[Senate Hearing 114-352]
[From the U.S. Government Publishing Office]






                                                        S. Hrg. 114-352

                AMERICAN SMALL BUSINESSES' PERSPECTIVES 
         ON ENVIRONMENTAL PROTECTION AGENCY REGULATORY ACTIONS

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

                                HEARING

                               before the

                   SUBCOMMITTEE ON SUPERFUND, WASTE 
                  MANAGEMENT, AND REGULATORY OVERSIGHT

                                 of the

                              COMMITTEE ON
                      ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 12, 2016

                               __________

  Printed for the use of the Committee on Environment and Public Works





[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]






       Available via the World Wide Web: http://www.gpo.gov/fdsys
                                   ______

                         U.S. GOVERNMENT PUBLISHING OFFICE 

21-408PDF                     WASHINGTON : 2016 
-----------------------------------------------------------------------
  For sale by the Superintendent of Documents, U.S. Government Publishing 
  Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; 
         DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, 
                          Washington, DC 20402-0001       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                    ONE HUNDRED FOURTEENTH CONGRESS
                             SECOND SESSION

                  JAMES M. INHOFE, Oklahoma, Chairman
DAVID VITTER, Louisiana              BARBARA BOXER, California
JOHN BARRASSO, Wyoming               THOMAS R. CARPER, Delaware
SHELLEY MOORE CAPITO, West Virginia  BENJAMIN L. CARDIN, Maryland
MIKE CRAPO, Idaho                    BERNARD SANDERS, Vermont
JOHN BOOZMAN, Arkansas               SHELDON WHITEHOUSE, Rhode Island
JEFF SESSIONS, Alabama               JEFF MERKLEY, Oregon
ROGER WICKER, Mississippi            KIRSTEN GILLIBRAND, New York
DEB FISCHER, Nebraska                CORY A. BOOKER, New Jersey
MIKE ROUNDS, South Dakota            EDWARD J. MARKEY, Massachusetts
DAN SULLIVAN, Alaska

                 Ryan Jackson, Majority Staff Director
               Bettina Poirier, Democratic Staff Director
                              ----------                              

             Subcommittee on Superfund, Waste Management, 
                        and Regulatory Oversight

                  MIKE ROUNDS, South Dakota, Chairman
DAVID VITTER, Louisiana              EDWARD J. MARKEY, Massachusetts
MIKE CRAPO, Idaho                    THOMAS R. CARPER, Delaware
JOHN BOOZMAN, Arkansas               JEFF MERKLEY, Oregon
DAN SULLIVAN, Alaska                 CORY A. BOOKER, New Jersey
JAMES M. INHOFE, Oklahoma (ex        BARBARA BOXER, California (ex 
    officio)                             officio)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
                            C O N T E N T S

                              ----------                              
                                                                   Page

                             APRIL 12, 2016
                           OPENING STATEMENTS

Rounds, Hon. Mike, U.S. Senator from the State of South Dakota...     1
Markey, Hon. Edward J., U.S. Senator from the State of 
  Massachusetts..................................................     3
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...     4

                               WITNESSES

Canty, Michael, President and CEO, Alloy Bellows & Precision 
  Welding, Inc...................................................     6
    Prepared statement...........................................     9
    Responses to additional questions from Senator Inhofe........    24
Buchanan, Tom, President, Oklahoma Farm Bureau Federation........    27
    Prepared statement...........................................    29
    Responses to additional questions from Senator Vitter........    54
Sullivan, Thomas M., of counsel, Nelson Mullins Riley & 
  Scarborough LLP................................................    58
    Prepared statement...........................................    60
    Responses to additional questions from:
        Senator Inhofe...........................................    70
        Senator Vitter...........................................    72
Knapp, Frank, Jr., President and CEO, South Carolina Small 
  Business Chamber of Commerce...................................    74
    Prepared statement...........................................    76
    Responses to additional questions from Senator Inhofe........    80
Reichert, Emily, CEO, Greentown Labs.............................    84
    Prepared statement...........................................    87
    Responses to additional questions from Senator Inhofe........    94

 
  AMERICAN SMALL BUSINESSES' PERSPECTIVES ON ENVIRONMENTAL PROTECTION 
                       AGENCY REGULATORY ACTIONS

                              ----------                              


                        TUESDAY, APRIL 12, 2016

                               U.S. Senate,
         Committee on Environment and Public Works,
               Subcommittee on Superfund, Waste Management,
                                  and Regulatory Oversight,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:31 p.m. in 
room 406, Dirksen Senate Office Building, Hon. Mike Rounds 
(chairman of the subcommittee) presiding.
    Present: Senators Rounds, Markey, Boozman, Inhofe, and 
Booker.

            OPENING STATEMENT OF HON. MIKE ROUNDS, 
          U.S. SENATOR FROM THE STATE OF SOUTH DAKOTA

    Senator Rounds. Good afternoon, everyone. The Environment 
and Public Works Subcommittee on Superfund, Waste Management, 
and Regulatory Oversight is meeting today to conduct a hearing 
on American Small Businesses' Perspectives on Environmental 
Protection Agency Regulatory Actions.
    The purpose of the hearing is to further this 
subcommittee's oversight of EPA's rulemaking process. We have 
already held hearings examining the science advisory process 
underpinning EPA's regulatory action, the sue-and-settle 
agreements that result in new EPA regulations, and the EPA's 
approach to economic analysis used to justify regulations.
    This hearing will examine EPA's consideration of small 
businesses in its rulemaking process and the real-world impacts 
of EPA regulation from the perspective of regulatory experts 
and small business owners.
    America's small businesses are the backbone of the U.S. 
economy. The 28 million small businesses in the United States 
provide 55 percent of all American jobs and make up 99.7 
percent of U.S. employer firms.
    The ability to build a small business from the ground up is 
a cornerstone of the American dream. Small businesses are able 
to flourish in our country. They provide jobs for millions of 
Americans and account for 54 percent of all United States 
sales. Unfortunately, despite their success, American small 
businesses are hindered by approximately 3,000 current and 
pending regulations that will impact small businesses and cost 
$1.75 trillion annually in compliance costs.
    The Environmental Protection Agency imposes some of the 
most significant and far reaching regulatory burdens on small 
businesses. According to the Small Business Administration, EPA 
regulations cost small businesses 364 percent more to comply 
than large businesses. For example, EPA's greenhouse gas 
reporting rule is estimated to be 65 times more burdensome for 
small businesses than larger entities.
    American small businesses are burdened with sweeping EPA 
regulations and provided few resources to aid them in complying 
with a myriad of confusing and costly regulations. In a recent 
study, 90 percent of respondents identified Government 
regulations as a challenge affecting their business.
    Mindful of the disproportionate impacts Federal regulations 
could have on small businesses, Congress passed the Regulatory 
Flexibility Act, or RFA, in 1980, which requires Federal 
agencies to analyze how their regulations will impact small 
businesses and consider less burdensome alternatives. The RFA 
requires agencies to convene a small business advocacy review 
panel to receive input from small businesses' representatives 
before a proposed rule is issued.
    However, the Government Accountability Office and others 
have found that the RFA does not define a number of key terms, 
and the courts have done little to clarify these terms.
    Additionally, while courts have held agencies are not 
required under the RFA to analyze the effect of a regulation on 
small businesses if the regulation only indirectly impacts 
small businesses, agencies are still bound by executive orders 
to consider a regulation's impact on these businesses. Yet the 
EPA claims major environmental regulations, such as revisions 
to the National Ambient Air Quality Standards, or NAAQS, will 
have no significant impact on small businesses because NAAQS 
standards apply directly to States, not small businesses. 
However, these regulations will lead to significant economic 
harm on small businesses.
    Further, the EPA has improperly certified that major 
regulations imposed by the Obama administration, such as the 
Waters of the U.S. Rule and the Clean Power Plan, will not have 
significant impacts on U.S. small businesses. However, the 
independent Small Business Administration's Office of Advocacy, 
the Government agency tasked with providing support and 
resources to small businesses, expressed concerns over each of 
these rules, even going so far as to urge the EPA to withdraw 
the expansive Waters of the U.S. Rule due to concerns regarding 
the costly impact the rule will have on small businesses.
    The Office of Advocacy also pointed out particular 
challenges that would be faced by small businesses in complying 
with the EPA's proposed Federal compliance plan for the Clean 
Power Plan and how it would impact small businesses.
    American small businesses provide jobs, products, and 
services for millions of Americans. We must recognize the 
unique characteristics and challenges faced by this vital 
segment of the U.S. economy so that businesses are able to 
thrive and grow rather than be burdened by complex, 
overreaching EPA regulations that run contrary to the original 
intent of Congress.
    I would like to thank our witnesses for being with us here 
today, and I look forward to hearing your testimony.
    Now I would like to recognize my friend, Senator Markey, 
for a 5-minute opening statement.
    Senator Markey.

          OPENING STATEMENT OF HON. EDWARD J. MARKEY, 
          U.S. SENATOR FROM THE STATE OF MASSACHUSETTS

    Senator Markey. Thank you, Chairman Rounds. Thank you, 
Chairman Inhofe, for having this very important hearing today.
    And I am very delighted that Dr. Emily Reichert of 
Greentown Labs in Somerville, Massachusetts, is with us today, 
and Frank Knapp, the President and CEO of the South Carolina 
Small Business Chamber of Commerce and Co-Chair of the American 
Sustainable Business Council, are able to join us today.
    I had the opportunity to visit Greentown Labs with Dr. 
Reichert and EPA Administrator Gina McCarthy in the fall. Dr. 
Reichert and the work she is leading at Greentown Labs have 
helped make Massachusetts a clean energy innovation hub.
    Frank Knapp has been a leader of the South Carolina Small 
Business Chamber of Commerce and an advocate for American small 
businesses and their employees across the Nation.
    I look forward to hearing from both of them and the other 
witnesses.
    Today's hearing will examine the impact on small businesses 
of EPA's efforts to protect public health and the Nation's 
water and air. Massachusetts is the home to over 620,000 small 
businesses that employ 1.4 million people, or over 46 percent 
of our work force. In Massachusetts, we understand that a 
healthy environment is key to a healthy economy. Where some 
might see Government overreach, our entrepreneurs see 
opportunity to develop new technology and to create new jobs.
    We know that by cutting carbon pollution we can grow our 
economy and save American families money. It is a formula that 
works. We did it in Massachusetts through the Regional 
Greenhouse Gas Initiative.
    Since the Regional Greenhouse Gas program went into effect 
in 2009, the program has added almost $3 billion in economic 
value to participating States and saved consumers more than 
$1.5 billion. This formula is at the heart of the Clean Power 
Plan.
    The Clean Power Plan will create jobs and grow our economy. 
It is a signal to the marketplace to invest in clean energy. 
Today, more than 2.5 million Americans are employed in clean 
energy, and this February the Solar Foundation released a 
report showing that sunny Massachusetts is second in the Nation 
in total solar workers.
    Massachusetts now has nearly 100,000 clean energy jobs in 
our State. It is now in the top 10 in terms of sectors for 
employment, up from non-existence for all intents and purposes 
10 to 15 years ago. Protecting the climate and public health by 
investing in the clean energy sector is fueling small business 
entrepreneurs and innovators across the country.
    The same is true when it comes to clean water. Sensible 
regulations protect our beaches, our waterways, our drinking 
water, and our economy. In Massachusetts, we love that Dirty 
Water--the Standells--but understand that tourism, recreation, 
agriculture, and other economic engines of growth in 
Massachusetts need clean water in order to flourish.
    For over 40 years the Clean Water Act has played an 
integral role in the protection and clean up of America's most 
iconic and important waterways, and we must continue that 
effort. It helped clean up the Charles River and Boston Harbor, 
and today a cleaner Boston Harbor is helping revive waterfront 
development, create jobs, and grow our economy dramatically.
    The Clean Water Rule is smart and sensible and has the 
support of business leaders. Last year, 300 small businesses, 
including several in Massachusetts, wrote a letter to President 
Obama in support of the new rule. What small businesses, 
entrepreneurs, innovators, and Government are doing in my home 
State of Massachusetts can serve as a model for the rest of our 
Nation, demonstrating that growing our economy and protecting 
our environment go hand in hand.
    Because small businesses play such an important part in our 
economic vitality, Congress has directed agencies to 
incorporate the impact of their regulations on small 
businesses. EPA takes their responsibilities to incorporating 
small businesses' concerns very seriously. For example, their 
recently finalized Petroleum Refineries Rule was only applied 
to major refineries. Small refineries were excluded, one of the 
suggestions made by the Small Business Administration's Office 
of Advocacy.
    I look forward to working with my colleagues to ensure that 
EPA and the Small Business Administration get the resources 
they need so that the views of small businesses continue to be 
incorporated into the rulemaking process.
    Again, Mr. Chairman, thank you for holding this hearing, 
and I am looking forward to hearing from our witnesses.
    Senator Rounds. Thank you, Senator Markey.
    We are also pleased to have the chairman of the full 
committee here with us, Senator Inhofe.
    Senator Inhofe, thank you, and welcome.

          OPENING STATEMENT OF HON. JAMES M. INHOFE, 
            U.S. SENATOR FROM THE STATE OF OKLAHOMA

    Senator Inhofe. Thank you. I have imposed upon Chairman 
Rounds and Senator Markey to allow me to make a couple of 
comments, even though this is a subcommittee hearing. And at 
the appropriate time I want to introduce one of our witnesses, 
as we do for all the witnesses that come along.
    Just two quick stories. One is my poetic justice story. And 
by the way, you are looking up here at a panel of really 
diverse philosophies. I consider Senator Markey one of my 
closest personal friends, and I have even back when we were 
serving in the House together. Yet you won't find two Senators 
who are further apart philosophically than the two of us. So 
you will enjoy this story.
    For 20 years I was in the real world, and I was being 
abused by the bureaucracy, and I can remember so often there I 
was down there building and developing. Most of this was in the 
coast in Texas. And toward the end of it, I thought, who would 
be opposed? Why am I getting harassed by the bureaucracy? Here 
I am expanding the tax base, doing things that Americans are 
supposed to do; hire people, making fortunes, losing fortunes, 
and all that. So why is it that the Federal Government is the 
chief opposition to everything I am trying to do?
    Well, the poetic justice part of it is I now chair the 
committee that has jurisdiction over the bureaucracy that tried 
to put me out of business for 20 years.
    [Laughter.]
    Senator Inhofe. The other thing I want to remind both of my 
good friends up here, Senator Rounds and Senator Markey, is 
that I was Mayor of Tulsa in 1980, and I was in the middle of 
drafting this bill at the time. I was pretty naive and I 
thought, well, that takes care of all the problems of costing 
businesses and all that. It didn't quite work, but we tried.
    That is my statement.
    [The prepared statement of Senator Inhofe follows:]

                  Statement of Hon. James M. Inhofe, 
                U.S. Senator from the State of Oklahoma

    Thank you, Subcommittee Chairman Rounds, for convening 
today's hearing, and thank you to our witnesses for being here 
to testify. I am especially pleased we will hear testimony 
today directly from small business owners with operations 
across the country from Oklahoma, to Ohio, to Massachusetts.
    Our Nation's best ideas and economic success stories stem 
from small businesses. Yet it is small businesses that are most 
vulnerable to Federal regulatory overreach, where even a minor 
change in the eyes of a regulator can equate to a death 
sentence for a small operation. I know first-hand, from my days 
as a former developer, how red tape can bury a small operator 
from doing good work, as I once had to go to 26 different 
government bureaucracies to get a single project permit 
approved.
    For these reasons, it is critical small businesses have a 
voice in Washington, both in Congress and in the overwhelming 
Federal bureaucracy. Today the subcommittee will take a closer 
look at how well those voices have been heard at the U.S. 
Environmental Protection Agency (EPA).
    Mindful of the sensitivity small businesses have to Federal 
regulation, Congress has enacted several laws and Presidents 
have signed executive orders that require Federal agencies to 
carefully consider the impacts of a potential regulation on 
small businesses. Most notably, the Regulatory Flexibility Act 
of 1980 (RFA), and its amendments from the Small Business 
Regulatory Enforcement Fairness Act (SBREFA) of 1996, designed 
a process to make Federal regulators think about how small 
businesses would actually comply with a regulation--on the 
front end. This statutorily mandated process was so important, 
Congress created the Office of Advocacy within the U.S. Small 
Business Administration to monitor agency implementation of the 
RFA.
    Decades later, we are amidst a regulatory regime under the 
Obama administration that has grown too big and short-changed 
this process. EPA has exploited ambiguities in these laws to 
issue its agenda driven policies, even at the expense of small 
businesses. Instead of robust review and meaningful input from 
small businesses prior to issuing a regulation, the Obama-EPA 
has treated the RFA has a mere ``check-the-box'' exercise.
    This is precisely what happened before EPA proposed its 
waters of the U.S. (WOTUS) Rule to drastically expand waters 
regulated by EPA, which will make it extremely difficult for 
farmers to make routine changes to their own property and 
decrease farmers' property values. In this case, EPA and the 
Army Corps of Engineers certified the proposed rule would not 
have significant small business impacts--contrary to the advice 
of the Office of Advocacy. EPA's decision to simply ignore the 
Office of Advocacy's advice allowed the agency to circumvent 
RFA requirements despite ample evidence that the rule would 
lead to much higher costs for many small businesses.
    There are plenty of other examples where the Obama-EPA and 
the Office of Advocacy have disagreed on the impacts a 
potential regulation could have on a small business. 
Ultimately, this regulatory approach is inefficient. 
Disregarding small businesses leads to poorly written rules and 
years of litigation, which only delays action that could 
produce meaningful public health and environmental benefits.
    Accordingly, Congress must continue to conduct oversight 
over EPA's implementation of the RFA to ensure robust analysis 
and input from small businesses are used to issue leaner, 
smarter regulations that benefit all stakeholders and avoid 
costly rules with little to no benefit. American ingenuity and 
well-being depend on it.

    Senator Rounds. Thank you, Mr. Chairman.
    Senator Markey. May I just say to Chairman Inhofe, I was an 
original co-sponsor of that bill in 1980.
    Senator Inhofe. That was one of our early successes. Maybe 
our only success.
    [Laughter.]
    Senator Rounds. I had just bought my first home in 1980.
    [Laughter.]
    Senator Rounds. Thank you.
    Our witnesses joining us for today's hearing are Mr. 
Michael Canty, President and CEO, Alloy Bellows & Precision 
Welding, Inc.; Tom Buchanan, President, Oklahoma Farm Bureau 
Federation; Thomas M. Sullivan, of counsel, Nelson Mullins 
Riley & Scarborough; Mr. Frank Knapp, Jr., President and CEO of 
South Carolina Small Business Chamber of Commerce; and Dr. 
Emily Reichert, CEO, Greentown Labs.
    Now we will turn to our first witness, Mr. Michael Canty, 
for 5 minutes.
    Mr. Canty, you may begin your opening statement, and 
welcome.

STATEMENT OF MICHAEL CANTY, PRESIDENT AND CEO, ALLOY BELLOWS & 
                    PRECISION WELDING, INC.

    Mr. Canty. Thank you.
    Good afternoon. I want to thank Subcommittee Chairman 
Rounds and Ranking Member Senator Markey and all of the 
subcommittee members for allowing me the opportunity to share 
my perspectives on the impact of EPA regulatory actions on 
small business.
    My name is Michael Canty. I have been in the business world 
for 40 years. I have owned my own current company for about 10 
years. I have about 135 employees with two manufacturing 
locations, up from 25 employees about 10 years ago. We sell 
primarily to the power generation, oil and gas, aerospace, and 
semiconductor industries.
    I am proud to be here representing not only Alloy Bellows, 
but the National Small Business Association, NSBA. The NSBA 
represents 65,000 small business owners across every sector of 
this country, and it is a member-driven and staunchly 
nonpartisan organization, and I currently serve as an Associate 
Trustee.
    I also have significant public service serving on a 
council, village council, and as Mayor for 8 years on various 
public service boards and councils and commissions, including 
over 4 years now on the CSI, or Common Sense Initiative, from 
Ohio initiated by the Governor, John Kasich, to review all 
regulations being proposed by State agencies before they become 
law, and all regulations every 5 years to sunset them if they 
become obsolete.
    In recent years the EPA has an important job. However, the 
EPA is one of the most prolific regulatory agencies that exist, 
in my view. It has implemented a seemingly endless stream of 
rules and regulations, including the Waters of the U.S. and the 
Clean Power Act, which have significant negative impacts on 
small business. Small businesses want to help, but it is 
becoming increasingly difficult to do so.
    Alloy Bellows was forced to hire a few years ago a senior 
level compliance officer just to keep up with the regulatory 
issues and stay in compliance. We spend well in excess of 
$200,000 every year just to do that.
    An OSHA inspector came in a surprise visit to our 
organization, and her mentality to us kind of sums up many--
certainly not all, but many of the Federal regulatory agencies. 
She fined us for a very, very minor infraction of an adjustable 
guard on a little-used manual grinder. It was up one-eighth of 
an inch too high, an issue that we fixed on the spot. We got a 
fine of thousands of dollars, and she told me flat out that 
finding issues and issuing fines was how they help fund their 
department.
    I decided I couldn't be more shocked at whether it was her 
candidness or angry at just the mindset of how she had to deal 
with things.
    The cumulative effect on Federal regulations is pretty 
intense. I often hear from elected officials and Agency 
staffers, this is just one more form, and it only takes 22 
minutes to fill out and submit. We must wonder if those same 
elected officials and staffers have ever worked at a growing 
manufacturing company, where resources are scarce, personnel 
are pressed with company needs, and nothing gets done either in 
isolation or in the 22 minutes they often say.
    I want to thank Chairman Rounds for introducing the 
bipartisan RESTORE resolution. This resolution would have an 
enormous impact on my small business and all businesses. And 
along those same lines, the NSBA strongly supports the National 
Regulatory Budget Act of 2014, introduced by Senator Marco 
Rubio. It is aimed to ensure fairness and common sense in the 
Federal regulatory processes. Regulatory compliance costs are 
disproportionately higher on small businesses than their large 
counterparts. Some of those issues were read during the opening 
statement.
    In Ohio, the Common Sense Initiative, now State law thanks 
to Governor Kasich, was passed as a second bill. It requires 
all proposed State agencies to run their proposed regulations 
through a cost-benefit review process and ensure that all 
affected stakeholders have input into the process. The numbers 
are impressive. The number of annually proposed regulations has 
dropped significantly as bad proposals get weeded out early and 
then through the process as well.
    Some personal examples. Stormwater regulation. When I was a 
Mayor in the early 2000s, the Federal EPA passed the stormwater 
regulations requirements on every community to develop, 
monitor, and report annually on six key areas of water quality 
at every water area, every outflow in the community. The EPA 
mandates were vague, and they were overreaching. The result was 
excessive, permanent, and annual taxpayer cost paid by both 
businesses and residents alike.
    NORSD--the Federal and State EPA imposed in Ohio certain 
regulatory and extensive requirements to control potential and 
real sewage overflows into Lake Erie during 500-year storms. To 
deal with this, the State of Ohio set up through State law 
multijurisdictional sewer districts to control and manage the 
problem. My business is located in one of those 
multijurisdictional districts. The district just imposed--and 
this isn't the first time--without oversight and without a 
vote, stormwater control fees, a permanent annual $35 million 
fee, a 19.5 percent increase in their annual budget. Our firm's 
share was $2,000 annually, every year, forever.
    NORSD also implemented an 11 percent to 13 percent increase 
in sewer fees for each of the next 5 years and stated that that 
annual increase would continue for the next 25, a 1,900 
percent-plus increase paid for by business and residents alike. 
Our firm, with 135 employees, is moving in 2017, and we are 
moving out of the NORSD district.
    Our electric costs alone because of the input on coal and 
the shutting down of those plants has increased 35 percent on 
our company, an energy intensive company, over the last 2 
years.
    Senator Rounds. Sir, if you could, bring it to a close, OK?
    Mr. Canty. I will sum up.
    Senator Rounds. Thank you.
    Mr. Canty. Over the last 10 years our philosophy has been 
to make everything we sell. Ninety-five percent of everything 
we have sold is made in America, with American labor. That has 
to change. Next Sunday I leave for Poland and Berlin, and the 
first week of June for China to set up vendor relationships 
with companies due in large part to the ever increasing and 
ever costly increase cost of Federal regulations on small 
businesses like mine. That means fewer jobs, fewer investments, 
and fewer technologies in the U.S.
    Again I want to thank Senator Rounds and Ranking Member 
Senator Markey for holding this hearing and allowing me to 
testify on behalf of NSBA. The need for relief is real and 
immediate. Thank you.
    [The prepared statement of Mr. Canty follows:]
    
    
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    
    
    Senator Rounds. Thank you, Mr. Canty.
    At this time I would ask if Senator Inhofe would care to 
introduce Mr. Buchanan.
    Senator Inhofe. OK.
    Well, first of all, we are very happy to have Tom Buchanan 
here. He has been a good friend for a long period of time. He 
has a cow-calf operation in southwestern Oklahoma. He grows 
wheat and irrigated cotton. He is the Vice Chairman of the 
Oklahoma Water Resources Board and is President of the Oklahoma 
Farm Bureau, and most important, a close friend.
    Senator Rounds. Thank you.
    Mr. Buchanan, you may begin your opening statement.

             STATEMENT OF TOM BUCHANAN, PRESIDENT, 
                OKLAHOMA FARM BUREAU FEDERATION

    Mr. Buchanan. Thank you, Senator Inhofe, for that 
introduction.
    Chairman Inhofe, Subcommittee Chairman Rounds, and Minority 
Member Markey and members of the committee, I appreciate this 
opportunity to testify on behalf of American Farm Bureau and 
this great Nation's farmers and ranchers.
    My name is Tom Buchanan. I am President of the Oklahoma 
Farm Bureau, and I serve on the Board of the American Farm 
Bureau Federation.
    Chairman Rounds, it seems that 1980 is an important date 
for everyone on the committee, including myself. While your 
esteemed colleagues started their professional career in 1980, 
so did I; 1980 is when I produced my first cotton crop and grew 
my first set of calves. So I have been trying to farm ever 
since that point.
    I have attached two documents which I would like to request 
be included in the committee's record for this hearing. I would 
also like to begin by expressing my gratitude to Chairman 
Inhofe for the Government Accountability Office's investigation 
into EPA's illegal lobbying and social media campaign.
    From our perspective, EPA did use covert propaganda to 
mislead the public and violate the Anti-Lobbying Act and was 
more focused on promoting a flawed WOTUS Rule than keeping an 
open mind or hearing good faith concerns with their proposal. 
Farmers and ranchers deserve better when important matters of 
public policy are discussed and are at stake.
    I am here today because of my organization's experience 
with a major new Clean Water Act rulemaking by EPA and the 
Corps. This is a rule of extraordinary practical importance for 
farmers, ranchers, and almost anyone who grows, builds, or 
makes anything in this great Nation.
    After carefully studying the proposed rule, we at Farm 
Bureau concluded that the rule's vague and broad language would 
define waters of the United States to include countless land 
areas that are common in and around farm fields and ranches 
across the countryside. These are acres that don't look a bit 
like water. They look like land, and they are farmed and 
ranched today.
    But by defining them as waters of the U.S., the rule would 
make it illegal to farm, build fences, cut trees, build a 
house, or do most anything else there without first asking 
permission of the Federal Government and navigating a costly 
and complex permitting process.
    From the day it first issued the proposed rule, EPA behaved 
like an advocate for a decision that was already made, willing 
to say most anything to get the desired result. It waged a 
public relations campaign aimed directly at farmers and 
ranchers, providing false and misleading assurances in speeches 
and blogs that the rule will not increase permitting 
requirements for farmers or get in the way of farming. Our 
experience is that EPA and the Corps will interpret their rules 
broadly, not narrowly.
    EPA also engaged in an extraordinary social media campaign 
aimed at a different audience, the broader public audience. 
That campaign consisted almost entirely of non-substantial 
platitudes about the importance of clean water, which, of 
course, no one disputes the need for clean water. It used 
simplistic blogs, tweets, and YouTube videos to generate 
purported support for the rule among well intended people who 
have absolutely no idea what the rule would actually do or what 
its actual costs would be. EPA later claimed public support for 
the rule, even though the vast majority of those who actually 
read the rule, State and local governments, businesses and 
organizations representing virtually every segment of the U.S. 
economy, vehemently opposed it.
    I would like to point out that the agencies also ignored 
another important regulatory safeguard for small businesses by 
improperly certifying the WOTUS Rule under the Regulatory 
Flexibility Act. The Office of Advocacy concluded that the 
effects of EPA's WOTUS Rule would have direct economic impacts 
on a substantial number of small businesses, and the agency 
should have convened a small business advocacy review panel 
under the Small Business Regulatory Enforcement Fairness Act 
before releasing the rule for comment.
    Congress should hold the agencies accountable for ignoring 
the requirements of the RFA and for openly showing their 
contempt for small entities by characterizing their concerns 
about this proposal as silly and ludicrous.
    Last, EPA should try to honestly and transparently account 
for the regulatory impact and cost of their actions, even when 
they expect opposition. I truly hope this committee's efforts 
will lead us in that direction.
    Thank you for the time and this opportunity.
    [The prepared statement of Mr. Buchanan follows:]
    
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
       
    Senator Rounds. Thank you for your testimony, Mr. Buchanan.
    Our next witness is Mr. Thomas Sullivan.
    Mr. Sullivan, you may begin.

         STATEMENT OF THOMAS M. SULLIVAN, OF COUNSEL, 
             NELSON MULLINS RILEY & SCARBOROUGH LLP

    Mr. Sullivan. Thank you, Mr. Chairman, members of the 
subcommittee. I am pleased to present my views on how EPA rules 
impact small business. The bulk of my testimony will actually 
cover how small businesses impact EPA rules, or at least how 
the Reg Flex Act is designed to ensure that small business has 
a voice in the process.
    Believe it or not, my first job in Washington was with the 
Environmental Protection Agency. I served under both 
Administrator Bill Reilly and Administrator Carol Browner. I 
then joined the National Federation of Independent Business, 
NFIB. One of my proudest professional experiences was working 
on NFIB's campaign working with this committee to prevent small 
businesses from being sued under the Superfund law just because 
they sent household garbage to their local landfill. It was the 
story of Barbara Williams of Gettysburg, Pennsylvania, who I 
was honored to be with when President George W. Bush signed the 
Small Business Superfund bill in January 2002.
    Later that month I was unanimously confirmed to head the 
Office of Advocacy that we have already discussed this 
afternoon at the SBA. The Office of Advocacy is responsible for 
overseeing the Regulatory Flexibility Act. I served there as 
Chief Counsel for Advocacy until 2008. During my tenure, that 
office issued approximately 300 public comment letters to 68 
agencies, averaging about 38 letters to agencies per year.
    I have remained deeply interested in how small businesses 
are impacted by regulation and how small business involvement 
in the decisionmaking can benefit regulatory policy.
    The rationale for passage of the Regulatory Flexibility Act 
still exists today. That rationale is based on the critical 
role small businesses play in our economy and an understanding 
of how small firms are disproportionately impacted by 
regulation. Recent data show that small firms create almost 
two-thirds of the net new jobs in this country, and we will 
hear later in the panel how small businesses lead America's 
innovation economy. Studies from the Office of Advocacy show 
that small firms produce 16 times the number of patents per 
employee than their larger business competitors.
    At the same time, research shows that over $2 trillion cost 
of Federal regulation hits small businesses the hardest. Small 
businesses with fewer than 50 employees shoulder $11,724 per 
employee per year to keep up with regulatory mandates. That 
cost is more than twice the cost of healthcare at a per-
employee basis. Plus, the cost for the small firms is 29 
percent higher per employee than for firms with 100 or more 
employees.
    Those are the reasons that led to the enactment of the 
Regulatory Flexibility Act in 1980.
    There has been extensive research about the success and 
failures of the Regulatory Flexibility Act, and I would 
actually just like to get into some of the good news and bad 
news about how it is being implemented.
    The good news is that EPA actually does work with the 
Office of Advocacy and hosts SBREFA panels to explore how the 
Agency can sensitize its approach to small business. It is 
encouraging to know that EPA holds pre-panel sessions before 
the SBREFA panels actually start in order to think through 
issues that they may not have anticipated in developing a 
rulemaking.
    The bad news is that there are still times when EPA's 
deadlines, whether they are judicial, statutory, or political, 
push the careerists to approach the Regulatory Flexibility Act 
as a set of bureaucratic procedural hurdles. The most obvious 
example of EPA purposely avoiding the Regulatory Flexibility 
Act, in my opinion, was its recent promulgations of the Waters 
of the U.S. Rule that Mr. Buchanan just outlined.
    That troubling situation with EPA's promulgation of the 
Waters of the U.S. Rule leads people like me to try and figure 
out, how can it be improved. EPA's decision on whether to 
conduct a full examination of small business impacts is really 
a critical point in the rulemaking process. That certification 
part of the Reg Flex Act is truly the fork in the road when it 
comes to whether EPA should listen to small business or not. I 
believe that Congress, the EPA, and the Office of Advocacy 
should consider ways in which EPA certification would benefit 
from an objective third party's judgment when the Office of 
Advocacy has an objection.
    When agencies quarrel over their impact on the environment, 
the Council on Environmental Quality acts as an arbiter. Some 
thought should be given on whether a similar model could work 
for disagreements between the Office of Advocacy and EPA under 
the Regulatory Flexibility Act.
    In my opinion, EPA makes its best decisions or, as Senator 
Markey said, sensible regulations when it decides to embrace 
the Regulatory Flexibility Act and treat its interaction with 
small business as a constructive dialogue where the Agency can 
meet its objectives while also minimizing burden on small 
business. It can work. I have seen it work. And I thank the 
committee for taking the time to make sure it can work.
    [The prepared statement of Mr. Sullivan follows:]
    
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
        
    Senator Rounds. Thank you, Mr. Sullivan.
    We will now hear from our next witness, Mr. Frank Knapp, 
Jr.
    Mr. Knapp, you may begin.

    STATEMENT OF FRANK KNAPP, JR., PRESIDENT AND CEO, SOUTH 
          CAROLINA SMALL BUSINESS CHAMBER OF COMMERCE

    Mr. Knapp. Thank you, Chairman Rounds, Ranking Member 
Markey, and Chairman Inhofe. My name is Frank Knapp. I am the 
President of the South Carolina Small Business Chamber of 
Commerce, also the Board Co-Chair of the American Sustainable 
Business Council, with a network representing 200,000 
businesses.
    Today's hearing topic is important for small business and 
the vitality of our economy. Good regulations tend to stimulate 
innovation and entrepreneurship in addition to limiting or 
preventing destructive forms of economic activity. Bad 
regulations, whether because they are not designed properly or 
simply not needed, would be a burden on small businesses and 
thus harm our economy. Everyone here would prefer the former 
and not the latter.
    However, even good regulations will have some negative 
impact on certain small businesses. The issue is do the 
positive economic, social, environmental, or health outcomes 
outweigh the negatives.
    For example, well constructed regulations that encourage 
alternative energy to reduce carbon dioxide emissions impede 
the use of fossil fuels, which reduces capital spending and 
jobs in the fossil fuel industries. However, alternative energy 
is much more responsive to technology driven innovation, and 
dollar for dollar invested, alternative energy stimulates much 
more employment than fossil fuels.
    The issue today is, does the Environmental Protection 
Agency and the Federal Government's process of promulgating 
regulations adequately consider any negative on small 
businesses when developing a final regulation? Twelve years ago 
we addressed this issue in South Carolina. Back then, my 
organization worked with our State Chamber of Commerce and our 
State's NFIB to pass our Small Business Regulatory Act modeled 
after the Federal law.
    A few years ago, the then-chairman to the Regulatory Review 
Committee told me that in 7 years his committee had reviewed 
about 300 proposed regulations and identified only 10 that 
raised their concern. His committee worked with the State 
agencies promulgating these new regulations to satisfactorily 
amend the regulations to address unnecessary burdens on 
impacted small businesses.
    The Regulatory Flexibility Act works in our State because 
we provide the all-volunteer committee the resources they need 
to do an effective job on newly proposed regulations, and there 
is the important point. If you want the regulatory process to 
be fair to all parties, and you set up a mechanism to do that, 
it has to be adequately resourced.
    Back on June 27th of 2012, I testified before the U.S. 
House Small Business Committee on this same subject. Mr. Keith 
Holman of the U.S. Chamber of Commerce was also testifying. I 
referred to Mr. Holman's filed written testimony in my 
testimony, and here is what I said back then: ``Mr. Holman 
correctly identifies one area where the EPA's compliance with 
the RFA can be improved: more resources for the rulemaking 
process. While there are voices we hear in Washington critical 
of the EPA and calls for cutting back or freezing the 
regulatory process, the reality is that it can work better for 
small businesses and the public if the EPA was better funded.''
    That testimony was almost 4 years ago. Yet here we are 
still talking about the EPA regulations and small businesses, 
as well as proposals to erode the operational capacity of 
regulatory agencies, instead of providing the proper resources 
for them to do the job Congress tasked them to do, to protect 
small businesses.
    This month, ASBC, the American Sustainable Business 
Council, led a coalition of 25 business organizations, 
including the South Carolina Small Business Chamber, in filing 
an amicus brief with the D.C. Circuit Court of Appeals in 
support of the Clean Power Plan. The brief argues that 
unrestrained climate change will burden national, State, and 
local economies with increased costs and business disruptions 
from droughts, flooding, reduced agriculture productivity, 
extreme weather, rising seas, and other disturbances. In 
addition, the report points out that the Clean Power Plan would 
boost economic growth by generating new market-based solutions 
and new jobs in renewable energy.
    Small business also supports the intent of the Waters of 
the U.S. Polling commissioned by ASBC found that 92 percent of 
small business owners support regulations to protect our water 
and air and that 80 percent supported the Waters of the U.S. 
Rule.
    Small businesses know that the risks of clean water 
disruptions are very real. In 2013 massive manure spills into 
clean water sources occurred in Wisconsin, threatening the 
dairy industry. In 2014 it was the Elk River chemical spill in 
West Virginia which cost the State's economy $19 million a day.
    When clean water resources are shut down, the economic 
burden falls on small businesses.
    In conclusion, the regulation promulgating process can 
produce good rules while protecting small businesses from 
unnecessary burdens if we provide the resources for agencies to 
expeditiously carry out the requirements Congress has already 
put in place. But the Federal Government's responsibility to 
impacted small businesses shouldn't stop there. Some small 
businesses will find compliance with Federal regulations 
difficult. The answer is not to throw the baby out with the 
bath water and invalidate existing rules. Instead, we believe 
the solution lies in expanding the capacity of the Federal 
Government to provide regulatory compliance assistance to small 
business.
    Thank you for the opportunity to speak before you today. I 
welcome any questions the committee may have.
    [The prepared statement of Mr. Knapp follows:]
    
   [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 
    
  
    
    Senator Rounds. Thank you, Mr. Knapp.
    And now, to introduce our next witness, I would ask Ranking 
Member Markey to do the honors.
    Senator Markey. Thank you, Mr. Chairman, very much.
    We are very honored to have Dr. Reichert here with us 
today. Her office, her operation is in Somerville, 
Massachusetts. It is like equidistant from Tufts, Harvard, MIT, 
Boston University, all of these 250,000 students all within 
like a 3- or 4-mile radius of where she has set up this 
incredible Greentown Laboratories; and she now has dozens of 
startup companies all trying to capture this incredible green 
energy revolution, job creating, a millionaire making clean 
energy revolution, and it is our honor to have you here, 
Doctor.
    Senator Rounds. Welcome, Doctor, and you may begin.

        STATEMENT OF EMILY REICHERT, CEO, GREENTOWN LABS

    Ms. Reichert. All right. Thank you, Chairman Rounds, 
Ranking Member Markey, and Senator Inhofe, for giving me the 
opportunity to testify on the impacts of EPA's regulations on 
American small businesses. My name, as Senator Markey just 
said, is Dr. Emily Reichert, CEO of Greentown Labs. We are the 
largest clean technology incubator in the country, located in 
Somerville, Massachusetts, with 40,000 square feet of space 
used to enable entrepreneurs to solve the world's biggest 
energy and environmental challenges.
    The mission of Greentown Labs is to enable a vibrant 
community of entrepreneurs to work on their visions and to 
provide access to space, resources, and funding that allows 
their early stage companies to thrive.
    We offer roughly 25,000 square feet of prototyping lab 
along with co-located office space, a shared machine shop and 
electronics shop, immersion in a growing community of clean 
technology entrepreneurs, onsite events and programs designed 
to help small businesses rapidly grow their networks and their 
companies.
    Greentown Labs was started in 2011 by four startup 
companies who needed inexpensive space to build prototypes. 
Back in 2011 our operating budget was just $99,000 a year, 
covering rent and shared supplies for four companies without 
any Government assistance of any kind. It was a grassroots 
initiative.
    Five years later, in 2015, Greentown Labs was home to over 
40 companies, operating as a for-profit small business with a 
business of $2.1 million and six full-time employees.
    Overall, in 2015, 83 percent of our budget was privately 
funded in the form of members paying rent and large corporate 
entities sponsoring our programming and activities because they 
want access to the innovation coming out of Greentown Labs. 
Only 17 percent of our operating budget was from public 
sources, 2 percent of which was from Federal grants, a $50,000 
grant from the Small Business Administration for one of our 
programs.
    In total, we have now supported 103 small businesses since 
our founding in 2011. In a recent survey of our alumni has 
shown that 86 percent of them continue to grow today, the 
majority of these in Massachusetts, but others have relocated 
to Texas, Colorado, California, and Wisconsin and continue to 
grow their businesses in these States.
    Greentown Labs tries hard to quantify the impact our 
companies have on our community. Today, 50 member companies 
call Greentown Labs home. Greentown Labs companies employ more 
than 400 people and provide nearly 300 indirect jobs as well. 
These companies and our alumni have raised more than $180 
million in both public and private funding, and in 
Massachusetts. This is all happening in one of the most heavily 
regulated States in the country.
    Since being elected, Governor Charlie Baker has undertaken 
a review of State regulations. We now know that we have over 
1,600 regulations that companies have to deal with to do 
business in the State. Many of these are the State's 
interpretation of Federal standards. But like in many other 
States, in Massachusetts Federal rules act as the floor, 
particularly when it comes to environmental regulations.
    Over the last 9 years, Massachusetts has enacted a number 
of laws that increase our State's investment in renewable 
energy, clean technology deployment, and business regulations 
regarding these matters. It has also led to over 1 gigawatt of 
installed renewable energy capacity in Massachusetts as of 
2015.
    Over the same timeframe, Massachusetts has also grown to be 
one of the leading States in innovation, home to thousands of 
startup companies, small businesses. According to the 
Massachusetts Clean Energy Center, a quasi-State government 
agency who issues an annual report on the clean energy industry 
and is now considered the gold standard whose methodology is 
used in 10 other States, job growth in the State's clean energy 
sector continues to grow by double digits every year since 
2010, 11.9 percent in 2015 alone, which represents 10,500 new 
jobs.
    For the purpose of this hearing, though, I want to share 
some specific examples of how companies at Greentown Labs 
incubator are creating new innovative products that benefit 
from some of the regulations passed and under consideration by 
the EPA.
    In April 2012 the EPA put into effect regulations under the 
Clean Water Act to limit water pollution from aircraft and 
airport runway de-icing operations. In response to this, a 
young company in our incubator is developing a new electric-
based plane wing de-icing method that will not only help 
airlines comply with this regulation, but will also help 
airlines save time and money on the runway and potentially 
remove all glycol, a toxic substance, from the de-icing of 
planes.
    I mentioned another company in my written testimony that 
has benefited from the Clean Air Act. They help landfill owners 
to better monitor and utilize methane gas, allowing the owner 
to make money while reducing emissions of methane, a greenhouse 
gas with a much greater impact, 25 times more, than carbon 
dioxide.
    Across the country, new companies like Greentown, the two 
Greentown startups I have mentioned are popping up every day. 
We see them in places from L.A. to New York City, to Oregon, to 
Texas, Chicago, Detroit, even Hawaii.
    I know that many of the people on this panel with me 
believe that environmental regulations cause an unnecessary 
burden to small businesses, but I, in my experience, have not 
seen that. Instead, I have observed EPA regulations to be a 
catalyst for new business ideas and new innovative products. 
And as this committee continues to review the impacts of EPA 
regulations on small businesses, I hope you will keep the 
experience of Massachusetts and Greentown Labs in mind.
    Creating regulations that can help promote a cleaner and 
more efficient environment can also lead to job growth and 
create innumerable opportunities for new businesses.
    Thank you again for inviting me here today and for the 
opportunity to speak on such an important issue.
    [The prepared statement of Ms. Reichert follows:]
    
    
 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]   
    
    
   
    
    Senator Rounds. Dr. Reichert, thank you for your testimony.
    Senators will now have 5 minutes each for questions. I will 
begin the questioning.
    Mr. Canty, in your testimony you discuss the Small Business 
Advisory Council that you are a member of. When I was working 
as a Governor in South Dakota, we had a similar panel that 
would regularly review State regulations. We referred it to as 
the Rules Review Committee. There are 41 States that have a 
similar plan in place. Can you tell us the benefits of having a 
stakeholder panel review regulations, and in particular how 
this panel helps ease the regulatory burden for small 
businesses?
    Mr. Canty. Thank you, Mr. Chairman. Yes, I have served on 
this committee for 4 and a half years, since its inception. 
What we find is that, first, when all stakeholders get around 
and are required to be around the formation of new policies, 
proposed policies for organizations, it becomes much more 
balanced. They begin to understand the needs and the costs 
better than what they might have been before. And with all good 
intentions, proposals that aren't quite so solid get weeded out 
very early in the process or get modified.
    There are, the first year, as you might expect, a 
significant reduction of proposed policies being reduced, but 
right now it has settled into about 25 or 30 percent fewer 
agency proposals being done. But far more important, when those 
policies do get through and get passed, they are better, they 
are more solid, they are more business friendly, and they are 
accepted by everyone around the table because they all had a 
stake in it, and they are much more friendly to the business 
community.
    Senator Rounds. Thank you.
    Mr. Buchanan, many farm families and ranches will be 
impacted by the Waters of the U.S. Rule. These are small family 
owned, and in some cases the land and the farm have been passed 
down through family to family, generation after generation. Do 
you believe the EPA adequately took the unique characteristics 
of these family farms and family owned agricultural operations 
into consideration when promulgating the WOTUS Rule? And what 
impact will this rule have on these families?
    Mr. Buchanan. Thank you for the question, Chairman Rounds. 
I would tell you that I categorically would say that, no, they 
did not take into account the impact that this would have to 
those family farmers. Thank you for recognizing that the 
majority of farmers and ranchers in this great Nation are truly 
family farmers and have operated on that land for many 
generations now, and will continue to do that.
    The impact that my neighbors are beginning to see is that 
certainly as this hangs over our head, being able to make 
business plans and implement potentially new ag business plans 
are on hold because we don't really know where this is going to 
go. Additionally, any purchase or sale of land is in question 
now. What could that land be used for?
    So the impact is growing and is beginning to scare rural 
America, and is really impacting the rights of private property 
owners, and I would hope that this committee recognizes that. 
Thank you, sir.
    Senator Rounds. Thank you, sir.
    Mr. Sullivan, EPA's Brick MACT Rule is another instance 
where it seems EPA overlooked the impacts on small businesses. 
EPA estimated the rule would cost $25 million. However, a 
February 2016 U.S. Chamber report, which I would like to insert 
in the record, reported the cost to be as much as $100 million 
per year. Importantly, more than 60 of the 70 U.S. brick plants 
impacted by the rule are small businesses, often family owned. 
In South Dakota, this could cost nearly 300 good paying jobs.
    I understand EPA convened a small business review panel and 
the Office of Advocacy recommended the EPA should grant 
flexibilities to minimize the impacts on these already 
struggling small businesses. So can you help me understand what 
went wrong here?
    Mr. Sullivan. Thank you, Senator. The brick industry is a 
very good case example of how the proverbial straw will break 
the camel's back. These are family owned businesses that, 
unfortunately, due to regulatory pressures over and over and 
over again, are rapidly just folding shop, and that gets at the 
challenge of process versus outcome. You can have a process 
that I think this entire panel would agree on, that if it truly 
engages the small business community in a constructive 
discussion, you can come up with better alternatives.
    The challenge with the brick MACT and several other rules 
that impact the brick industry is that if you have a series of 
panels and a series of EPA rules, eventually just that 
overwhelming burden is going to crush an industry, and I am 
afraid that that is what has gone on here.
    So the solution to that challenge I think goes beyond just 
the Reg Flex Act into an understanding of how EPA calculates 
the cumulative impact. It does a very good job of calculating 
and making public the cumulative benefits of many of the air 
rules, but I think it does not do as good of a job as measuring 
and making public the cumulative burden. And I think if the 
Agency is being public about both the cumulative benefits of 
many Clean Air Act rules, then I think that you deserve and the 
public deserves an equal assessment of the cumulative burdens 
on those same industries.
    Senator Rounds. Thank you, Mr. Sullivan.
    Senator Markey.
    [The referenced report was not received at time of print.]
    Senator Markey. Thank you, Mr. Chairman, very much.
    Dr. Reichert, I was thrilled by your ability to lay out how 
new companies get created when EPA identifies problems that 
have to be solved. So can you expand upon that a little bit 
more? What gets unleashed when there is a clear pollution or 
environmental issue that is identified from the private sector 
perspective?
    Ms. Reichert. Absolutely. Thank you, Senator. In fact, I 
think I can best do that by sharing a few additional examples 
of companies that have responded to environmental regulations, 
already in effect or about to be in effect. So in addition to 
the young companies that I had mentioned previously, we have 
several others who benefit from new markets that are created by 
Clean Air Act regulations already in effect or about to be in 
effect.
    So one company creates coatings for copper tubing, which 
increases condensation efficiency in power plants, increasing 
the plant's overall efficiency and reducing emissions. And this 
company will benefit from the Clean Air Act's Clean Power Plan.
    A second example, one of our companies provides highly 
sensitive infrared sensing of methane gas leaks. Two more of 
our companies provide technologies to capture or use natural 
gas from wellheads through the multi-phase compression or 
microturbine technologies that they have developed. And those 
companies all benefit from several different Clean Air Act 
regulations; one is about methane emission standards for new 
and modified sources in the oil and gas industry, a second is 
the Clean Air Act's oil and gas air pollution standards, and a 
third, stationary internal combustion engines also under the 
Clean Air Act.
    Senator Markey. Thank you. So that is kind of exciting. You 
don't end the old industry; you add new technology that just 
keeps the old industry going, but with higher environmental 
standards met by innovative new technologies. So I think that 
is pretty much what we are talking about.
    Mr. Knapp, in your testimony you are saying that the Clean 
Water Rule enjoys a lot of bipartisan support and that you are 
here representing, I think you said, 200,000, 300,000 small 
businesses?
    Mr. Knapp. Yes. The American Sustainable Business Council.
    Senator Markey. Yes. Could you talk about why those small 
businesses support the Clean Water Rule?
    Mr. Knapp. Small business owners are nothing more than 
regular folk out there. Who doesn't want clean water? And that 
is what I have always told everybody. A small business person 
really is just like your neighbor; they just happen to own a 
business. They have the same concerns that everybody else has.
    So to the degree that they feel that clean water is 
important and they support a regulation that would in fact 
guaranty that their fresh source of water is going to be 
protected. So it is not unusual for the results that we get 
from our polling, because those are the same results you get 
from polling of the general public.
    Senator Markey. So can you talk a little bit about this 
balance between regulation on the one hand and cost to 
businesses with the clear positive impacts that come about 
because of the regulations? That creates, sometimes, a little 
bit of a conundrum in seeing the benefits that come as well as 
the obvious kind of constraints that a regulation might place 
upon an existing way of doing business, but yet there are clear 
positives as well.
    Mr. Knapp. Yes. Look, regulations exist and the rules exist 
because there is some outcome that we are seeking, the 
Government wants to happen. Congress has passed some type of 
legislation that is going to require the implementation, which 
requires rules.
    So will there be impacted businesses that will be 
negatively impacted by a rule? Yes. But again, it is the 
overwhelming relationship between the negative response and the 
positive impact. And we know that regulations and rules will be 
responded to by the private sector. That is what the private 
sector does; they recognize where they can make money, and they 
go there. And if a rule was established that clearly sets a 
path for businesses to follow, they will follow it.
    Does that mean that some businesses are going to be 
negatively impacted? Yes, it does. But what businesses really 
want are fair rules; they want those rules to be set and to not 
be questioned all the time, because that then creates the 
uncertainty that we heard about here with the Waters of the 
U.S.
    Senator Markey. So once you set the goals for social or 
economic or health or environment outcomes, then all of a 
sudden you get this incredible explosion of entrepreneurial 
activity, which solves the problem.
    Mr. Knapp. Which the doctor just talked about.
    Senator Markey. Not just here at Greentown, but all across 
America as well. And that is kind of the balance that we have 
always struck since the beginning of the clean water and safe 
foods revolution back in the early part of the 19th century; it 
has always been a balance. But I think in the end it is pretty 
clear that the net effects of it are healthier, cleaner 
society, and many more jobs that were created in solving the 
problem.
    So thank you, Mr. Chairman.
    Senator Rounds. Chairman Inhofe.
    Senator Inhofe. Thank you, Mr. Chairman.
    Let me follow up a little bit from Chairman Rounds' 
questions to you, Mr. Buchanan. Your testimony mentions how the 
Small Business Administration Office of Advocacy told the EPA 
that the WOTUS Rule will have significant economic impacts on 
small business.
    The EPA ignored what I call this expert advice, refused to 
consult with small businesses, and said it certified that the 
rule would have no small business impacts. Now, clearly they 
don't have to do it. They will just ignore the recommendations. 
The Office of Advocacy is there to advise people of what is 
going to happen. What is your thought about that?
    Mr. Buchanan. I would adamantly say that the EPA should not 
ignore that recommendation. We have to recognize now that SBA 
is set there for a purpose, and in this instance their ability 
to function especially with independence within this process is 
imperative. Agencies need to recognize that SBA is here to 
advocate and to communicate to the other agencies about the 
impact of any proposed rule to small businesses across America, 
so they have to be listened to and have to be an integral part 
of this process.
    Senator Inhofe. Well, Mr. Sullivan, you just heard Mr. 
Buchanan say the EPA's failure to consult with small businesses 
against the Office of Advocacy's recommendation hurt its 
members. Now, do you have any recommendations that we can make, 
make it stronger or how to reconcile agency disputes with the 
Office of Advocacy? I mean, they are supposed to be consulting 
back and forth.
    Mr. Sullivan. Thank you, Chairman Inhofe. I have included 
detailed recommendations in my written testimony. I will try to 
summarize. I think there are a couple of fundamental things 
that don't work, and one of them is the legal community saying, 
well, if there is a problem, then after EPA finalizes the rule 
we can go to court. I think in the world of a small business 
owner, in the world of a farmer, having EPA certify that it is 
not going to impact small business, for SBA to throw the 
penalty flag and then for farmers to have to wait 2, 3, 5, 7 
years before a case is----
    Senator Inhofe. Let me interrupt just a little bit here 
because you are telling me something I didn't know.
    Mr. Sullivan. Sure.
    Senator Inhofe. You are saying that they have to certify 
that it is not going to hurt, and this is in light of the fact 
even if they were told by the Office of Advocacy that it would?
    Mr. Sullivan. Yes. It is just an interagency disagreement. 
I think what makes this unique is the Office of Advocacy's 
independent role. This committee certainly is aware that 
agencies should have deliberative discussions that are private 
and confidential to come up with recommendations.
    The Office of Advocacy's role as an independent check on 
regulatory authority is a significant and unique authority 
within the Federal Government; however, it is limited. And one 
of those limits is when the Office of Advocacy says, I am 
sorry, but you cannot certify that this rule will not 
significantly economically affect small businesses, then the 
businesses have to wait until after the rule is finalized 
before they go to court.
    There is an unfairness there. I think in the legal 
community we are satisfied by saying, well, you know, the law 
provides a legal backstop. But the reality is that backstop 
happens 2, 4, 7 years later, and actually what happens in those 
7 years, as you heard from Mr. Buchanan, is uncertainty and 
other bad things. I think that Congress can take action and try 
to come up with ways for quicker and more efficient resolutions 
of that disagreement.
    Senator Inhofe. And that is helpful. That is helpful.
    Before I lose my time here, Mr. Canty, a lot of the 
regulations coming out of the EPA's Office of Air, the Air 
Office, called the Clean Power Plan, I think we all need to 
understand what this is. This is what the President came up 
with and made a commitment in Paris that we in the United 
States would reduce emissions by between 26 and 28 percent by 
2025. They don't know how they are going to do it.
    We even tried to have a hearing and the EPA didn't want to 
come in and tell us how they are going to do it. So obviously 
nobody knows how that is going to happen. But it would have 
devastating effect on the reliability, the reliability, the 
predictability.
    Can you kind of walk through how even a brief disruption in 
electricity impacts the operation at one of your manufacturing 
offices?
    Mr. Canty. Thank you, Senator Inhofe. You are quite right, 
it is not only the extra cost to a manufacturing company like 
mine, but when we have outages, which we have on a regular 
basis, it is not just the 5-minute or the 30-minute outage that 
we have; it is the rebooting of equipment, it is the rebooting 
of personnel and the rebooting of software, it is the stoppage 
of work and then trying to get a whole team back working. The 
cost is pretty significant.
    And when we look at relocating, taking into power 
considerations is critical what we do and how we do it, and 
that is happening in Ohio a great deal because of the Clean Air 
Act being proposed to, before their time, shut down a great 
deal of our energy that comes out of coal plants. Everyone 
wants clean air, but when you are pushing it faster than 
technology can garner it and faster than new capacity in other 
forms can take it over, we end up severely hurting 
manufacturing companies and other businesses that are desperate 
for that power.
    Senator Inhofe. Thank you.
    Senator Rounds. Thank you.
    Senator Booker.
    Senator Booker. Thank you very much, Mr. Chairman. 
Actually, we appreciate the thorough testimony from the 
witnesses, and any other questions I have I will submit for the 
record.
    Senator Rounds. Very good.
    At this time I think we are going to try to do one more 
round of 3 minutes each, and we will limit ourselves on it, but 
this will give us an opportunity to wrap up. Let me begin.
    Mr. Sullivan, in your testimony you say that there are 
times when the EPA approaches the Regulatory Flexibility Act as 
merely a bureaucratic procedural hurdle. The RFA was defined to 
be a safeguard for small businesses when agencies seek to 
implement regulations that will impact them.
    When it is viewed as simply a procedural hurdle, how does 
this affect the quality of the regulation and the thoroughness 
of the review of how the regulations will impact small 
businesses?
    Mr. Sullivan. Thank you, Chairman Rounds. I think when 
agencies, including EPA, look at the Reg Flex Act as a hurdle 
it doesn't work. When they look at it from a constructive 
exercise it does. That means committing to having a SBREFA 
panel early in the process, it means listening to the small 
business owners before the ink is dry on the proposed 
regulation, and it means working with the small businesses all 
the way through the rulemaking process, and it doesn't stop 
there, the actual compliance and implementation process. And if 
that is the case, it is a constructive dialogue, it is not an 
adversarial dialogue, and it can work.
    Senator Rounds. Mr. Canty, you will soon be traveling to 
Poland, Germany, and China in order to begin the process of 
importing products for your company that you used to make in-
house. Can you explain what about the regulatory environment 
has made it impossible for you to continue to produce these 
products in the United States? And when this happens, what is 
the overall impact on your business, including jobs in your 
company?
    Mr. Canty. Thank you, Mr. Chairman. We have grown in the 
past 10 years our employment by over 400 percent. Our company 
has grown in revenues by over 500 percent. Our goal has always 
been to in-source everything. But the magnitude, the cumulative 
magnitude of regulations from the EPA, from OSHA, from the 
Department of Labor, from the NLRB that have been passed and 
are currently in the process of being passed are just becoming 
so costly and so cumbersome that it drives manufacturers like 
us to go overseas, where they don't have to comply with some of 
those costs and certainly not to the level that they have to do 
here.
    They also end up having an unknown. We don't know what is 
going to come this year or next year or the year after. What 
additional escalating costs are going to be coming? How are we 
going to have to comply? And to what level are we going to have 
inspectors, surprise inspectors, whether it is the EPA, in a 
very clean company that we have, or OSHA or someone else come 
in and say you are doing it wrong, so you are going to get tens 
of thousands of dollars of fines because you didn't know about 
the rules, you didn't understand the rules? That is a huge 
issue. That is as important to us as the costs are.
    And the impact on our company. We have invested millions 
the past 10 years, we are a small company, in new technologies 
and new equipment, processes and people. We have technology and 
equipment no one in the world has at this point. That won't 
happen with some of these product lines; it is going to go 
overseas. And the technology and the jobs and the processes and 
our manufacturing prowess both with our company and this 
country are going to continue to be shifted overseas instead of 
right here, made in America, where I would just as soon have it 
be.
    Senator Rounds. Thank you, Mr. Canty.
    Senator Markey.
    Senator Markey. Thank you very much.
    We only have 3 minutes. I want to give you, Mr. Knapp, and 
Dr. Reichert a chance to deal with this question of whether or 
not these environmental regulations, in their own way, create a 
bubbling, boiling caldron of competitiveness trying to create 
the new ideas to make our country cleaner and safer on the one 
hand, but also more prosperous with homegrown jobs.
    So maybe you, Mr. Knapp, you can talk about the 200,000 
companies that you are representing in this sector; and you, 
Dr. Reichert, maybe you can talk about the Massachusetts 
challenge, this accelerator going from concept to execution and 
starting up new companies to solve these problems.
    Mr. Knapp. I am going to let the doctor talk about the 
specific acceleration of companies. I want to address some 
things, if you don't mind, Senator, some things that were said. 
The Clean Power Plan is going to be implemented by the States. 
It is a goal set by the Federal Government, by the 
Administration, EPA, but it will be up to each State to decide 
how they are going to achieve that goal.
    I don't think that any State is going to then say we are 
going to shut down electricity to do that. I know in South 
Carolina we are very fortunate, we have two nuclear plants 
being built that will take care of 80 percent of our goal. 
Coincide or not, we are going to be sitting pretty good.
    But nevertheless, the proof is in the economic data that 
clearly shows that when you invest in new technology, you grow 
more jobs. I will note that you probably said that you have 
over 100,000 clean energy jobs in Massachusetts, and 
congratulations on that. I will tell you that that is actually 
more jobs than the coal mining industry right now. So you are 
going that way, and they are going the other way. But on 
balance we are producing a healthier and stronger economy with 
new technology.
    Senator Markey. Dr. Reichert.
    Ms. Reichert. Thank you, Senator. So, in my experience as 
CEO of Greentown Labs since 2013, we have seen just incredible 
growth in the innovation in clean technology sectors here in 
Massachusetts. I can speak especially about all of the 
different support systems that have sprung up, whether they be 
accelerators, incubators, and other means of support to help 
these early stage companies get off the ground.
    It is a tough thing to do, right, you are going from an 
idea to something that you make in the lab to something that 
you hope can be 5 that work in the lab to 50 that work in the 
field to 1,000 that hopefully work in your first customer's 
shop. So it is a real challenge that these startups face. They 
struggle with it, but it is also an incredible opportunity, and 
so many of them are doing so well, and we just see that really 
all over Massachusetts.
    But we also are in touch with incubators from around the 
country, whether they be in Texas or Michigan or Illinois, 
California, New York, Hawaii. All of these other incubators we 
work with who are also helping early stage companies to develop 
their technologies, they are seeing the same thing, too.
    Senator Markey. When I look at MIT, I know there are 2,000 
kids at MIT who have self-selected themselves into the energy 
club. So that is 2,000 kids with 800s on their boards saying, I 
want to work on energy issues, and they want to do well and do 
good. In other words, they would like to solve the problems and 
get rich at the same time.
    And that is not just at MIT, it is at every college all 
across America, regardless of the State. These kids are there, 
readying to go to solve the problem. And like you are saying on 
methane, there is a new technology there that could be used and 
applied to solve the problem of whether or not these other 
plants ever have to shut down. They just found a way of 
reducing by 95 percent the methane by unleashing this new 
technology.
    So I just think it is very exciting to our country, and the 
potential is really unlimited in this sector, and I think that 
all energy technologies, as a result, can flourish 
simultaneously.
    Thank you, Mr. Chairman.
    Senator Rounds. Senator Boozman.
    Senator Boozman. Thank you, Mr. Chairman.
    First of all, being from Arkansas, I want to welcome our 
Oklahoma neighbors that are in the audience from Oklahoma Farm 
Bureau, and then also USRA.
    Mr. Buchanan, tell me what we can do to better encourage 
rule writing that takes into account impacts to small business.
    Mr. Buchanan. Thank you for the opportunity, sir, and good 
to see you again.
    I want you to know that what I have heard on this panel, 
and hopefully this answers your question, is that some people 
believe that Government regulation drives ingenuity and 
innovation and meets new needs. I will tell you that 6 million 
members of American Farm Bureau who are family farmers and 
ranchers are meeting needs today by using technologies that the 
market drives.
    There is not a one of us that produces product that 
somebody doesn't want to buy. We have the ultimate regulator, 
and that is the American consumer. And if we are producing a 
safe and a quality and an affordable product, the American 
consumer will continue to do business with us. Regulations will 
do nothing but handcuff us and handicap us. I'm getting all 
soapbox a little bit, sir.
    Senator Boozman. No, we want you to get on your soapbox. 
That is good.
    Mr. Buchanan. I would hope that we would recognize that 
regulations placed on American farmers and ranchers become, in 
my view, somewhat of a food snobbery. There are many amongst us 
in this Nation that are having difficulties feeding their 
families today. In fact, in my home State of Oklahoma, one in 
four children goes to bed hungry at night. Food insecurity is a 
big issue across this Nation, across the world. I would ask you 
folks who can write regulations or not write regulations to not 
handcuff, not handicap American agriculture.
    Think that when you go to the grocery store, regardless of 
where you shop, Senator Boozman, if that is at a discount 
grocery store or the boutiques, or a farmer's market on a 
Saturday morning, the American public today, as I alluded to, 
enjoys the most abundant, the highest quality and the most 
affordable food sources they have ever had, and that is a 
result of American agriculture meeting the need of the market. 
I am a market driven guy. Call me naive. I believe if the 
market requests something, wants something, that American 
farmers will meet that demand.
    So to answer your question, Senator Boozman, what we can do 
to encourage rural America and American agriculture is--being a 
smart aleck here--get out of our way, give us the opportunity 
to continue to feed and clothe and start doing fueling for this 
Nation. We are ready to do that job, we want to do that job and 
will do it if you give us the chance. Thank you, sir.
    Senator Boozman. Thank you.
    Mr. Sullivan, as you know, the EPA often creates new 
mandates under the sue-and-settle process. Here is how it 
works: the EPA will be sued by a left-wing law firm or lobbyist 
group; then the agency will settle the lawsuit with the group, 
agreeing to pass new mandates by negotiated deadline; the 
courts rubber stamp the agreement. In the end, the Agency gets 
more power, and the law firms and lobbyists get what they want, 
too.
    Do you think these negotiated deadlines from sue-and-settle 
agreements can rush critical interagency reviews such as those 
required under the Regulatory Flexibility Act?
    Mr. Sullivan. Yes, I do.
    Senator Boozman. Very good. What kind of harm and 
consequences are caused by the rushed interagency reviews under 
the Regulatory Flexibility Act?
    Mr. Sullivan. Thank you, Senator. The harm that is caused 
by deadlines, whether real or false, are that agencies don't 
listen to small business. I am a dad; I have two little boys, 
and I learn every day that what helps our family is when I 
listen to them. Thank goodness they are not always right, but 
listening makes a big difference. And I think that when folks 
have deadlines and the incentive, every incentive is to pass a 
rule, then an agency is disinclined to listen, and based on 
that input from small business make changes that both meet the 
underlying statutory goal and minimize the burden on business.
    Senator Boozman. Very good.
    Thank you, Mr. Chairman.
    Senator Rounds. Senator Booker, would you care to?
    Senator Booker. No.
    [Laughter.]
    Senator Rounds. OK. Very good.
    Senator Inhofe. I haven't had my 3 minutes.
    Senator Rounds. Oh, I am sorry. Mr. Chairman, would you 
care to take 3 minutes?
    Senator Inhofe. Yes.
    [Laughter.]
    Senator Inhofe. Let me just share something that everybody 
in this room knows, and that is I am very thankful that the 
courts have gotten involved in some of these. What we consider, 
Mr. Knapp, the ones out in my State to be the most significant 
over-regulations, if you might, would be the WOTUS. In fact, I 
think I mentioned earlier that when I talked to Mr. Buchanan in 
his capacity as the President of the Oklahoma Farm Bureau, he 
identified the WOTUS bill. And then the other is the Clean 
Power Plan.
    But the courts have come along, the Sixth Circuit put a 
stay on the WOTUS bill, so you have breathing room now. We 
don't know what the outcome is going to be. Then the U.S. 
Supreme Court put a stay, issued a stay on the Clean Power 
Plan. And of course, that is the one where we had some 27 
States, more than half the States had lawsuits against the EPA 
on that particular regulation, the Clean Power Plan.
    Now, that is all good, but it tells me that if we had done 
a better job of passing the regulations to begin with it 
wouldn't be necessary for the courts to come in and intervene. 
I was just on the Senate floor today with a giant chart just 
like this on the Clean Power Plan. If you look at what is going 
to happen, on February 9th the stay took place; June 2nd the 
case is before a three judge panel. It goes on all the way 
back. It is going to be 2018 before there is going to be any 
final decision on this thing.
    Now, I see that as good news, but it is a problem because, 
obviously, if they had done the job right in the first place, 
we wouldn't have had to have all this unpredictability.
    Do you agree with that, Mr. Buchanan?
    Mr. Buchanan. Absolutely. I would assume, sir, sitting in 
your chair, strategically, you would be able to slow-play that. 
That might be a good thing, but I would tell you that when I am 
getting ready to plant a cotton crop and my fellow farmer 
neighbors and ranchers in Oklahoma are trying to get the inputs 
that they need to produce whatever crop they are going to 
produce for the coming year, the inability to know what is 
coming down, the inability to know what EPA or anybody else 
might place a new regulation upon us really makes it very tough 
to do business.
    And if I may, sir, one thing that while agriculture has the 
mic, we would like to take advantage of that, and I want you to 
know that it appears that many times we are overlooked, being 
landowners, about how we treat the land, and I hope it doesn't 
fall on deaf ears, but the majority of farmers don't have big 
401(k) accounts, they don't have great big stock holdings; they 
have investment in land, and that is their retirement plan. And 
that retirement plan will be passed on to their sons and 
daughters and family members. And why in the world would anyone 
in good conscience pass on something to their family members 
that was polluted or ruined or somehow infringed upon the 
ability to produce?
    Senator Inhofe. There is a mentality that somehow 
Government has to intervene to make sure you are taking care of 
your property and all this. I had a meeting in my office; there 
are four people here that were in my office a couple hours ago, 
and this idea, they are more concerned than anybody else. That 
is why the partnership program has been one of the most 
successful programs that we have had. It has been very 
successful in Oklahoma.
    Thank you, Mr. Chairman.
    Senator Rounds. First of all, let me just say thank you to 
all of our panel members, and Ranking Member Markey and 
Chairman Inhofe. The idea behind this is to get good 
information, to learn, to see what we can do to do better, and 
it requires input from all sides, and that is what we are 
receiving here today.
    I would like to thank you for taking the time to be with us 
today, and I would also like to thank my colleagues as well for 
attending this hearing and their thoughts.
    The record for this meeting will be open for 2 weeks, which 
would bring us to Tuesday, April 26th.
    With that, this hearing is adjourned. Thank you.
    [Whereupon, at 3:53 p.m. the committee was adjourned.]

                                 [all]