's degree 
in political science from the University of Louisville.
    Our final witness is Mr. Sam Batkins, Director of 
Regulatory Policy at the American Action Forum. Mr. Batkins 
focuses his research on examining the rulemaking efforts of 
administrative agencies in Congress. His work has appeared in 
the Wall Street Journal, the New York Times, the Hill, Reuters, 
and the Washington Post, among other publications. Prior to 
joining the forum, Mr. Batkins worked at the U.S. Chamber of 
Commerce, the Institute for Legal Reform, and the National 
Taxpayers Union. Mr. Batkins received his bachelor's degree in 
political science from the University of the South and his law 
degree from Catholic University.
    We welcome you all, look forward to your testimony. And, 
Ms. Kerrigan, if you'll begin.

                TESTIMONY OF MS. KAREN KERRIGAN,

                       PRESIDENT AND CEO,

                        SMALL BUSINESS &

                    ENTREPRENEURSHIP COUNCIL

    Ms. Kerrigan. Great. Well, thank you, Chairman Smith. It's 
a pleasure to be here. Thanks. Good morning to all the 
committee members. And it's--again, thank you for the 
invitation. This is a very important issue for our members in 
the small business sector of the economy.
    It should come as no surprise to members of the committee 
that many small businesses have concerns about federal 
regulations and the process by which the rules are made. A host 
of new rules and ones yet to come are piling on at a time when 
small businesses continue to struggle in a very tough economy. 
Complying with existing regulations and navigating new rules 
takes time and significant resources. Business owners are now 
looking at what's currently in the pipeline, which only 
perpetuates the uncertainty that's behind less risk-taking and 
growth.
    The period between the recession until now has been 
challenging for small businesses. A Bank of America survey 
conducted midyear last year found that only one in five small 
business owners say they have completely recovered from the 
Great Recession. So it is times such as these that federal 
agencies and government policies need to be especially 
sensitive about how proposed actions impact entrepreneurship 
and small business growth. After all, even given their 
struggles and challenges, small businesses and startups still 
remain the engine of job creation and innovation in our nation.
    And it's that understanding that was behind the development 
and passage of laws meant to protect small businesses from 
excessive regulation and provide them with some voice in the 
regulatory process. But unfortunately, there has been a 
breakdown in the process and responsiveness to their concerns.
    So as we enter a period where there will be a change of 
Administrations, and historically, this has been a time where 
there is an uptick in new rulemakings, I think you can 
empathize with the concerns of small business owners who feel 
that their voice and concerns can be minimized even further. We 
are concerned that an anticipated regulatory rush could lead to 
more shortcuts in a process that is meant to look out for small 
business owners.
    The Mercatus Center analyzed data during the midnight 
regulatory period across Administrations from 1975 to 2006 and 
found regulatory analysis quality drops and regulatory 
oversight by the Office of Information and Regulatory Affairs 
weakens. As a result, federal agencies produce ineffective 
regulation, and these rules are more likely to be more costly.
    So this is why we do hope there can be some actions, some 
reforms that will improve the process and make it more 
accountable and inclusive for the small business community 
because small businesses are disproportionately impacted by 
regulation, and I would add more so by environmental 
regulation. A National Association of Manufacturers' report 
details the disproportionate cost, which I've included in my 
written testimony.
    EPA's possible activity is of concern given the Agency's 
history of improper certification of proposed rules when it 
comes to small business impact. On several major rulemakings, 
the SBA's Office of Advocacy made it clear that EPA's 
certification of rules did not comply with the Regulatory 
Flexibility Act. This was the case, for example, with 
greenhouse gas rules and the Waters of the United States Rule. 
In each of these cases, EPA's own analysis contradicted its 
certification.
    The bottom line is that small businesses remain very 
concerned about what's ahead in 2016 on the federal regulatory 
front. With an economy that lacks a strong traction and with 
indications that economic growth may slow further, regulations 
that raise compliance and energy costs and make it more 
difficult to compete only create more headwinds for small 
businesses.
    But I am somewhat optimistic. Thankfully, both sides of the 
political aisle recognize that we have a regulatory problem, a 
process problem as well. There are solid bipartisan solutions 
that have been proposed in the House and Senate that begin to 
chip away at the lack of accountability and to provide small 
businesses a greater voice and more protection in the 
regulatory process. And I look forward to discussing these with 
committee members. Thank you.
    [The prepared statement of Ms. Kerrigan follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Smith. Thank you, Ms. Kerrigan.
    And, Mr. Bosworth.

                TESTIMONY OF MR. JERRY BOSWORTH,

              PRESIDENT, BOSWORTH AIR CONDITIONING

    Mr. Bosworth. Yes. Is this still on? There we go. I'm 
sorry.
    Chairman Smith, Ranking Member Johnson, and members of the 
committee on energy, thank you for the opportunity to testify 
before you today. My name is Jerry Bosworth, and I am the 
President of Bosworth Air Conditioning and Heating in 
Galveston, Texas.
    Bosworth Air Conditioning and Heating has been selling, 
installing, and servicing Galveston County's residential and 
commercial comfort systems since 1959. I am here today 
representing the interests of ACCA, the Indoor Environmental 
and Energy Efficiency Association. ACCA is the leading national 
association representing the technical, educational, and policy 
interests of small business contractors that design, install, 
and maintain residential and commercial heating and cooling 
systems. But I am also before you today representing more than 
the 1 million Americans employed by the manufacturers, 
distributors, contractors--and contractors of the HVACR 
industry.
    Today, I would like to highlight some of the concerns 
related to the uptick in the number of rules and regulations 
related to the energy and environmental regulations the 
Department of Energy and the Environmental Protection Agency 
have had significant adverse impact on manufacturers, 
distributors, and contractors.
    From the Department of Energy, we have seen an aggressive 
push to increase the energy efficiency standards for 
residential and commercial heating, ventilation, air-
conditioning, refrigeration equipment, as well as water 
heaters. At the time--at the same time, we have been--there 
have been problems with the test procedures used to rate some 
of the equipment that makes it more difficult to achieve these 
higher standards, affecting a double impact.
    As an example, the Department of Energy recently proposed a 
set of new minimum national energy conservation standards for 
residential natural gas furnaces at 92 percent AFUE, a ratio 
that describes how efficiency--how efficiently the appliance 
converts gas to heat. According to DOE's own economic models, 
nearly 1/3 of all homeowners in 19 southern States and 
territories would never see a positive payback from replacing 
their existing furnace; 12 percent of homeowners in the 33 
northern States, a similar prospect.
    In proposing to set this standard, DOE is effectively 
eliminating one type of furnace technology that represents half 
of the current models shipped today. I have installed a lot of 
furnaces in my lifetime, but only once have I installed a 
furnace that approached the standard DOE wants to set as the 
basic model for all States.
    Higher efficiency furnaces like the ones DOE wants to 
mandate as a minimum are not appropriate in all parts of the 
country, not even the North. This is because furnaces that have 
an AFUE ratio equal or above 90 percent have special 
requirements that can only add thousands of dollars to the 
installation cost. This may force the homeowners to repair or 
maintain an older, inefficient model instead of upgrading, or 
it can drive many homeowners in areas of low heat load to opt 
for a heat pump, driving up the utility costs, leading to more 
fossil fuel emissions at the energy plant.
    On Section 608, 608, the production, use, and handling of 
hundreds of refrigerant compounds that make air-conditioning 
and refrigeration possible are controlled and regulated by the 
EPA. Many have found it--many of these have been found to harm 
the ozone layer or have a higher global warming potential if 
they are released into the atmosphere. EPA rules requires 
anybody who works on an air-conditioning system to take a 
certification test to obtain their 608 card, named after 
Section 608 of the Clean Air Act, prohibiting the release of 
most refrigerants while performing any service or maintenance.
    In order to comply with these rules, the service technician 
must be trained, have the required equipment, take the extra 
time to properly evacuate the entire refrigerant into an 
appropriate container before performing any service work to the 
sealed system. ACCA has no problem with these rules, but 
unfortunately, there are a lot of individuals who claim to be 
professional contractors who skirt these rules and are never 
caught. The bottom line--the bottom-feeders take advantage of a 
lax enforcement and undermine our industry.
    So we think that better enforcement of--we would like to 
see better enforcement of the Section 608 rule. Unless 
significant changes are made to Section 608 program through 
increased enforcement, it cannot accomplish its mission to 
protect the environment and should be abandoned.
    Lastly, I would like to bring to the Committee's attention 
an important gap in existing regulatory scheme for residential 
equipment. According to a 2013 National Institute of Standards 
and Technology study, there are substantial equipment 
efficiency losses due to poor installation practices typically 
due to duct leakage, refrigerant undercharge/overcharge, low 
indoor airflow, oversized equipment, and undersized ductwork.
    For years, ACCA has championed the need for quality 
installations in the HVACR contracting business, and DOE seems 
to ignore our pleas.
    So I look forward to any questions from the Committee. 
Thank you much.
    [The prepared statement of Mr. Bosworth follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Smith. Thank you, Mr. Bosworth.
    And, Ms. Callahan.

               TESTIMONY OF MS. KATERI CALLAHAN,

               PRESIDENT, ALLIANCE TO SAVE ENERGY

    Ms. Callahan. Thank you, Mr. Chairman, and members of the 
committee, for the opportunity to testify before you today. I'm 
going to take a bit of departure from my fellow witnesses so 
far and talk about the significant and very positive impacts 
that appliance, equipment, and vehicle efficiency standards are 
having on our economy.
    My organization, the Alliance to Save Energy, is a 
nonprofit coalition that has worked for 39 years to advance 
energy efficiency for the economic benefits, the improvement of 
the environment benefits, and also to enhance our energy 
security.
    I'm very proud of the fact that we were founded by two 
then-sitting Members of Congress, Hubert Humphrey, a Democrat 
from Illinois; and Chuck Percy, a Republican from--excuse me--
Hubert Humphrey, a Democrat from Minnesota; and Chuck Percy, a 
Republican from Illinois.
    We have jealously guarded our inherited culture of 
bipartisanship, and today, we count 14 sitting Members of 
Congress from both sides of the aisle and both sides of the 
Capitol as honorary members of our board. And I'd like to take 
this moment to note that we are very pleased that Congressman 
Paul Tonko, a member of this committee, is part of our august 
group.
    Our Congressional Members are joined on our Board of 
Directors by leaders from business and organizations across all 
sectors of the economy, including manufacturers and HVAC folks. 
Since the birth of the Alliance, our country has made very 
great strides in advancing energy efficiency, and that's thanks 
in large measure to effective national public policies, most 
notably, the appliance, equipment, and vehicle efficiency 
standards.
    Efficiency standards have proven to be the most cost-
effective way of driving energy efficiency into our market. In 
fact, if you take together the corporate average fuel economy 
standards and all our appliance and equipment standards, we're 
shaving off the energy use equivalent to ten percent of what we 
consume today. And that translates into very big money savings 
for Americans.
    Studies have shown that American businesses and consumers 
today are saving $800 billion every year on their energy bills. 
And as a country, we've doubled our energy productivity over 
the past three decades. That is to say that we are creating 
twice as much gross domestic product today than we did--using 
half of the energy than we did in 1980.
    We've done this once, and at our organization we believe we 
can do it again. The Alliance has articulated the goal of 
doubling energy productivity once again by 2030. If we do it, 
the benefits to our country are simply transformative. We would 
recycle $327 billion into our economy from energy cost savings. 
We would create 1.3 million new jobs, and we'd reduce the need 
for imported energy to represent less than seven percent of our 
total demand. But we can only achieve this goal with a strong 
foundation of public policies, and efficiency standards are a 
cornerstone of good national energy efficiency policy.
    Fortunately, the history of our national efficiency 
standards is one of bipartisan support. I'm not sure committee 
members are aware, but the first corporate average fuel economy 
standards were signed into law by President Ford, and the first 
appliance and equipment standards were signed into law by 
President Reagan. These laws were created and moved through the 
Congress with broad bipartisan support. Over the decades, this 
tradition of bipartisan support has remained solid, with the 
Congress enacting significant legislation in 1990, '92, 2005, 
and 2007. All included efficiency standards.
    The bipartisan work--this bipartisan work on standards is 
paying big dividends for our economy. For example, by 2020, 
appliance and equipment standards alone, not including CAFE 
standards, will be contributing 387,000 annual jobs to our 
economy. And these are jobs that are spread all across all 50 
States.
    As the focus of this hearing is on midnight regulations, I 
believe it's important to note that in the case of efficiency 
standards at least, it's Congress--not the Administration--that 
dictates the timelines and deadlines for action. And these 
aren't tied in any way to a given President's term in office.
    The typical time needed to complete a standards rulemaking 
is three years because it involves a significant engagement 
with impacted manufacturers, stakeholders, and others 
throughout the process. It is true that the pace of standards 
rulemaking has been brisk during the Obama Administration. This 
was driven in large part by a need to meet Congressional 
directives and court-ordered mandates to catch up on backlogged 
standards. We see no evidence that the Administration can or 
will rush any efficiency standards at the end of this 
President's term.
    While we have achieved great success through our--through 
appliance and equipment efficiency standards, we do believe 
there's always room for improvement. The Alliance, along with 
many stakeholders and others, would like DOE to make more 
transparent the models and data that it's using to perform its 
energy savings and performance calculations. And doing so would 
help to avoid delays in litigation.
    There's also a big something I'm here to ask you to do, and 
that is to refrain from placing ad hoc policy riders on 
legislation that prevents DOE from enforcing standards that 
have been codified. Mr. Bosworth already mentioned that this 
allows what I would call unscrupulous manufacturers--he calls 
them bottom-feeders--to flout the law. So we'd like to see 
that.
    So in conclusion, there is a huge portfolio of research and 
analysis that demonstrates that efficiency standards are 
driving innovation, saving American businesses and consumers 
money on their energy bills, and they're creating jobs. All of 
this leads to a more energy-productive and more globally 
competitive economy. Congress should be proud of the work it 
has done in this area and should continue this legacy of 
bipartisan legislation to set minimum efficiency standards for 
our appliances, our equipment, and our vehicles. Thank you.
    [The prepared statement of Ms. Callahan follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Smith. Thank you, Ms. Callahan.
    And, Mr. Batkins.

                 TESTIMONY OF MR. SAM BATKINS,

                 DIRECTOR OF REGULATOR POLICY,

                     AMERICAN ACTION FORUM

    Mr. Batkins. Thank you, Chairman Smith, and Members of the 
Committee.
    [Slide.]
    Mr. Batkins. I will direct your attention to the chart, 
which is now everywhere, which shows midnight regulatory 
activity from 1997 to 2012, and you'll notice two pronounced 
spikes. Those are in red, in 2000 and 2008. And what I mean by 
midnight regulations, when we studied the midnight quarter, 
which is just between November and January--and you'll notice 
that if you look at--all midnight rules where this chart shows 
are just significant rulemakings. It's roughly 80 to 90 percent 
more than other similar midnight quarters. For example, in 2000 
and 2008 OIRA concluded review of 51 and 54 significant 
rulemakings.
    During those next subsequent quarters, so February to 
April, the next closest economically significant reviews were 
20 and 29. So we had almost double the amount of significant 
regulatory activity during the presidential midnight quarters 
as opposed to the next subsequent quarters. This chart is 
somewhat reflective of action at DOE and EPA as well, although 
perhaps a bit less so.
    Now, Administrations, of course, have tried to curb this 
practice in the past, and this makes sense. Administrator 
Howard Shelanski has a memo sort of ushering in a new era of 
let's slow down the process. Let's not rush any particular 
regulations. Josh Bolten, who was the White House Chief of 
Staff in 2008, issued a memorandum which set up sort of a brief 
schedule of when proposed rules should come to OIRA and when 
final rules should head to OIRA. But as you can see in 2008, 
agencies still managed to finalize quite a number of midnight 
regulations, including from DOE and EPA.
    Now, what does this mean? It has profound implications. 
We've heard the Mercatus data on quick OIRA review times 
generally lead to poor economic analysis, and poor economic 
analysis can often lead to poorer results as well. And when 
we're talking about multibillion, multimillion dollar rules, 
the Nation can't afford poor analysis. We want to be able to 
look back at these rules 5, ten years down the road and 
determine whether or not we were--they were effective. And 
rushing rulemakings through the process doesn't allow us to 
examine rulemakings, again, five, ten years later. So a 
measured pace that allows the small staff of OIRA to do their 
job is important.
    Now, the Nation has already paid a pretty high price--I 
mentioned DOE and EPA--for those regulations. If you add up EPA 
and DOE on a net present value basis, it's roughly $500 billion 
in costs with an associated 33 million paperwork burden hours. 
Just to put that paperwork burden in context, it would take 
16,500 employees working full-time, 2,000 hours a year, to 
complete the new paperwork from just these two agencies, which 
is one reason why the Nation's paperwork burden--and I checked 
today; it hasn't changed that much--is still at the highest 
level we've seen in recent history.
    So I've mentioned a lot of figures. What do they mean 
generally for individuals? Well, regulation imposes transition 
costs. Those costs can be borne by the firms in terms of their 
employees' pay or perhaps even employee dislocation, they can 
be borne by the shareholders of the companies, or they can be 
passed on to consumers in the form of higher prices, sometimes 
all three.
    And agencies themselves do routinely admit--and there is 
evidence--that a lot of these costs do get passed on to 
consumers. For example, a hypothetical consumer purchasing a 
furnace fan, refrigerator, water heater, according to analysis, 
could pay an additional $600 on what is in essence a regulatory 
tax.
    The G.W. Regulatory Studies Center and Sofie Miller have 
found that these burdens can often be regressive. They are 
based generally sort of on a one-sized-fits-all, but not all 
consumers have the same preferences. By using discount rates of 
3 and seven percent, we sort of assume that all consumers 
behave the same way, and in many respects, that's not the case.
    In terms of reform to the midnight regulation system, there 
are a lot of options, some of which are messy. We can do what 
Rahm Emanuel and Andy Card did when the Administration changed 
over and, in essence, issue a regulatory moratoria. I mean, for 
an entire month when President Obama took office, no new 
significant regulations came out of the White House.
    We can also use the Congressional Review Act, which is, 
again, a messy sort of piecemeal approach. If there are 
regulations Congress doesn't like in 2017, they can use that 
approach to repeal them.
    And there's also a positive approach. Congress could enact 
legislation providing for a flexible schedule for midnight 
regulation during presidential election years.
    Another way, the ALERT Act, which Congress is currently 
considering, would prohibit a rule from taking effect unless 
posted on the internet for at least 6 months. That doesn't have 
the direct intended effect of curbing midnight regulation, but 
it is one approach.
    And with that, I will conclude and I'll be happy to take 
your questions.
    [The prepared statement of Mr. Batkins follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Smith. Okay. Thank you, Mr. Batkins.
    Ms. Kerrigan, let me address a question to you but at the 
outset point out, as I mentioned in my opening statement, that 
in 2015 the President proposed 15 different energy regulations. 
In the three-year period prior to that, he proposed only five. 
So that means that last year, the rate of energy regulations 
was about nine times what it had been in the previous three 
years. No telling what it's going to be in 2016 if that trend 
continues. But what is the impact of all these regulations on 
two discrete groups: small business and the economy?
    Turn on your mike. Yes.
    Ms. Kerrigan. Got it. I will also add that if you looked 
at--if you look at the unified agenda that was put out in 
November 2015, that the Administration will also issue 75 
economically significant rules this coming year, and last year, 
they issued 62 such rules. So there will be an uptick on----
    Chairman Smith. Right.
    Ms. Kerrigan. --that side as well.
    I mean, look at the--as I mentioned in my statement, I 
mean, we're still dealing, I think, with a very tough economy 
from the small business perspective. They're very concerned and 
continue to be about weak sales, sales growth, the direction of 
the economy in 2016. I think NFIB had--its small business index 
came out yesterday, which showed they're very concerned about 
sort of where the economy is headed in 2016 and what that means 
for sales growth.
    So when--so there's a little wiggle room, you know, when it 
comes to costs, and regulations add costs on these small 
businesses. They're already dealing with a flood of--I mean, 
the ObamaCare regulations and regs over the last few years, and 
if we're--and we're also staring down the--staring at many more 
workplace regulations, overtime regulations, a whole host of 
things on top of environmental and energy regulations.
    So this cumulative impact has a massive impact on their 
ability to invest, to grow, to hire new employees, to compete 
in the marketplace, and to survive, quite frankly.
    Chairman Smith. Okay. Thank you, Ms. Kerrigan.
    Mr. Batkins, you have heard today and we've heard the 
Administration say that somehow all these regulations are good 
for the economy. What's the response to that assertion?
    Mr. Batkins. Well, I mean, if you take a deep dive and go 
into their own regulatory analysis, you'll find them admit 
often that regulations could raise healthcare costs, could 
raise energy costs, and could raise costs to the consumer. 
Another impact which is probably not talked about a lot is 
there are, I think, by our account, roughly 30 regulations 
where even regulatory agencies admitted that costs would exceed 
the benefits. And there have been a few in the environmental 
realm as well. So, you know, I think a lot of the big 
regulations get a lot of play in the press, but again, there 
are several where the agencies have admitted costs would exceed 
benefits.
    Chairman Smith. Okay. Mr. Batkins, last question. What can 
we do to make the regulatory process more transparent, more 
honest?
    Mr. Batkins. Well, it's a great question. One we've 
mentioned, Mercatus here, their research, looking at sort of 
the completeness of regulatory analysis. And they use a scale 
of--out of 30, and I think DOE on that scale is a 19 out of 30, 
which is not a grade that I would want to get. But it does 
actually best other Cabinet agencies. EPA is about a 15 out of 
30.
    So one thing that a lot of--when I talk to people who 
actually have to comply with regulations that are looking at 
the regulatory impact analysis is they want a way that they can 
sort of completely reproduce what the agency's analysis says. 
And that might be the case sometimes, but oftentimes, that's 
not the case, and the ability to sort of really see what the 
agency--what their assumptions are and how those assumptions 
play out in the data represented to the public.
    Chairman Smith. Okay. Thank you, Mr. Batkins.
    The gentleman from New York, Mr. Tonko, is recognized for 
his questions.
    And let me say I'm going to need to excuse myself for a few 
minutes but will catch up on the gentleman's questions later 
on.
    Mr. Tonko. Okay. Thank you, Chair. And thank you to all of 
our witnesses for joining us today.
    Kateri, it indeed is great to see you, and thank you for 
the awesome work the Alliance does on this issue. I'm proud to 
serve as an honorary member, as you indicated, of the 
Alliance's board, and I strongly believe that energy efficiency 
should be our fuel of choice.
    I have to tell you, I shared with Chair Smith--he had asked 
me about that assignment. I said I was on the board with the 
Alliance prior to my days in Congress also as President and CEO 
of NYSERDA, New York State's Energy Research and Development 
Authority. So I'm proud of that assignment. I'm especially 
proud that New York's capital region has recognized that it is 
indeed necessary to innovate and make the transition to a more 
energy efficient world.
    So my question to you, Ms. Callahan, in your assessment of 
the industry, it is your experience that regulation often will 
spur the private sector to innovate. Do you agree that private 
industry in America has proven time and time again that it has 
the ability to adapt and grow when new rules or policies are 
introduced? And specifically, how have you seen industry 
innovate as a result of energy efficiency standards?
    Ms. Callahan. Thank you very much for that question, 
Congressman Tonko. I couldn't agree more strongly that 
regulations have led to innovation and technology, and I want 
to talk about that in a minute. But I also want to address, if 
I could for a second, Chairman Smith's questions as well.
    We--our information that we have is that DOE issued 10 
standards or updates to standards in 2014 and 10 in 2015. There 
are 16 on the regulatory agenda now, and if they follow suit, a 
couple of those, they'll defer from updating. A couple others 
may follow--flow over. So we don't see that there's going to be 
any big uptick in that.
    And I think it's also really important to note that of all 
of the regulations that are at OIRA for review, all but one 
have been there for more than 90 days, so they're overdue. And 
only one is a final rule. So it's just going along in the 
regular process in the regular order of how we establish 
efficiency standards.
    So let's talk about how they've created innovation and 
driven it. A great example is a refrigerator. A refrigerator 
today uses 75 percent less energy. It only uses a quarter of 
the energy of one that was built in the '70s, it's 20 percent 
bigger, and it consumes--and it costs about 25 percent less in 
real dollars.
    So if--we're getting it all. We're getting better products, 
we're getting greater choice. The light bulbs which have caused 
some controversy in terms of the mandates that were put forward 
there, I would note that it was the manufacturers working with 
us, the stakeholders working with Members of Congress to put 
those in place. And what we've seen now, instead of one choice 
of an inefficient incandescent light bulb, we have many, CFLs, 
we have LEDs coming onto the market. The prices are falling 
dramatically. Now, you can choose color in the light you want, 
you can choose longevity of light bulbs. You have a wide 
selection, and all for costs that are coming down very 
significantly.
    The list goes on and on. Clothes washers, dishwashers, they 
perform better. Clothes washers, as an example, they are--cost 
about 45 percent less than they did before standards were put 
in place. Dishwashers are down about 30 percent. So you see 
costs falling for the first price. You also get the savings on 
the backend. And let's remember that homeowners are spending 
the second-most amount of money in their budget on their energy 
bills. After the mortgage, next up is energy bills, which are 
about $2,000--between $2,000 and $2,500 a year.
    So we're getting all kinds of innovation and products, 
we're getting savings in both ways, products that are coming to 
market and on the energy savings. So we see it really as a win-
win-win, and a lot of that secret sauce is because the 
manufacturers are working with DOE in a transparent way to 
develop standards that they know they can meet.
    Mr. Tonko. And also, Mr. Batkins' testimony argues that 
efficiency standards can have a negative impact on low-income 
consumers that may have to pay more initially for equipment 
that meets the standards, and then they may not keep those 
items long enough to reap the lifecycle cost benefits. How 
would you respond to those assertions? And is this a 
significant issue? And if so, what would you recommend to 
address it?
    Ms. Callahan. Well, I couldn't disagree with that more. 
First of all, a lot of low-income people actually rent homes 
and pay utility bills, but there's a split incentive. The 
people that own the buildings that supply them with the 
dishwashers, the clothes dryers, they don't have an incentive 
to put in the most efficient equipment because they're not 
going to be paying the bills. The person that lives there pays 
the bills. And so if you set minimum levels of efficiency 
allowable in the market, you make sure that the low-income 
people, like the people that can afford higher-end products, 
are getting an efficient model and they're saving on their 
energy bills.
    I also--I'll go back to the light bulb. You know, people on 
fixed incomes or low incomes might make a choice to buy a 25 
cent incandescent light bulb over a $2 CFL or a $3 LED. They're 
going to--that's going to cost them $60 over the cost of the 
product. So, you know, a lot of people just don't have the 
information at hand, don't know the decisions they're making 
are going to cost a lot more.
    So again, I think that, you know, as long as it's cost-
effective, as long as these are improving and innovating 
products, the low-income folks are benefiting, as are the high-
income folks.
    Mr. Tonko. Thank you very much. And with that, Mr. Chair, I 
yield back.
    Mr. Weber. [Presiding] I thank the gentleman.
    Before I recognize myself for five minutes, I would like to 
give Mr. Batkins a chance to respond to that previous 
statement.
    Mr. Batkins. Sure. In my testimony I sort of just merely 
highlighted the research which exists now, which basically just 
looks at consumer preferences by income range. Obviously, there 
are some consumers who will come out with a net benefit from 
efficiency standards. But what the existing research looked at 
was discount rates, and they found that lower-income consumers 
typically had much higher discount rates than higher-income 
consumers. And if you use those higher discount rates for a lot 
of these energy efficiency rules that were studied, they turn 
net costs as a result.
    Mr. Weber. Thank you, Mr. Batkins. And actually, Mr. 
Bosworth, would you like to weigh in on that as well?
    Mr. Bosworth. Well, one thing I would say is she is correct 
about refrigerators. Refrigerators are a sealed system. They 
come in a box. You slide it into your house. It operates. The 
only problem I see with the modern refrigerator is the old 
refrigerators had a little defrost timer. It cost about 30 
bucks to replace. These new refrigerators, they got a control 
board in them, a circuit board. They go out, it costs a couple 
hundred dollars to replace, plus the labor. So there is--with 
the energy efficiency, there is more cost on repair and 
maintenance.
    As far as central air-conditioning and heating, the unit is 
only as good as the installation. And you can put in a 13, 14. 
You can put in a 92 AFUE furnace, but if it's installed 
improperly or if it's installed to undersized ductwork or a 
duct leaking in the attic or return air is leaking from the 
attic or from the basement or whatever, it's not going to get 
the efficiency. So the equipment is fine and dandy, but it's 
the installation that makes a difference.
    Mr. Weber. Well, it is. And of course you know I own an 
air-conditioning company, and you're not--you know, your--
Bosworth was started in '59, and I'm guessing you probably 
didn't start that in '59----
    Mr. Bosworth. No, I'm----
    Mr. Weber. --because you look a little younger than I do. 
But you've been in the air-conditioning company--business how 
long?
    Mr. Bosworth. I went to work for my dad in 1985, and I took 
the business over in 2001 when he passed away, and so far 
we've--we're still paying the bills.
    Mr. Weber. Well, I started Weber's Air and Heat in 1981, 
November of '81, and, you know, you and I would agree there's a 
lot of stories of people who are hard-pressed to pay for these 
higher-efficiency units, and then when they do break, boy it 
is, there is a shock to them because they are so much more 
expensive to repair.
    And, Ms. Kerrigan, I'm going to give you a chance to weigh 
in on what they cited as well.
    Ms. Kerrigan. I think I'll address this from the--you know, 
from the small business impact in terms of, you know, the 
energy--in terms of, you know, some of these standards and 
regulations that, you know, there are winners and losers, I 
think, in the small business community. I mean, certainly, 
there are those businesses who gain, you know, from these types 
of regulations and mandates. And--but there's a host of other 
businesses, you know, the manufacturers and others, that--I 
mean, these are--they're real costs, you know, involved to 
the--into their businesses in terms of the changes that they 
have to make, in terms of their opportunity for growth, in 
terms of where their capital goes, their competitiveness, et 
cetera. So, I mean, there's a cost to businesses, to small 
businesses, and to the people that work for those businesses as 
well.
    Mr. Weber. Well, thank you. I just wanted--since your study 
was cited, Mr. Batkins, I wanted to make sure that the others 
had a chance to weigh in on that as well.
    I'm now going to recognize myself for five minutes with 
questions.
    Mr. Batkins, continuing with you, the Chairman mentioned in 
his opening statement that your analysis that you conducted on 
the cost of the regulations promulgated under President Obama, 
which, for last year alone, cost $197 billion or about $600 for 
every American citizen. Now, I'm assuming that means men, 
women, and children, quite frankly, and I'm just thinking 
children don't pay utility bills. Is it just me? It doesn't 
take an economist to understand that this regulatory burden 
will hit the poorest Americans the hardest.
    So I want you, if you can, I want you to elaborate on the 
kind of economic damage we have seen from the DOE and EPA rules 
and what has that meant in terms of cost for American families 
just during this Administration's tenure.
    Mr. Batkins. Sure. Whenever you, you know, hear figures, 
tens of billions, hundreds of billions, realize that a good 
portion or at least some of the costs ultimately get passed 
down to consumers, and that acts as a sort of regressive tax. 
It almost acts like a sales tax on consumers. And beyond just 
the consumer angle, there's also the angle of businesses. We've 
done some research which has found that as higher regulatory 
burdens increase, you'll actually get fewer small business 
growths and more deaths from small businesses. And what we have 
found, which was I think most surprising as the regulatory 
burdens increase is that we actually found growth in the 
largest businesses. So not only do these businesses have sort 
of regressive impacts on consumers through higher prices, 
higher energy bills, higher utility bills, but it can also 
impact small businesses as well because they don't have the 
capital, the ability to, you know, compete with--sometimes with 
large competitors.
    Mr. Weber. Well, that's great. And I want to move right 
over to Mr. Bosworth because he and I both ran an air-
conditioning company for a long time. And so every time the 
SEER rating is changed, I can tell you that it makes for--that 
company is going to have change their advertising, change their 
ads, they're going to have to train their technicians, they're 
going to have to bring more literature in, not to mention that 
the manufacturers and distributors have to do that as well. And 
so every time we do that, Jerry, I think--would--have you 
experienced that it runs your costs up, and then therefore, you 
have to charge more for that equipment?
    Mr. Bosworth. Well, the equipment definitely costs more 
money. That's just the way it is. I mean, every time it's more 
efficient, somebody gets paid. So with us, with getting more 
and more higher efficiency equipment, we have to learn how to 
install it better. We--or actually, we do install it better. We 
have somebody that has different techniques for the 
installations.
    And--but my biggest concern is is that on--especially on 92 
percent furnace, they're a condensing furnace. Right now, the 
furnaces we install are non-condensing furnaces. And they're 80 
percent efficient. When I first got in the trade in 1975, the 
standard furnace was a 60 percent furnace. It was--40 percent 
of the heat went out the roof and that's just the way it was. 
But the repair on the--between the 60 percent furnace and the 
80 percent furnace went up dramatically when we started 
installing 80 percent furnaces.
    And, like I said, I don't know about the 92 percent because 
we've only installed one, and it was only installed for a few 
years and the customer didn't like it and took it out.
    Mr. Weber. Well, I can tell you, we've looked at them and 
they're super expensive and not--they don't pay back into 
Texas. And so what happens is the cost of all of this expensive 
equipment is going to hurt the low income consumers the 
absolute most.
    And let me just say, you mentioned earlier in your 
testimony about the Department of Energy. You know, when I was 
a Texas State Rep, I was on the Environmental Regulatory 
Committee, and we wanted people on the TDLR, Texas Department 
of Licensing and Regulation. I'm an air-conditioning 
contractor. We wanted people on that board who actually knew 
our business and hopefully had experience in our business. Do 
any of you all know or are there any members--any of the folks 
that work for these agencies, DOE or EPA, that has actual 
business experience in an air-conditioning company? Ms. 
Callahan, you seem----
    Ms. Callahan. I----
    Mr. Weber. --chomping at the bit.
    Ms. Callahan. I'm chomping at the bit. I don't know about 
air-conditioning companies. I'll think about that for a minute. 
But the gentleman that runs the Building Technology Program, 
which is where the appliance and standards program sits, is a 
30-plus year veteran of Pacific Gas and Electric Company, one 
of the largest utilities in the country and ran all of their 
efficiency and demand side management programs and worked 
directly with manufacturers----
    Mr. Weber. While----
    Ms. Callahan. --understands those issues and----
    Mr. Weber. While I appreciate that, I want somebody who's 
been in those homes looking those people in the face----
    Ms. Callahan. Well----
    Mr. Weber. --having to deal with it.
    Ms. Callahan. --let me--yes, and let me say that in the 
process, the way that it's set up--and there's a big ongoing 
debate on the furnace standard right now and a lot of input 
coming in. There are stakeholders sitting at the table working 
with DOE, manufacturers, the stakeholders working with DOE 
trying to come to a consensus opinion on this and rate, and so 
it's a process that's ongoing. They're--those voices are being 
heard at the table.
    Mr. Weber. I'm running way over out of time so I appreciate 
that, but let me just say that we want to make absolutely 
certain that regulations that are promulgated are based on not 
just the idea that somehow they ought to all be more and more 
efficient.
    And I would add, too, for the record that--and, Jerry, I 
know you've experienced this in the air-conditioning business--
manufacturers, in order to gain a competitive edge, will 
actually build a better product. They will build a more 
efficient product. They will build a better product just for 
competition.
    And I'm going to end by saying--quoting one of my favorite 
speakers, Ronald Reagan. You know, Reagan said somebody who 
comes along with a better mousetrap, the government comes along 
with a better mouse.
    So anyway, I'm going to yield to the gentleman from 
Virginia, Mr. Beyer.
    Mr. Beyer. Thank you, Mr. Chairman, very much. I'd like to 
thank the Chair and the Ranking Member for having this hearing 
in the first place. It's very important. And thank all of you 
for coming and being with us. And I especially appreciate the 
perspective from both the majority and the minority that 
regulations are important and that it's important that we get 
them right.
    I've been in business 42 years, and the--see the impact 
that OSHA has had, that clean air and clean water and food 
safety and drug effectiveness and all these incredible things.
    But it's also important that we get the balance right in 
terms of the cost-effectiveness. I remember when I served in 
the Virginia Senate, one of the proposals was that we get rid 
of all asbestos in Virginia schools at a cost of $2 billion, 
and they estimated it would save the life of one child. We 
said, well, is that the best way to spend $2 billion in terms 
of children's health? And maybe not.
    So let me move on. To Mr. Batkins, your chart I thought was 
fascinating because I just wanted to point out that the high 
point was in 2008 when George W. Bush was President, and that 
the low point over all those years was in 2012 when President 
Obama faced a very uncertain election against Mitt Romney. So I 
was glad to see that it was very--presented in a nonpartisan 
way, that this is not just beating up on President Obama for 
what you fear will happen in 2016.
    Mr. Bosworth, thank you for talking about the unintended 
consequences of the condensing versus non-condensing furnaces. 
I loved your line that the false choice between short-sighted 
solution to repair and maintain old efficiency equipment--
inefficient equipment and purchasing new equipment that will 
never have a positive payback.
    Ms. Callahan wrote, and I quote, ``The process that leads 
to standards is informed at every step by stakeholders 
representing diverse sectors so that negotiations reflect the 
respective interests of industry and consumers and will have 
positive effects on the environment.'' And you just elaborated 
on that, Ms. Callahan, just a minute ago.
    Mr. Bosworth, so you're in the business at the retail 
level. You said the process is broken. How does your experience 
differ from what Ms. Callahan talked about in terms of 
promulgating these regulations? Why haven't this process with 
industry and stakeholders and consumers not apparently worked 
with respect to these furnaces?
    Mr. Bosworth. Well, we already have 92 plus furnaces 
available. I mean, they're sitting on the shelves ready to be 
sold. There's just no demand for them, at least in my area and 
I would think in the Midwest--or not the Midwest but the 
Southwest there's no demand for them. Maybe in Minnesota, 
Wisconsin, those areas it'd be nice and would work good. Matter 
of fact, I used to work in Minnesota where the--most of the 
furnaces were condensing furnaces. So there is a place for 
them, but it's not in the whole United States.
    Like I said, where I live, air-conditioning is more 
important and selling higher-efficiency air-conditioning--when 
it went from 13 SEER to 14 SEER this year, it was no big deal. 
Everybody wants a higher-efficiency air-conditioning because 
they pay a high light bill. Their gas bill is minimum.
    Mr. Beyer. So your argument would be that the regulation 
needs to be fine-tuned based on where you live in the country?
    Mr. Bosworth. Well, I really think it's what people want. 
It's--consumers will drive the economy. I mean, they'll drive 
the force towards the 92 percents.
    Mr. Weber. Mr. Beyer, I'm going to give you extra time 
because I went over so much, but would you yield for just a 
second?
    Mr. Beyer. Sure. Yes. Yes, sir.
    Mr. Weber. I'm thinking really what you're driving at is 
the idea that somehow one size fits all we would argue that 
high-efficiency furnaces are probably not going to be popular 
in Texas. You can't hardly give them away. But, then again, 
high-efficiency air-conditioners may not be all that popular in 
Minnesota.
    Mr. Beyer. Yes. Yes.
    Mr. Weber. So I yield back. Thank you.
    Mr. Beyer. Okay. Thank you. Yes, we sell a lot of all-wheel 
drive cars after Snowmageddon here, but they're tough to sell 
in Florida so--Ms. Kerrigan, your--some of the statistics that 
you quoted, I know you--they're not your statistics, that 
leaving aside manufacturing, that other firms, 50 employees or 
less, the full regulatory burden, $11,724 per employee, 
environmental regulations $3,574 employee, I'm trying to think 
here because I know my financial statement really well how I 
could ever get to numbers that high for my employees. The only 
way I could do it would be to consider the built cost of, you 
know, complying with fire codes.
    I certainly don't think you would want us not to dispose of 
Freon and antifreeze. I actually remember back in early 1980s 
we used to pour the antifreeze down the drain. And I called the 
EPA and they said, well, that's what everyone does. It's--we're 
in a very different world right now. How much did that $3,574, 
which I can't imagine is more than about $600, do you think we 
shouldn't be doing?
    Ms. Kerrigan. Well, that's a very good question. I--you 
know, I think the--you know, the point of the--including the 
National Association of Manufacturers' study, which shows the 
impact of regulation on small business and the disproportionate 
impact is that when it comes to smaller firms that--
particularly in the manufacturing sector, that it's very 
difficult to--I mean, they do not have the scale, they don't 
have the size to, you know, to spread these costs around. And 
it does cost them more to comply with these rules and 
regulations.
    So I don't have an answer to that, you know, specific 
question. I mean, I just--from our perspective, I mean, we just 
want--from a regulatory process perspective, we want the 
process to do what it's supposed to do in terms of protecting 
small businesses, to look at the economic impact, to consider 
their concerns, to mitigate the costs where possible in terms 
of complying with those rules and regulations.
    So--and, I mean, I think both sides of the aisle in terms 
of--you know, in terms of small business impact and regulation 
in general, I mean, do agree that, you know, small businesses 
being sort of undermined, you know, in this process and their 
voice is not being heard. So----
    Mr. Beyer. Well, I'd just like to invite you or somebody 
from your organization--and I do this with great respect--to 
come into my business with my daughter or my brother and walk 
through and see where you could figure out which regulation we 
should reverse because I can't think of one. I also can't think 
of one that costs very much so----
    Ms. Kerrigan. You mean on the--in the environmental side 
or----
    Mr. Beyer. Across the board.
    Ms. Kerrigan. --more broadly? I mean----
    Mr. Beyer. Across the board.
    Ms. Kerrigan. Oh, okay. Well, I mean--well, there's----
    Mr. Beyer. And I'm talking about retail automobile 
dealerships, you know, as gritty as you get.
    Ms. Kerrigan. Right. Right. Well, I'd love to respond to 
you in a--you know, get with my staff and my chief economist to 
provide you sort of maybe what the--but if you look at 
healthcare regulations, the ObamaCare regulations in terms of 
tax compliance costs, things like that, I mean there are ways, 
I think, where we can squeeze these costs and make them less 
burdensome for small businesses.
    Mr. Beyer. All right. Thank you. And one last question. Ms. 
Callahan, thank you, too, for being so bipartisan in your----
    Ms. Callahan. Thank you.
    Mr. Beyer. --and reminding us that these things have 
evolved over decades with Democrats and Republicans working 
together, which is what we would like again moving forward.
    But you also talked about there are ways to make 
improvements, transparency in data. Can you talk about that for 
just a minute until the Chairman tells me my time has run out?
    Ms. Callahan. Sure. I think it really goes to the point the 
Chairman's making and Mr. Bosworth, that we need to have the 
people that are impacted by these regulations at the table. And 
I actually think DOE does a pretty good job at that. Where we 
think they could improve is the transparency of the 
calculations that they're making. What are the models they're 
using? How are they coming up with the numbers on cost-
effectiveness, on performance? Because often, industry will 
have very different numbers.
    And so if the stakeholders are--they understand and it's 
transparent what DOE is doing, they can make more informed and 
better inputs into the process.
    We also think that if you vest people in the process and 
listen and hear them, it's less likely that you're going to 
have litigation, which causes delays in these standards.
    I would say that, you know, so many of the standards--we're 
talking about a couple that are controversial--most of them are 
ones that manufacturers have agreed to before they're put into 
final form. So these are things that the manufacturers are 
working with the stakeholders and with DOE, and it's a process 
where air conditioners in Texas aren't a big deal when it goes 
up to SEER 14.
    Mr. Beyer. We just want to make sure the Mr. Bosworths and 
Mr. Webers are at the table.
    Thank you, Mr. Chair.
    Mr. Weber. And I thank the gentleman for yielding back.
    I now recognize Dr. Babin from Texas for five minutes.
    Mr. Babin. Yes, sir. Thank you, Mr. Chairman. And thank 
you, panelists, for being here today.
    At last week's full committee SST hearing, we learned that 
this Administration has apparently been using fuzzy math to 
justify their promised reductions, 26 to 28 percent reduction 
of greenhouse gas emissions from 2005 levels at the Paris 
Climate Conference this past December. It's another example of 
how far this President's Administration will go to fulfill a 
politically driven agenda. It is an agenda not based on sound 
science.
    Over the last seven years, this President has pushed some 
of the costliest regulations in the history of the republic, 
including the Clean Power Plan, the ozone rule, and Waters of 
the United States. And in the final year of his Administration, 
President Obama is eager to push more of his ``all pain, no 
gain'' regulations in the same manner in which he pushed his 
other regulations, with little regard to regulatory process and 
the underlying science. And more importantly, he shows little 
regard as to how this would adversely affect senior citizens, 
the poor, and those living on fixed incomes, as we've heard 
earlier today.
    It's extremely important to invoke all stakeholders in the 
regulatory process. We heard from the agricultural sector and 
others that EPA did not meaningfully involve them in the 
rulemaking process. And now, we have a WOTUS rule that doesn't 
work for rural America, among others. Many farms and ranches 
are small businesses. We know that EPA failed to conduct a 
small business advisory panel, a SBREFA, to calculate the 
impact that the WOTUS rule will have on small businesses.
    So my question is, Ms. Kerrigan, in your capacity with the 
Small Business and Entrepreneurship Council, what are your 
thoughts on this procedural failure and the impact that the 
WOTUS rule will have on our small businesses?
    Ms. Kerrigan. Well, the procedure was a huge failure, I 
think, from a small business perspective. It was a travesty. 
The--well, there's been this and then other major rulemakings 
as well where it's obvious that the EPA is not taking its legal 
responsibilities under the Regulatory Flex Act and its legal 
responsibilities to--on the impact on small businesses.
    But--and the SBA Office of Advocacy, which is a watchdog 
for the RFA and for small business in the regulatory process, 
called them out. They said the EPA should pull the rule, begin 
again, and they did not. But even their economic analysis that 
the EPA did showed that it would have a pretty significant 
impact on small businesses. But their certification where they 
said it would not impact small business obviously contradicted 
their economic analysis.
    So that's very disheartening to small businesses in terms 
of the process failure. A law that was meant to protect them 
and where they feel they have some voice and input into the 
process is totally broken, and obviously we need to fix that.
    And, you know, in terms of the impact the agricultural 
sector, the home-building sector, you know, any type of 
business that's looking, you know, to build out and expand its 
facility, a lot of the economic development projects that you 
see happening not only in--you know, in inner cities but in 
rural America, I mean, this is going to have a huge impact in 
terms of costs or the ability for any of these projects to move 
forward.
    So--but we're happy to see that it's in the--we shouldn't 
have to go to the legal process, obviously, the courts, where 
we are right now. I mean, EPA should just do this. They should 
take their job responsibilities seriously.
    Mr. Babin. And if you don't mind, I'd like to follow up 
real quickly. Has this been a procedural failure by EPA to 
conduct a SBREFA panel with other regulatory rules, not just 
WOTUS?
    Ms. Kerrigan. Well, with the Clean Power Plan, there was a 
very hastily arranged last-minute, you know, type of panel that 
they put together. I think they were sort of shamed into that, 
but it really did not have a meaningful agenda, and obviously, 
they didn't consider the impact on small business.
    Their--in the Tailoring Rule, that was another instance 
where they--in their economic analysis or in their analysis 
they found that six million small businesses would be impacted, 
you know, by that regulation, yet they certified that it would 
not. So, yes, there's been several instances.
    Mr. Babin. Absolutely. Okay. Thank you so very much.
    Thank you, Mr. Chairman, and I yield back.
    Mr. Weber. The gentleman yields back.
    The gentleman from California, Mr. Swalwell, you're 
recognized for five minutes.
    Mr. Swalwell. Thank you, Chair, and thank you to our 
witnesses.
    And I wanted to start first with Ms. Kerrigan. Ms. 
Kerrigan, in your statement to the Committee, on page 2 you 
state in the third paragraph, if I'm correct, ``Regulation and 
the threat of new regulation continue to be a major issue of 
concern for our members.'' Is that right?
    Ms. Kerrigan. Yes.
    Mr. Swalwell. This is not the first time you've come to 
Washington to, I would say, argue that regulation of an 
industry is burdensome, is that right?
    Ms. Kerrigan. Yes.
    Mr. Swalwell. And, in fact, in 1997 you were on the federal 
legislative team for Philip Morris, is that right?
    Ms. Kerrigan. No.
    Mr. Swalwell. Have you ever----
    Ms. Kerrigan. I am--I'm--I am President and CEO of the 
Small Business and Entrepreneurship Council. We are an 
organization that represents small business owners. And I have 
been in this capacity for more than 20 years.
    Mr. Swalwell. Would it surprise you, Ms. Kerrigan, if in 
its Good Science Project Plan in October 1997 Philip Morris 
listed you as part of four people on its federal legislative 
team?
    Ms. Kerrigan. Yes.
    Mr. Swalwell. Okay. And would it surprise you if Philip 
Morris said that they intended to call as a witness to the 
Senate Environment and Public Works Committee Hearing Karen 
Kerrigan with the Small Business Survival Committee and ask her 
whether she would consider testifying? She's done some very 
good work, having several letters to the editor published on 
OSHA issues?
    Ms. Kerrigan. Well, that might not surprise me in terms of 
a--being invited to a committee and perhaps having a 
corporation recommend, you know, if they're working with staff 
that I testify before the committee.
    Mr. Swalwell. But putting you on their federal legislative 
team would have been done without your permission?
    Ms. Kerrigan. Yes.
    Mr. Swalwell. Okay. And the Small Business Survival 
Committee did in fact back in the late '90s receive money from 
Philip Morris, is that right?
    Ms. Kerrigan. Yes. We have a variety of corporate 
partners----
    Mr. Swalwell. And----
    Ms. Kerrigan. --who support our organization.
    Mr. Swalwell. And, Ms. Kerrigan, in 1999 on March 23, you 
sent a letter to Majority Leader Lott at the time stating that 
``America's tobacco industry is a legitimate one.'' Is that 
right?
    Ms. Kerrigan. I did probably. I mean, I--I mean, it was a 
legitimate industry so--I have to look at what the context of 
the letter is, though. If I could see that letter and if you 
have access to it, I'd----
    [Slide.]
    Mr. Swalwell. Behind you and to your right you'll see the 
Good Science Project Plan. That's Philip Morris's Good Science 
Project Plan where they list you, and you can see your name is 
highlighted in a red box, Karen Kerrigan, as being a federal 
legislative team member.
    Ms. Kerrigan. Right.
    Mr. Swalwell. And would you call tobacco something that is 
good for science or good for health?
    Ms. Kerrigan. I wouldn't call it good for health, no.
    Mr. Swalwell. Okay. Thank you. No further questions, Chair.
    Mr. Weber. I thank the gentleman. That was an interesting 
exchange, but we do want to be a bit more current and on the 
issues here today, I think. So I'm going to recognize the 
gentlelady from--I'm going to recognize the gentleman from 
Illinois, Mr. LaHood, for five minutes.
    Mr. LaHood. Thank you, Mr. Chairman, and thank the 
witnesses for being here today. And I want to thank Chairman 
Smith for having this hearing today.
    There was some references earlier on, you know, why we're 
having this hearing and the reason for it, and I would just 
tell you in my district when I talk to small and medium-sized 
businesses or I talk to farmers or healthcare providers or 
people in business, it's the number one issue that they talk 
about in terms of regulation, the overreach of the federal 
government, and, you know, the biggest hindrance to growing 
their small or medium-size business.
    And, you know, when you also look at these regulations and 
the overreach, you know, from the standpoint--we've heard some 
arguments on, you know--from the other side on how these 
regulations make sense and we all want clean water and clean 
air, which we all share in that, but I think the other part of 
this is you look at what these lawsuits that have been filed in 
federal court, we look at yesterday the Supreme Court ruled--
you know, put a stay on the climate rule, which is significant, 
basically let these lawsuits go forward, stopping that in its 
tracks.
    You look at the Waters of the United States regulation, two 
federal judges, one in North Dakota, one in Cincinnati, have 
issued injunctive declaratory judgments on them basically 
saying these need to be stopped. They cannot go forward. And I 
think that's--if you look at the legal reasoning there, it's 
because of the overreach and the violation of laws here.
    You also look at the executive order on immigration that 
has now gone to the U.S. Supreme Court because the Fifth 
Circuit underlying that has ruled that that appears to be 
unconstitutional, the point being that, you know, when you look 
at what this Administration has done particularly in terms of, 
you know, the regulation, the over-compliance, the--you know, 
the standards that have been put in place, and I think what I 
hear is, you know, there has not been a balanced kind of 
reasonable approach on this, working with business and 
industry. That seems to be the common theme.
    And the question was asked earlier, well, what rule would 
you reverse? I think it should be asked from the standpoint of 
what could be put in place so that you have a dialogue and a 
discussion on how you work together to implement these rules to 
make it easier on business?
    And, Mr. Bosworth, I commend you for engaging in the 
business you are and trying. It's a tough environment to do 
that.
    But I guess for you, Ms. Kerrigan, in terms of a more 
balanced, reasonable approach in working with business on 
implementing these rules, you know, whether you could comment 
on that.
    Ms. Kerrigan. Well, I think it all starts at the beginning 
of the process, the federal regulatory process. And you're 
right, there needs to be a balance. I mean, regulation is 
essential to the functioning of our society, to the 
environment, to health, to the free market, to business, to job 
creation.
    But--and there has been protections in place in law where 
that type of small business input and engagement, along with 
the economic analysis and the analysis that's supposed to take 
place, to look at what the impact will be on small businesses. 
I think the dialogue needs to take place before the rule is 
proposed. And in fact, in January of 2011 when the President 
issued his executive order on regulation, which built on 
Clinton's Executive order, I mean, that was one of the pieces 
that he put in there, that regulations where it's appropriate 
and where it's feasible should bring in stakeholders, small 
businesses, other groups at the front end of the regulatory 
process before the regulations are even proposed.
    Mr. LaHood. Well, and I would follow up with Mr. Batkins on 
this. You know, at the end of your testimony you talked about 
what we need to do to reform this or change this. I mean, 
clearly, when you hear of a midnight regulation, that frightens 
every business owner when you've had an election that has 
occurred, and then between the period of time of an election 
and when somebody gets sworn in that you're going to have all 
these regulations come forth when there's really no 
accountability, right? Nobody is being held accountable. And 
that's what's scary and is what makes people very cynical about 
government, that exact phraseology. And then you see what's 
occurred.
    So you mentioned in terms of reform, moratorium, but are 
there other things that are more substantial that can be put 
into place to kind of stop this mentality?
    Mr. Batkins. Sure. I mentioned that Congress has under 
consideration the ALERT Act, which would basically allow sort 
of posting on the internet a regulation for at least 6 months 
before it can go into effect. There are some regulations that 
we've studied where there's been an economically significant 
regulation imposed before it was even published in the Unified 
Agenda, period, and very little in the way of public feedback.
    And I'll give you one example. From the 2000 midnight 
period, there was a Department of Energy regulation which was 
proposed in October of 2000, published in the Federal Register 
the following January 2001. The entire rulemaking history was 
less than the comment period for the Clean Power Plan. So 
that's how quickly some rulemakings can move through the 
process, in the matter of a few weeks.
    Mr. LaHood. Thank you. Those are all my questions, Mr. 
Chairman.
    Mr. Weber. I thank the gentleman for yielding back. And 
seeing that the minority side has no other witnesses, we will 
now go to Barry Loudermilk of Georgia.
    Mr. Loudermilk. Thank you, Mr. Chairman. And thanks to the 
witnesses being here. I've got a couple of questions, but 
first, I was--as we were listening to the testimony, I was 
reading over the testimony and I started wondering when does 
the madness actually come to an end? And as a small business 
owner for 20 years, I experienced the impact overregulation has 
on the small business community, whether it be environmental 
regulations, it being the IT business, affected my customers, 
whether it be health regulations brought on by the Affordable 
Care Act, which affected my customers, or whether it be Dodd-
Frank, which affected everyone. I definitely saw the impact of 
overregulation.
    But as I was reading over some of the testimony here, 
something--a question came to me as who gains? Who's going to 
gain from all of this? We had testimony here in this Committee 
that the average American family, the average American family 
pays $15,000 a year in hidden regulatory cost. Another report 
said that the 60 percent, 60 percent of the cost of a new home 
is due to government regulation.
    So I'm wondering with all of this who actually gains, and 
then I read something in Ms. Kerrigan's testimony, which may 
indicate who gains from this. It was dealing with the Waters of 
the United States. When--I think the testimony said that 
there'll be $158 million in new permits that I would assume the 
EPA would be collecting those funds. So I think it's clear who 
gains in some of this regulation. It's not the consumer, it is 
not the individual citizen, it's the government. The government 
is the one that gains. But on to my question.
    I did find a ray of hope as I was reading over the--I hope 
there's a ray of hope here as I was reading over some of the 
written testimonies. And Ms. Callahan writes in her written 
testimony ``Many stakeholders would like the U.S. Department of 
Energy to find ways to increase transparency with respect to 
the data and models it uses to make performance and energy-
saving calculations. More transparency could help stakeholders 
make more informed contributions to the standards process and 
perhaps, more importantly, help prevent situations that lead to 
litigation and delay. Simply put, process pays dividends beyond 
energy savings.''
    This is refreshing because definitely we need--we need more 
transparency, and if--what I'd like to ask of Ms. Kerrigan, Mr. 
Bosworth, and Mr. Batkins is are you seeing more transparency? 
Do we need to look for more transparency? Because, let me tell 
you, even with subpoena power, this committee is having a hard 
time getting transparency from these agencies, especially the 
EPA, who fails to respond to our requests for their data, for 
their models, for information. And so my first question is do 
we need--do you see a need for more transparency? And are these 
agencies looking? Ms. Kerrigan?
    Ms. Kerrigan. Yes. I mean, we definitely need more 
transparency, I think, on the economic analysis side, the 
scientific data, I mean, all the data and the technical 
information that's being used to justify the regulations. And 
in terms of if we're seeing any more, I'm not quite sure. I 
don't think so. Again, we were--we had some hope with President 
Obama's Executive order in January of 2011, which again said 
that we are--that scientific and technical information, I mean, 
the goal was--I think there was actually a requirement and 
where possible to begin moving this stuff online so that 
everyone can see it on Regulations.gov so the regulatory--
regulated community could also see it.
    But as you noted, with subpoena power you're not getting 
this data----
    Mr. Loudermilk. Right.
    Ms. Kerrigan. --and I think--I mean, the ozone rule and the 
underlying data in that very significant regulation--I know 
you've subpoenaed for that information and you're not getting 
it. So I don't see any sign of transparency----
    Mr. Loudermilk. Well, thank you. Since I'm----
    Ms. Kerrigan. --in that regard.
    Mr. Loudermilk. --running out of time, let me skip to the 
second question----
    Ms. Kerrigan. Sure.
    Mr. Loudermilk. --and hopefully, we can get the other two 
to weigh in on both of these is even with subpoena power we're 
having a hard time getting transparency. So as we bring these 
stakeholders in for these meetings, are they having the 
transparency? And as I--as some of the testimony says, this--
again, Ms. Callahan writes, ``These standards are proof that 
even when dealing with the biggest impacts, regulation in this 
context can work and result in the benefits to all 
stakeholders.'' By saying we're bringing them in, the 
stakeholders buy into this, but are the stakeholders getting 
the information they need, and is the choice that they're given 
equating to would you rather be shot or hung and not giving a 
third option? Mr. Bosworth?
    Mr. Bosworth. To be quite honest, I am not in the political 
atmosphere of all this stuff, so this is not really my 
expertise.
    Mr. Weber. Count your blessings.
    Mr. Bosworth. So I'm going to have to just----
    Mr. Loudermilk. Okay.
    Mr. Bosworth. --defer on this one.
    Mr. Loudermilk. Mr. Batkins, would you like to weigh in on 
either of those?
    Mr. Batkins. Sure. I mean, there's always--I think what you 
fear, especially, like I mentioned, when you're dealing with 
these multimillion, multibillion dollar regulations, you don't 
want that unknown. If a regulation is getting finalized and 
industry still has questions and there might even be some 
uncertainty--a great deal of uncertainty for regulators, you 
don't want that degree of unknown.
    And what's more troublesome is that, you know, we're sort 
of issuing hundreds of regulations, and the number that 
actually we go back and look at and determine whether or not 
they were effective or not is on the area of 1 or two percent. 
I mean, Congress has the benefit of passing a budget and going 
back and seeing whether or not programs were effective. On the 
regulatory side, it is really just sort of a black hole of 
information.
    Mr. Loudermilk. Is----
    Ms. Callahan. May I make a comment, Mr. Loudermilk, since 
you're quoting my testimony? Can I comment on this as well?
    Mr. Loudermilk. Sure. And then I'll yield back, Mr. 
Chairman, after----
    Ms. Callahan. Okay.
    Mr. Loudermilk. --her comments since I'm out of time.
    Ms. Callahan. Okay. I just want to say that narrowly 
focused on the energy efficiency standards that are being set 
by the Department of Energy, I want to remind you what's also 
in my testimony is that Department of Energy is just executing 
the job that it's been given by the Congress, and it sets 
regular timelines and dates for looking at updating standards. 
Sometimes they demur. They believe--and they have to make a 
designation that it's not time to increase that energy 
efficiency standard, and they did that. They did that last 
year, they did it the year before, we expect them to do it 
again this year.
    It's a three-year process typically, and it engages 
stakeholders from the beginning of the process so----
    Mr. Weber. Ms. Callahan, I hate to cut you off, but I've 
got to go to the gentleman from Florida, Mr. Posey. We're 
running out of time.
    Mr. Posey, you're recognized.
    Mr. Posey. Thank you very much, Mr. Chairman.
    Most people think Members of Congress make all the laws. In 
my office, four years ago we started collecting the daily 
register that's delivered to every Member of Congress, 435 
Members of Congress, 100 Members of the Senate every day--
excuse me--of the executive orders, rules, proposed rules, 
changes in rules. And I ask people how big do you think that 
stack is now? And I get answers, you know, from like four feet, 
six feet, eight feet, ten feet. Well, it's seven stacks over my 
head now, and that mostly is laws made by unelected people, 
unelected bureaucrats. It shocks a lot of people, but that's 
the very issue we're talking about here.
    Ms. Kerrigan and Mr. Batkins, how do EPA and DOE 
regulations hurt those who live paycheck to paycheck, for 
example, senior citizens or others who may be on a low income 
level? Ladies first, time is wasting.
    Ms. Kerrigan. Sure. No, sorry about that. Well, cost. I 
mean, you know, look at--we--it's a very difficult economy. I 
mean, there is--you know, in terms of wage growth is not 
growing. There's a lot of cost and, you know, with--for 
example, under the, you know, Clean Power Plan, if you're going 
to have electricity costs that are going to be jacked up 
anywhere between, you know, 5 or 20 percent depending upon 
which country--which part of the country you live in. I mean, 
this is--that's real money. That's real money.
    And in sectors, too, for example, you know, the whole coal 
industry and some of these mining towns that are being wiped 
out. I mean, the small businesses and their employees because 
of--you know, because of rules that are--you know, that are 
affecting coal.
    So it impacts--it has a very, very difficult--a regressive 
impact I think, you know, particularly on low-income and 
middle-income people.
    Mr. Posey. Okay. Thank you. Mr. Batkins?
    Mr. Batkins. Sure. I mean, I would echo those comments as 
well, noting that, you know, the--a lot of the research that we 
have today shows that not everyone along the income ladder 
benefits the same way from EPA or DOE regulations. And--but 
when the regulations are promulgated, they sort of assume 
homogenous consumer and that's not always the case. Our 
consumer preferences are different. Our time series are 
different. Our income streams are different. So, yes, a lot of 
these regulations can have regressive impacts.
    Mr. Posey. Do--and back to Ms. Kerrigan and Mr. Batkins, do 
you foresee any downsides from a healthcare perspective?
    Ms. Kerrigan. You mean, you know, I guess dis-benefits if 
you will to----
    Mr. Posey. Yes.
    Ms. Kerrigan. --you know, individuals impacted by these 
regulations? I mean, certainly, it's very--if you lose your 
job, I mean, you know, that has an impact on access to 
healthcare, it has an impact on your health in terms of stress 
and everything that goes along with that, in terms of your 
ability to provide, you know, for your children and your 
family. I mean, that's one thing that comes to mind.
    Mr. Batkins. Sure, there was actually an EPA regulation 
which was issued, I believe, I in 2011 or 2012, and in it EPA 
forecasted $52 million in environmental dis-benefits was the 
term that they used from dirtier air and dirtier water, which 
was a bit of a surprise coming from EPA. There is actually some 
research on employment dislocation and what that means for 
mortality and morbidity going forward. And researchers found 
that employment dislocations can lead to a 15 to 20 percent 
jump in mortality the 20 years after a dislocation. So in a 
sense it can all be connected.
    Mr. Posey. I hear from a lot of senior citizens--and I have 
quite a few in my district--that the pressure is on them to 
choose between medication and paying their utility bills. Is 
that a common thread that any of you have seen among seniors?
    Mr. Batkins. I mean, I don't study at that sort of granular 
level, but I can understand certainly, you know, how that would 
be the case. When you're talking about, you know, in some 
instances a regulatory tax of a few hundred dollars, there are 
going to have to be some tradeoffs made, and I can certainly 
see that taking place in the real world.
    Mr. Posey. Okay. Mr. Bosworth, could you give examples from 
your business experience about how excessive regulations have 
resulted in unintended consequences?
    Mr. Bosworth. Well, with the energy efficiency standards 
going up and up, we have seen where we've been pulling out like 
10 SEER equipment and trying to install 13 and 14 SEER 
equipment in a spot and it won't fit. If you go to--all of you 
all have homes and all of you all have furnaces and air 
conditioners at your home. You go take a look at your furnace 
and see what's--where it's sitting. It's sitting usually in a 
closet or in the basement and it's usually got walls built 
around it because nobody wants to see them.
    The problem comes is when it needs to be replaced and you 
go to like a condensing furnace. Well, a condensing furnace is 
probably about a foot taller than the standard non-condensing 
furnace. So then you've got a height----
    Mr. Weber. And you've got to deal with the condensate.
    Mr. Bosworth. You've got to deal with the condensation 
because it's got an acid-based condensate on it and it can't go 
into a cast iron drain. It's got to go into a PVC drain. So 
there you have to do some plumbing.
    Then you have venting. If you stand--if you change out a 
standard furnace, you have what we call B vent aluminum piping 
or steel piping that we vent through. These--now, for these 
condensing furnaces, they use PVC pipe. And then again, if your 
unit is in the basement and you're in a--or you're in a 
basement that's been made into a bonus room or something, you 
have a ceiling that you might have to remove in order to--or 
tear a piece of it out in order to run vent pipe.
    Or if you're in a closet, you might have an issue to where 
the vent pipe doesn't go straight up. It might go over and up 
and you still have to do some carpentry work in order to get 
this system installed.
    Mr. Posey. But they had the best of intentions when they 
wrote the rule.
    Mr. Bosworth. Well, you know, that's what I mean. The 
equipment itself, you're looking at adding about $600 to the 
job cost, marking up, you looking at a couple hundred bucks, 
but then you're looking at the construction work that might be 
required to install this system, and the sky's the limit.
    Mr. Posey. If you'll indulge one more question, on 
automotive air-conditioning, we had to get rid of Freon and we 
have a replacement now.
    Mr. Bosworth. Yes, we went from R-12 to 134a.
    Mr. Posey. You know, I'm told you could, you know, breathe 
all the Freon you want, too, and it won't hurt you.
    Mr. Bosworth. Well, it'll get you high.
    Mr. Posey. It'll get you high? We better not----
    Mr. Weber. We probably want to strike that----
    Mr. Posey. --broadcast that.
    Mr. Weber. --from the record.
    Mr. Posey. Yes. But I'm told if you breathe the replacement 
stuff, it can kill you.
    Mr. Bosworth. Well, the replacement stuff we have now is--
we don't breathe it; we reclaim it. And that's what I was 
talking about Section 608. Most of us that are ACCA contractors 
are premium--we try to be premium contractors. We abide by the 
rules. We reclaim the refrigerant. We take it to a disposal 
site or a recycling site. But there's a lot of contractors who 
are what I call bottom-feeders----
    Ms. Callahan. Right.
    Mr. Bosworth. --who----
    Ms. Callahan. That's a great word.
    Mr. Bosworth. --will go and they'll install a condensing 
unit, they'll take the old unit back to their garage or their 
house or whatever and they'll just slowly vent it out on the 
way home. So some of these EPA rules, which are--which I 
believe in; I think they're good. They're good for the 
environment, but a lot of them are being ignored because 
there's no bite to it.
    Mr. Posey. Okay. Thank you, Mr. Chairman.
    Mr. Weber. Mr. Knight, you're up.
    Mr. Knight. Thank you, Mr. Chair.
    I have a couple things. One I'd just like to state for the 
record because I know this was said about Aliso Canyon earlier 
today that we have called for a Congressional committee on the 
gas leak in southern California. It is in my district. 
Hopefully, we will be capping that in the next week or so. And 
I have put forward a piece of legislation that will be a 
baseline of regulation from the federal level. So not all 
regulations are bad. There should be a baseline. But in that 
there's about 30 states that have to deal with underground 
piping, and they should be the authority and they can build 
regulation and legislation around that.
    A couple things I wanted to bring up, though. You know, I 
think everyone goes around their district and they talk to 
businesses and businesses say, ``regulation is killing me,'' 
``it's hurting me,'' ``it's taking away from my bottom line,'' 
or ``I'm having to pass along to the customer'' or whatever, 
but then we don't hear specifics.
    And we had a bill earlier this year by Representative Smith 
about the--called the SCRUB Act. And it was talking about 
regulations that might not have been looked at over years or 
have been outdated or looking at the hundreds of thousands of 
pages that we have on the books already and why can't we look 
at some of these regulations and maybe get rid of them.
    When I was in the state legislature in California there was 
a state in the south that had just gotten rid of their law that 
you couldn't leash your alligator to a fire hydrant. That 
probably had gotten outdated. I don't know when that was dated, 
but at some point somebody said that was no good anymore.
    So what do we do about this, Ms. Kerrigan? How do we find 
certain regulations from industries or how do we get industries 
to come forward and say this is hurting me? And I'm going to 
give you a little follow-up on that here in a second but I want 
to let you start with that.
    Ms. Kerrigan. Well, I think the SCRUB Act is a good idea, 
and I think legislative efforts or the--anything that we can 
do, I think--or Congress can do to reassert its authority in 
this area is needed. I know over in the Senate and in the House 
actually there is bipartisan legislation that would establish a 
legislative commission to do just that, to, you know, look at 
all the rules and regulations, see what needs to be not only 
repealed but modified, changed, updated, modernized, whatever. 
And I think that's a really good idea because you will get the 
input from a wide array of stakeholders on that.
    Mr. Knight. And that's exactly what I'm looking for. I need 
the Mr. Bosworths to come forward and say, you know, these are 
the regulations. This is what I have to do on a daily basis 
when I shouldn't have to do this on a daily basis. If we did 
this on a monthly basis, if we did these reports on a monthly 
or biannual basis, it would still cover what we need to. But 
since I have to do them on a daily basis or a weekly basis, 
it's costing me time or I have to hire somebody and it's taking 
six hours out of their week.
    Recently, we've seen a decision that I've written a 
letter--and we've gotten 108 Members on this letter--about the 
decision to raise the $23,000 of--where you have to pay 
overtime, and they're raising it to over $50,000. At that point 
you're going to hurt small business. You're going to impact 
them, and that's why we've gotten so many small businesses and 
so many organizations to sign on to this letter.
    But that's something that we can identify. We can say if 
you take that $23,000 overtime limit and you raise that to 
$50,000 now everyone under $50,000 has to be paid overtime, I 
can actually point to that and I can actually say this will 
detrimentally hurt small business.
    So that's what I'm kind of asking for homework is, 
especially some of these industries--you know, I come from 
California, so we over-regulate pinball machines. So I know 
that some of these folks come from states that don't do that, 
but the farming industry in California and the farming industry 
across this country is detrimentally hurt. Many of the small 
shops that work on cars, that work on houses are hurt beyond 
belief. And it gets passed onto us.
    So what I'm going to ask is if we can look into some of 
these industries and maybe help us, maybe help us with a list 
because I do believe that regulations can help. I do want clean 
air, I do want clean water, I do want clean working conditions, 
but I also want to be able to buy products at a price where I 
can afford them and a middle-class person can afford them 
instead of sitting at home saying I just can't afford to do 
that so I'm not going to do it or I'm not going to be in 
compliance because I can't afford to do it or the small 
business person that says if I do that, my business goes under.
    Those are the things we hear on a daily basis, and those 
are the bad stories that we hear, I'm not going to comply with 
the law.
    So the last question I'll ask to Mr. Batkins is how often 
do you hear that, that we just--well, you probably don't hear 
that we don't comply, but how often do you hear stories that 
people just don't comply with the law because, one, there is no 
bite to the law; or two, it'll just put them out of business?
    Mr. Batkins. I mean, quite frankly, frequently. I mean, we 
have I think over 176,000 pages of regulation. And I know a 
specific example for the new silica standard which is being 
drastically lowered. It's currently at the White House----
    Mr. Knight. I know this story well.
    Mr. Batkins. It's currently at the White House now, and 
OSHA has said that, you know, they don't have--they haven't 
fully enforced, you know, the old standard. They don't know 
that 100 percent of businesses are currently running--are in 
compliance with the old standard. So when you have 176,000 
pages and tens of thousands of regulators, obviously, you will 
get some instances where there is non-enforcement, and then 
that won't stop a regulator from going back and tightening the 
standard further.
    Mr. Knight. Thank you, Mr. Chair. I just wanted to say one 
more comment. If we do regulations that have no bite, that have 
no enforcement, why would we do that? Just for the people that 
have good morals and good ethics that are going to do it on 
their own, that's fine, but we also know that if it's going to 
kill the business or if it's going to damage them in such a way 
and there is no enforcement, then we should probably think 
about that, too.
    Thank you, Mr. Chair. I yield back.
    Mr. Weber. I thank the gentleman. Alligators leashed to 
fire hydrants? What, did the OSHA mandate stronger fire 
hydrants?
    Mr. Knight. I'm surprised California didn't pick it up.
    Mr. Weber. Okay. All right. The gentleman from Alabama, Mr. 
Gary ``Roll Tide'' Palmer is recognized for five minutes.
    Mr. Palmer. Thank you, Mr. Chairman, especially for that 
appropriate salutation. We'll try to make sure that Alabama 
stays on the radar for years to come unless they're regulated 
out of it.
    Let's get back to the issue at hand. I know everybody's 
tired of questions and answers and--but a couple of points have 
been raised that I want to come back to. And there's two things 
about this whole issue of midnight regulations and really about 
how we're doing regulations, but particularly this idea that 
the executive branch, by executive fiat, can make law outside 
the legislative process. You lose transparency; you lose 
accountability. So that's one aspect of it. It's a 
constitutional aspect. And if we're going to have a 
constitutional government, we've got to get back to Congress 
making law rather than the executive branch bypassing Congress, 
making law through agencies.
    But there's also the economic consequences. Ms. Kerrigan, 
there is a report out of Brookings, came out in May of 2014 
that indicated that business dynamism is in decline. Have you 
seen that in your field of work? And here's a slide from that 
report that I want to draw your attention to.
    [Slide.]
    Mr. Palmer. That's a pretty severe slide over the last few 
decades.
    Ms. Kerrigan. Yes. I have seen that, and I've seen some 
other reports with Census Bureau data showing the same thing.
    Mr. Palmer. Well, I'm going to get to that in a moment. 
That's a little bit different. This indicates some stagnation 
in entrepreneurism.
    Ms. Kerrigan. And new business creation----
    Mr. Palmer. Yes, new business----
    Ms. Kerrigan. --correct.
    Mr. Palmer. --creation. And in respect to this, how much of 
this is--do you think is attributable to regulation not just by 
the federal government but at every level?
    Ms. Kerrigan. I can't say what--how much, but I do think it 
does impact. I mean, certainly, I think that the weak recovery, 
there is an economic--there is a regulatory drag where we 
haven't had a robust recovery, that regulations have played 
into the uncertainty where there's a lack of investment, 
business growth, people taking risks, et cetera. And if you 
don't have a competence that there's going to be a strong 
economy, then that's going to impact people willing to start 
businesses.
    Mr. Palmer. Well, that's the whole point is, for instance, 
Dodd-Frank. We've only issued half of the regulations that will 
come out of Dodd-Frank. And if you look at all of the 
regulations that have been issued, all the pages of regulation 
during the last seven years, for instance, I think it's 
somewhere north of 25,000 pages, Mr. Chairman, and that 
includes all the regulations related to ObamaCare, somewhere 
north of 25,000 pages. But Dodd-Frank by itself right now is 
over 27,000 pages.
    So we have an environment that is not conducive to risk-
taking, it's not conducive to capital investment, and as a 
matter of fact, there's--I think Mr. Loudermilk mentioned it--
that the cost of regulations on our economy last year was right 
around $2 trillion. That's a little over $15,000 per household. 
Some people say that's a hidden tax. Well, it's not a tax. I 
mean, at least a tax goes to fund something.
    Mr. Loudermilk. And it ain't hidden.
    Mr. Palmer. And it's not hidden. It's buried in everything 
that you come in contact with, and it's killing us in terms of 
disposable income that would go into the economy and in terms 
of investment capital that could go into business startups. And 
it's had an impact on business growth. The United States, in 
terms of other industrialized nations, we don't rank in the top 
two, three. We're not number five. We're number 12. We're 
behind Hungary.
    There's another slide I'd like for the committee staff to 
put up.
    [Slide.]
    Mr. Palmer. This is where we are in terms of businesses 
starting versus businesses closing. Prior to 2008, on a regular 
basis we had 100,000 more businesses start up than closed. From 
2008 forward, we're now running at 70,000 more businesses 
closing than starting up.
    And I just--you work with small business. I just want to 
ask you to--again, to comment on this and how this uncertainty 
that we've created with an overregulated economy not only again 
at the federal level, the state level, the local level is a 
driver behind this.
    Ms. Kerrigan. Well, I mean, certainly the Great Recession 
had a huge impact on business closures and bankruptcies and all 
of that. And I--as I noted in my written testimony, one in five 
small business owners say they haven't fully recovered from the 
recession. So you know that they're operating under very 
difficult conditions and there could be something that, you 
know, it could be a regulation potentially that can put them 
under.
    But I do think there is--again, there's a regulatory drag. 
I mean, you do mention the Dodd-Frank Act. I mean, there has 
been legislation that was signed by the President that we 
supported to allow for equity in debt-based crowdfunding, to 
improve capital formation and all of that, but, you know, 
capital access is still very difficult to come by, particularly 
for startup and high-growth firms.
    So I think 2016 will be an interesting year because, you 
know, businesses still continue to have this same outlook in 
terms of weak sales and they're not confident in terms of where 
the economy is going. And you have to have that confidence and 
that momentum, that traction in the economy and strong growth, 
I think, to reverse that chart.
    Mr. Palmer. Having come out of a think tank environment 
working in a think tank world for 25 years, I'm very much data-
driven. But I'm also informed by what I hear on the street. And 
I constantly run into people who talk to me about the 
regulatory environment, the uncertainty, and how difficult it 
is today to start a business. And I've literally heard guys 
tell me that they're going to shut their business because it's 
just not worth it anymore. I've heard guys say I was thinking 
about expanding; I'm just not going to do it because it's just 
not worth it anymore.
    And this is a huge issue, Mr. Chairman. I thank the 
committee for having this hearing, and my time is expired. I 
yield.
    Mr. Weber. I thank the gentleman.
    And I do want to say also that I thank the witnesses for 
staying on topic to the issue at hand. And actually, I would 
note for the minority, we hope that going forward the minority 
would focus more on the substance of the hearing rather than on 
the background or actions of any witnesses.
    Ms. Kerrigan, I'm sorry you had to endure what I believe 
was a pretty staunch cross examination. I guess if I was doing 
it, I would say there's probably times in some of the 
witnesses' lives where they even drank beer in college. I won't 
ask you to raise your hand, and maybe even too much of it, and 
maybe I should ask up here for them to raise their hands.
    But anyway, we do appreciate you all being here. I thank 
the witnesses for their testimony and the members for their 
questions. The record will remain open for two weeks for 
additional written comments and written questions from the 
members. This hearing is adjourned.
    [Whereupon, at 11:54 a.m., the Committee was adjourned.]

                               Appendix I

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                   Answers to Post-Hearing Questions

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                              Appendix II

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                   Additional Material for the Record


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