    [Senate Hearing 114-552]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 114-552

                    AN EXAMINATION OF PROPOSED ENVIRONMENTAL
               REGULATION'S IMPACTS ON AMERICA'S SMALL BUSINESSES

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

                                    HEARING

                                   BEFORE THE

                          COMMITTEE ON SMALL BUSINESS
                              AND ENTREPRENEURSHIP
                              UNITED STATES SENATE

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                  MAY 19, 2015

                                   __________

        Printed for the Committee on Small Business and Entrepreneurship

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

                                   __________

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                COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP

                        ONE HUNDRED FOURTEENTH CONGRESS

                                  ----------
                       DAVID VITTER, Louisiana, Chairman
                 JEANNE SHAHEEN, New Hampshire, Ranking Member
    JAMES E. RISCH, Idaho                MARIA CANTWELL, Washington
    MARCO RUBIO, Florida                 BENJAMIN L. CARDIN, Maryland
    RAND PAUL, Kentucky                  HEIDI HEITKAMP, North Dakota
    TIM SCOTT, South Carolina            EDWARD J. MARKEY, Massachusetts
    DEB FISCHER, Nebraska                CORY A. BOOKER, New Jersey
    CORY GARDNER, Colorado               CHRISTOPHER A. COONS, Delaware
    JONI ERNST, Iowa                     MAZIE K. HIRONO, Hawaii
    KELLY AYOTTE, New Hampshire          GARY C. PETERS, Michigan
    MICHAEL B. ENZI, Wyoming
                      Zak Baig, Republican Staff Director
                     Ann Jacobs, Democratic Staff Director

                               C O N T E N T S

                                  ----------

                               Opening Statements

                                                                       Page

    Vitter, Hon. David, Chairman, and a U.S. Senator from Louisiana..     1
    Shaheen, Hon. Jeanne, a U.S. Senator from New Hampshire..........     2
    Ernst, Hon. Joni, a U.S. Senator from Iowa.......................    20

                                   Witnesses
                                    Panel 1:

    Maresca, Charles, Director of Interagency Affairs, Small Business
      Administration, Office of Advocacy, Washington, DC.............     4

                                    Panel 2:

    Dougherty Maulsby, Darcy, Fifth-Generation Iowa Farmer, Dougherty
      Farm, Lake City, IA............................................    21
    Noel, Karl Randall, President, Reve Inc., Laplace, LA............    27
    Milito, Hon. Elizabeth, Senior Executive Counsel, National
      Federation of Independent Business, Washington, DC.............    40
    Bulis, Benjamin, President, American Fly Fishing Trade
      Association, Bozeman, MT.......................................    48

              Alphabetical Listing and Appendix Material Submitted

    American Sustainable Business Council
        Statement....................................................    81
    Bulis, Benjamin
        Testimony....................................................    48
        Prepared statement...........................................    50
    City of Baltimore Council Bill 14-0185R
        Resolution Introduced and Adopted September 8, 2014..........    83
    Dougherty Maulsby, Darcy
        Testimony....................................................    21
        Prepared statement...........................................    24
    EPA
        Summary of the Discretionary Small Entity Outreach for
          Planned Proposed Revised Definition of ``Waters of the
          United States''............................................    85
        Summary of the Small Entities Outreach Meeting on the
          Proposed Rule for Redefining Waters of the United States
          under the Clean Water Act, October 15, 2014................    99
    Ernst, Hon. Joni
        Testimony....................................................    20
    Latino Business Council
        Opinion by Ruben Guerra......................................   111
    Maresca, Charles
        Testimony....................................................     4
        Prepared statement...........................................     6
    Markey, Hon. Edward J.
        Advocacy Waters of the United States Contacts: Small
          Businesses and their Representatives.......................    62
    Milito, Hon. Elizabeth
        Testimony....................................................    40
        Prepared statement...........................................    42
    National Farmers Union
        Letter Dated September 22, 2014..............................   113
    National Federation of Independent Business
        Jurisdictional Comments......................................    66
        RFA Comments.................................................    75
    National Wildlife Federation
        Letter Dated May 18, 2015....................................   124
    Noel, Karl Randall
        Testimony....................................................    27
        Prepared statement...........................................    29
    Shaheen, Hon. Jeanne
        Testimony....................................................     2
    Small Business Owners Favor Regulations to Protect Clean Water
        Phone Poll Dated July 2014...................................   132
    Vitter, Hon. David
        Opening statement............................................     1

                           AN EXAMINATION OF PROPOSED
        ENVIRONMENTAL REGULATION'S IMPACTS ON AMERICA'S SMALL BUSINESSES

                                  ----------

                             TUESDAY, MAY 19, 2015

                          United States Senate,
                            Committee on Small Business
                                          and Entrepreneurship,
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 2:02 p.m., in
    Room 428A, Russell Senate Office Building, Hon. David Vitter,
    Chairman of the Committee, presiding.
        Present: Senators Vitter, Fischer, Gardner, Ernst, Ayotte,
    Shaheen, Markey, and Booker.

     OPENING STATEMENT OF HON. DAVID VITTER, CHAIRMAN, AND A U.S.
                         SENATOR FROM LOUISIANA

        Chairman Vitter. Good afternoon, everyone, and we will call
    the committee to order.
        Welcome to the Senate Committee on Small Business and
    Entrepreneurship's hearing assessing the economic and
    regulatory impacts of the EPA and the Army Corps of Engineers'
    proposed rule to redefine the term ``waters of the United
    States,'' which will be finalized in the near future.
        The purpose of this hearing is to examine the impact that
    the proposal will have on small businesses as well as the
    agencies' egregious circumvention of the very regulatory
    process set in place to protect small businesses. Specifically,
    the EPA and the Corps have publicly concluded that the proposed
    rule will not have any significant impact on a substantial
    number of small entities, and they also concluded that the
    proposal will have no direct impacts on small entities.
        Now, I think this is flat out outrageous, that the
    administration would pretend that the proposal would not have a
    substantial and a direct impact on small businesses. It is so
    outrageous, in fact, that I will soon introduce a Sense of the
    Senate Resolution condemning the administration's circumvention
    of this important process and will hold a vote on that
    resolution in this committee.
        Regarding the content of the rule, the sweeping language in
    the proposal represents a direct threat to private property
    rights. By expanding the types and numbers of water bodies
    subject to federal control, these agencies will further expand
    their authority enormously to tell home owners, small
    businesses, and others what they can do on their own property.
        This provides an opening for the federal government to
    increase its role yet again, and dramatically, in local land
    use planning and decisions. State and local zoning commissions
    will see their rules displaced by Washington bureaucrats who do
    not truly understand the implications of the policy changes
    they will be pushing forward with. This will lead to costly
    litigation and expand the ability of radical environmental
    groups to sue land owners over how they manage and use their
    own property. Additionally, the rule as proposed will have a
    significant negative impact on agriculture, and particularly
    smaller family farms.
        On October 1, 2014, the Office of Advocacy, an independent
    office of the SBA, sent a letter to the EPA and the Army Corps
    that was highly critical of their finding that the proposal
    will not have any significant impact on a substantial number of
    small entities. The Office of Advocacy's role is to represent
    small entities in the federal rulemaking process. In fiscal
    year 2014, it achieved regulatory cost savings to small
    businesses of more than $4.8 billion. A substantial part of
    these savings--in fact, the great majority, $4.6 billion--arose
    from changes to proposed EPA regulations.
        In its October letter, Advocacy unequivocally stated, and I
    quote, ``Advocacy believes that EPA and the Corps have
    improperly certified the proposed rule under the Regulatory
    Flexibility Act because it would have direct significant
    effects on small businesses. Advocacy recommends that the
    agencies withdraw the rule and that the EPA conduct a Small
    Business Advocacy Review Panel before proceeding any further
    with this rulemaking,'' close quote. As we know, EPA has
    completely ignored that input.
        Under the Regulatory Flexibility Act, when an agency finds
    that a proposed rule will have a significant economic impact on
    a substantial number of small entities, it must evaluate the
    impact, consider alternatives, and in the case of EPA, convene
    a Small Business Advocacy Review Panel to consider the input of
    the Office of Advocacy and the small business community. But,
    by certifying that the rule will not have that impact, which is
    clearly just not the case, the EPA and the Corps effectively
    shut down this process mandated by law.
        As Chair of the Small Business Committee, I am committed to
    ensuring that we do not allow that sort of action to proceed
    unchecked. That is why we are having this hearing. That is why
    we are going to have this resolution, which I will be
    introducing soon and certainly hope can gain bipartisan support
    in this committee and in the Senate overall.
        Now, I turn to our distinguished Ranking Member, Senator
    Shaheen, for her opening comments.

      OPENING STATEMENT OF HON. JEANNE SHAHEEN, RANKING MEMBER, A
                    U.S. SENATOR FROM NEW HAMPSHIRE

        Senator Shaheen. Thank you, Mr. Chairman.
        Good afternoon, everyone. Welcome to today's hearing. I
    want to begin by thanking both panels who are here to testify.
        As the Chairman noted, today, we are discussing the impact
    of environmental regulations on small business, and
    specifically, we are going to focus on the joint efforts by the
    Environmental Protection Agency and the Corps of Engineers to
    amend their definition of Waters of the United States. This
    term is integral to clarifying which bodies of water will be
    covered under the Clean Water Act.
        I am pleased that on our first panel, we will have Mr.
    Maresca, who is the Director of Interagency Affairs with the
    Office of Advocacy of the Small Business Administration,
    testifying. You will bring an important voice to this
    afternoon's hearing, given the role the Office of Advocacy has
    representing the interests of small businesses in the federal
    rulemaking process.
        In addition, I think it is beneficial that our second panel
    will provide small business perspectives across a variety of
    diverse industries, including agriculture, home building, and
    outdoor recreation.
        I am disappointed that we do not have officials from the
    two relevant federal agencies who are charged with promulgating
    this rule joining us today. I believe that in order for there
    to be a meaningful and constructive conversation about the
    proposed rule's impact on small businesses, we need to have all
    parties who are part of this rulemaking process participating
    in the discussion.
        I hope that today's hearing is not about attacking the
    Clean Water Act or obstructing the efforts of the federal
    government to make regulatory decisions. This hearing should
    focus on whether the agencies responsible for promulgating this
    rule, the Environmental Protection Agency and the U.S. Army
    Corps of Engineers, complied with their statutory requirements
    to ensure that small businesses are considered in the
    rulemaking process.
        As we all know, the EPA and the Corps of Engineers
    determined that the rule would not have a significant impact on
    small businesses, and I am disappointed that they are not here
    to answer questions and tell us how they arrived at their
    conclusions.
        It is my sincere hope that moving forward this Committee
    can work together in a bipartisan manner to effectively
    communicate the interests of small businesses with federal
    agencies charged with crafting federal regulations.
        So, thank you, Mr. Chairman, and I look forward to hearing
    from today's witnesses.
        Chairman Vitter. Thank you very much, Senator Shaheen.
        And, just for the record, let me point out that we would
    have welcomed the EPA and the Corps to be here, and it is my
    understanding that the Minority staff reached out to them about
    that and were basically told that they were not going to be
    coming. So, that underscores, I think, the frustration of many
    of us with their decision and with the tone and the attitude
    they have taken in making this certification, which I think--I
    am just speaking for myself--is just flat out contrary to a
    whole, whole lot of evidence.
        Okay. At this point, I would like to introduce our first
    witness, Charles Maresca, Director of Interagency Affairs at
    the Small Business Administration's Office of Advocacy. Mr.
    Maresca will be the lone witness on the federal panel because
    of what I just said. He leads Advocacy's efforts to monitor
    federal agencies' compliance with the Regulatory Flexibility
    Act, and, of course, that is what we are talking about with
    regard to this proposed waters of the United States rule today.
        Welcome, Mr. Maresca.

    STATEMENT OF CHARLES MARESCA, DIRECTOR OF INTERAGENCY AFFAIRS,
         OFFICE OF ADVOCACY, U.S. SMALL BUSINESS ADMINISTRATION

        Mr. Maresca. Thank you, Chairman Vitter, Ranking Member
    Shaheen, members of the committee. I am honored to be here this
    afternoon to present testimony to you on behalf of the Office
    of Advocacy of the U.S. Small Business Administration regarding
    the Environmental Protection Agency and the Army Corps of
    Engineers' proposed rule on the definition of waters of the
    United States under the Clean Water Act.
        Advocacy is an independent office within the SBA that
    speaks on behalf of the small business community before federal
    agencies, Congress, and the White House. The views in my
    testimony do not necessarily reflect the views of the
    administration or the SBA and this statement has not been
    circulated to the Office of Management and Budget for
    clearance.
        And, I ask that my complete testimony be entered into the
    record. It includes a detailed background on Advocacy's work
    with this proposed rule, but I will just summarize my thoughts
    in these remarks.
        Chairman Vitter. Without objection, that will be entered
    into the record.
        Mr. Maresca. As Director of Interagency Affairs in the SBA
    Office of Advocacy, I manage a team of attorneys that works
    with the federal government agencies during the rulemaking
    process to reduce the regulatory burdens on small businesses
    and oversee the requirements of the Regulatory Flexibility Act.
    The RFA requires federal agencies to consider the effects of
    their proposed rules on small businesses and other small
    entities, including small government jurisdictions and small
    nonprofits.
        The Clean Water Act was enacted in 1972 to restore and
    maintain the integrity of the nation's waters. The Act requires
    a permit in order to discharge pollutants, dredged, or fill
    materials into any body of water deemed to be a water of the
    United States. The courts have left much uncertainty regarding
    what constitutes a water of the United States. This uncertainty
    makes it difficult for small entities to know which waters are
    subject to Clean Water Act jurisdiction and permitting.
        To address this uncertainty, the EPA and the Corps have
    proposed a rule which would revise the regulatory definition of
    waters of the United States and would apply to all sections of
    the Clean Water Act. Advocacy has been engaged with EPA, the
    Corps, and small entities on this issue from its inception,
    including holding roundtable discussions in Washington, D.C.,
    and Los Angeles, California, in July and August of 2014. In
    addition, the Office participated in two small entity meetings
    held by EPA and the Corps in 2011 and 2014.
        Advocacy has met with and spoken to numerous individuals,
    small entities concerned about the effects of this rule over
    the last four years. These small entities represent many
    different industries, including but not limited to agriculture,
    real estate, home builders, cattlemen, farmers, and the mining
    industry. Feedback from these small entities has remained
    consistent. Small businesses believe that the rule as proposed
    by EPA and the Corps is an expansion of jurisdiction and will
    increase costs to small businesses.
        On October 1, 2014, the Office of Advocacy sent a letter to
    EPA and the Corps expressing our concerns with their RFA
    compliance. Advocacy believes, first, the rule will impose
    direct costs on small businesses. Second, these costs will have
    a significant economic impact on those small businesses. And,
    third, the agencies incorrectly certified the rule and should
    have conducted a SBREFA panel.
        In conclusion, Advocacy and small businesses are concerned
    about the rule as proposed. The rule will have a direct and
    potential costly impact on small businesses. Advocacy has
    advised the agencies to withdraw the rule and conduct the
    SBREFA panel prior to promulgating any final rule on this
    issue.
        I would be happy to answer any questions you might have.
    Thank you.
        [The prepared statement of Mr. Maresca follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairman Vitter. Thank you very much, and we will start
    those questions.
        Mr. Maresca, you stated in your testimony that EPA and the
    Corps should have certified that the proposal will have that
    significant economic impact on a substantial number of small
    business entities and, therefore, they should have convened an
    SBAR panel. Can you please explain how that panel process helps
    protect the interests of small businesses?
        Mr. Maresca. Yes, Senator. The requirement of a panel that
    is in the RFA for EPA requires that they convene a meeting with
    small entity representatives. The panel consists of--would
    consist of EPA, Advocacy, and OMB. We would hear--they would
    present to those small entities any data that they had
    collected in support of the rule that they were proposing and
    they would suggest to the small entity representatives a number
    of regulatory alternatives, including a preferred option, in
    most cases, and the small entity representatives would have
    been given an opportunity to comment on all of those
    alternatives and to suggest ways that the rule could be--could
    mitigate the costs.
        Chairman Vitter. So, just to clarify and make sure I
    understand, it is significant in at least two senses. Number
    one, the agencies would have to present their factual evidence
    and basis for this rulemaking, proposed rulemaking. And, number
    two, they would have to present alternatives, correct?
        Mr. Maresca. That is correct. That is the point of the
    SBREFA panels.
        Chairman Vitter. Okay. Your testimony also states that the
    agencies incorrectly used a standard from 1986, a standard that
    has been abrogated by the U.S. Supreme Court, to find that the
    rule will not expand the jurisdiction of the Clean Water Act
    and, therefore, not affect small businesses. However, in their
    economic analysis, the EPA and the Corps used the more recent
    and correct standard to show that the rule could expand the
    jurisdiction of the Clean Water Act. It seems like they are
    trying to have it both ways and use whatever standard is
    convenient at the time. Can you provide some additional detail
    on how the use of an incorrect baseline obscures what the real
    impacts of their proposal might be?
        Mr. Maresca. Well, we believe that the impact of the rule
    is the change in practices that small businesses would have to
    begin. The way that agencies measure the costs of their rules
    in any regulatory analysis is governed by--generally governed
    by OMB Circular A-4, which tells them to use the world as it
    is, and the world as it is right now for waters of the United
    States is the EPA guidance from 2008. And, this rule would--the
    rule, as proposed, would expand the jurisdiction as compared to
    that guidance.
        Chairman Vitter. Okay. As we have discussed, the EPA and
    the Corps through this fraudulent certification are avoiding
    conducting this RFA analysis, including holding the SBAR panel.
    In your expert opinion, could the underlying RFA law be
    modified or strengthened to prevent this in the future?
        Mr. Maresca. Senator, the problem with this rule as
    proposed is the misapplication of case law and the choice--the
    incorrect choice of a baseline. I am not sure how to--how we
    would amend the RFA to approach that, those problems. However,
    we do think that the RFA could be improved in the area of
    indirect effects and we would be happy to work with you on
    that.
        Chairman Vitter. Could this improper action under federal
    law be the basis for future litigation challenging the rule?
        Mr. Maresca. Certain parts of the RFA are judicially
    reviewable, and an incorrect certification is one of the--could
    be a basis for a complaint in federal court.
        Chairman Vitter. Okay. Thank you. I will turn to Senator
    Shaheen.
        Senator Shaheen. Thank you, Mr. Chairman.
        I just wanted to clarify that it is my understanding, as
    well, that we asked both the EPA and the Army Corps to be
    present at today's hearing and that they were not able to do
    so, they said, for scheduling reasons. So I wonder, Mr.
    Maresca, if you could talk about why neither of those agencies
    seems to feel--or said that there was no need to appoint a
    Small Business Advocacy Review Panel. What was the reasoning
    for that?
        Mr. Maresca. The reasoning, as stated, is that the costs
    that are imposed by the rule are indirect and there is case law
    on the point that whether an agency needs to consider the
    indirect effects of a rule. We believe that the case law was
    misapplied. They also based their certification on the choice--
    on whether there was an expansion of jurisdiction or not. As
    compared with the 1986 rule, there is not. As compared with the
    2008 guidance, there is.
        Senator Shaheen. Right. I understand that, and I know that
    you pointed that out in the letter. What was the response when
    you did that? Because it would seem that it might be prudent to
    err on the side of, given the discrepancies in the statutes, to
    err on the side of making sure that they had responded to any
    potential small business concerns.
        Mr. Maresca. Senator, we would agree with that. In their
    own economic analysis, EPA points out that there are, in fact,
    costs to this rule.
        Senator Shaheen. As I have talked to representatives from
    small business, I have heard from some people who feel like
    there will be a significant impact because of this proposed
    rule. There are others who feel like they support it. There are
    others who feel like it does not really make any difference.
    So, I am sure you heard those different perspectives, and can
    you explain how Advocacy weighted those diverse perspectives as
    you were trying to make recommendations and consider the
    position?
        Mr. Maresca. Senator, the statute requires us to do
    outreach to small businesses, and we have done an extraordinary
    amount of outreach on this rule, and we have heard from many,
    many small businesses in every industry that we have talked to
    that there are costs to this rule. We have examined EPA's
    numbers as they are in their own economic analysis and we
    conclude, along with EPA, that there are costs. We do not know
    at this moment how expensive those costs are. We do know that,
    according to EPA's own figures, the cost for a Section 404
    permitting, for example, will increase by $50 million, and we
    think that is at least $50 million, and there are many, many
    other costs that have not been counted.
        Senator Shaheen. So, when you were looking at the
    determination of impact, it was the cost issue that you were
    weighing as opposed to anything else that might be affecting
    small businesses?
        Mr. Maresca. That is typically what we look at, is the
    cost. The RFA does require us to look at ways to mitigate, to
    examine with the agencies ways to mitigate the cost of the rule
    in order to achieve the same regulatory objective.
        Senator Shaheen. And, did you do that? Did you--when you
    brought those concerns about cost to the attention of the
    agencies, what was their response and did you have any
    discussions about potential mitigation to address those?
        Mr. Maresca. Senator, in the several meetings that we have
    had with EPA, with the small entity representatives, with small
    business stakeholders, that has been brought up. I would
    suggest the response of EPA is this proposed rule. But, there
    has been--there is no--if there had been a SBREFA panel, there
    would have been a presentation of alternatives and there could
    have been a consideration of whether those alternatives--which
    of those alternatives would mitigate the cost to small entities
    the best.
        Senator Shaheen. So, basically, they said, we do not need
    to appoint a panel because we do not think there are any costs
    involved.
        Mr. Maresca. That is correct.
        Senator Shaheen. Okay. Thank you, Mr. Chairman.
        Chairman Vitter. As we go to Senator Ernst, I just want to
    clarify something. A couple of times, Senator Shaheen asked
    about their response. In terms of your written letter strongly
    objecting to their certification, has there been any direct
    written response?
        Mr. Maresca. No, Senator, there has not been a written
    response. That is not unusual. The statute requires that EPA
    respond in writing to our written comments, so we do expect
    there will be a written response, but there is not one at this
    point.
        Chairman Vitter. There has not been to date?
        Mr. Maresca. No.
        Chairman Vitter. Is there any assurance that they are going
    to do that, even before they come up with this proposed rule?
        Mr. Maresca. It would--as I say, it would be unusual for an
    agency to respond in writing to our comment letters before they
    issue a final rule.
        Chairman Vitter. Okay. Senator Ernst.
        Senator Ernst. Thank you, Mr. Chair, and thank you, Mr.
    Maresca, for being here today.
        It is greatly concerning. I wish we would have had the
    Corps members and the EPA representatives here. Very early this
    year, I sent a letter to the EPA Administrator and asked her to
    come to Iowa. I would love to have her in Iowa with some of her
    leadership just to show her the impact on small businesses,
    manufacturers and members of our agriculture community, when it
    comes to waters of the United States. I have yet to hear back
    from the EPA, which I thought was--at least they could have
    responded to me. So, very disappointed that they are not able
    to join us and give their perspective on this particular rule.
        I am also concerned--you mentioned that the EPA, because
    they are not direct costs, just maybe indirect costs, they did
    not feel the need to look at this any further. That is deeply
    troubling to me because there are so many times that we talk
    through the implications of legislation or rules and
    regulations and what are those secondary and tertiary effects
    that will hurt our small businesses. So, disappointed to hear
    that.
        But, in addition to the work here in the Small Business
    Committee, I also sit on Homeland Security and Governmental
    Affairs, and one of the subcommittees that I sit on also
    focuses on regulatory reform. And, through that particular
    subcommittee we have done a few hearings on the regulatory
    climate that we have right now, and one of the recurring themes
    I have heard about and we have discussed seems to be the trend
    of these federal agencies going around the necessary and
    appropriate economic and cost analysis--cost/benefit analysis.
        And, as an independent office within the SBA, can you speak
    a little more about these issues as it pertains to the federal
    agencies and them trying to circumvent what I see as a
    specified process. Can you speak to that?
        Mr. Maresca. Certainly, Senator. In general, we find the
    agencies are very good at complying with the Regulatory
    Flexibility Act. We have worked with the agencies to train them
    in how to do that since 2003. And, in fact, EPA is one of our
    model agencies. So, when they make these kinds of judgments, it
    seems it is unusual. But, when they do, there are costs
    involved, and the RFA requires that they, in this case, convene
    a SBREFA panel.
        Senator Ernst. Very good. Do you think that in this case,
    they did take any public comment into judgment? Did they look
    at those, do you believe? Have they indicated any of that to
    you?
        Mr. Maresca. Well, they have--they also convened several
    roundtables and participated in stakeholder events. The
    outcome, again, is this rule that does have significant
    economic impact on small business.
        Senator Ernst. Very good. Thank you.
        Thank you, Mr. Chair.
        Chairman Vitter. Sure. Senator Markey.
        Senator Markey. Thank you, Mr. Chairman, very much.
        Welcome, sir.
        Mr. Maresca. Thank you.
        Senator Markey. Thank you for being here. Clean water is
    important to everyone. Eighty percent of small business owners,
    a clear majority, favor the rules, clarifications in wetlands
    protection set forth in the Clean Water rule, and EPA and Army
    Corps of Engineers have spent years engaging in a transparent
    rulemaking process. The agencies have met with stakeholder
    small businesses, received over one million comments, held over
    400 outreach meetings, used important time and resources, and
    above all, important taxpayer dollars, and are now just weeks
    away from producing a final Clean Water rule that will protect
    our nation's vulnerable waterways and drinking water for 117
    million Americans.
        But, what you are saying is the agency should put the
    brakes on the implementation of this economically critical and
    scientifically rigorous rule before the public has even had a
    chance to see the finished product. A decision like that would
    disrupt and prolong the rulemaking and forces the agencies to
    go back and solicit input from stakeholders they have already
    consulted, consider factors they have already considered, and
    then propose the rule all over again.
        Has your office considered the impact on small businesses
    of delaying the rulemaking and prolonging the uncertainty for
    small businesses about what will be regulated under the Clean
    Water Act?
        Mr. Maresca. Yes, Senator. Those are concerns of our
    office. The main concern that we have is compliance with the
    Regulatory Flexibility Act. Every rule that EPA produces has to
    comply with the RFA, and in this instance, it did not--they did
    not comply with the RFA. And, so we--and, so, our job at
    Advocacy is to speak for small businesses in that instance.
        Senator Markey. Well, in the Environment and Public Works
    Committee, we heard testimony from the New Belgium Brewery on
    behalf of the businesses around the country that rely on clean
    water for the success of their business. How does the Office of
    Advocacy take the needs of those companies into effect?
        Mr. Maresca. Senator, we take the needs of every small
    business that we possibly can into account. Again, our
    statutory obligation is to get federal agencies to comply with
    the Regulatory Flexibility Act, and in this instance, EPA
    should have convened a SBREFA panel.
        Senator Markey. Well, the EPA has estimated that waste from
    mountaintop removal coal mining has buried between 1,200 and
    2,000 miles of Appalachian streams. This mining practice has in
    some communities been linked to contamination of water
    supplies, endangered wildlife, and threatened public health,
    all so that much of the coal produced from the Appalachian
    region can be exported to other countries in the world to
    increase profits for the coal companies.
        By opposing the Clean Water rule, coal companies are
    continuing their assault on the administration's actions to
    protect the public health and the environment from mountaintop
    removal mining. Fossil fuel companies have also threatened
    legal challenges to the rule before it has even been issued.
        Will you please tell the committee the groups and
    associations that your office met with or which groups
    encouraged the Office of Advocacy to submit your comments about
    the Clean Water rule.
        Mr. Maresca. Senator, we met with small businesses in every
    industry that we could find. They all said that there were
    going to be costs to this rule.
        Senator Markey. Will you submit to the committee the
    companies that you met with, just so that we can have an
    understanding of who it was that was seeking to lobby you on
    this issue?
        Mr. Maresca. We would be happy to do that.
        Senator Markey. Okay. That would be very helpful.
        A delay in the Clean Water rule would provide confusion,
    not clarity, for small businesses and add to the delay of
    important infrastructure projects and will create jobs--that
    will create jobs and grow our economy. What would you say to an
    unemployed iron worker, laborer, or American driver that just
    crossed a near-crumbling bridge or pothole about the delay in
    the final Clean Water rule?
        Mr. Maresca. Senator, the point of the Regulatory
    Flexibility Act is to create an environment for small
    businesses to thrive and grow and provide more jobs,
    ultimately, and our job is to ensure that the federal agencies
    comply with the requirements of the statute.
        Senator Markey. How many public meetings should an agency
    have to hold on a proposed rule, in your opinion?
        Mr. Maresca. Senator, I would say that probably varies with
    the impact of the rule. But, in this instance, EPA should have
    convened a SBREFA panel.
        Senator Markey. Is 400 outreach meetings insufficient to
    solicit input on a proposed rule?
        Mr. Maresca. Senator, in none of those outreach meetings,
    to my knowledge, did EPA present regulatory alternatives or
    preferred options. In none of them did they present the data on
    which they were basing the rule.
        Senator Markey. And, finally, are you aware that OMB
    reviewed the proposed rule and made the determination that the
    proposed rule would not have significant impact on small
    businesses? Are you aware of that?
        Mr. Maresca. Senator, it is our statutory obligation to
    speak on behalf of small businesses when it comes to issues
    under the Regulatory Flexibility Act. In our opinion, EPA
    should have convened a SBREFA panel because this rule will have
    impacts.
        Senator Markey. I think that we should let the EPA do its
    job. I think delaying the Clean Water rules makes no sense.
    Small business owners need clarity, not confusion. That is what
    your recommendations are going to create and we are just going
    to repeat the same process and, I think, come to the same
    conclusions.
        Thank you, Mr. Chairman.
        Chairman Vitter. Thank you.
        Senator Shaheen. Mr. Chairman, can I just ask that when we
    receive the list from the Office of Advocacy about the
    businesses you met with, that that be shared with all of the
    members of the committee?
        Chairman Vitter. Certainly. Of course. Without objection.
        Senator Shaheen. Thank you.
        Chairman Vitter. And, now we will go to Senator Gardner.
        Senator Gardner. Thank you, Mr. Chairman. Thank you for
    holding this hearing, and to Ranking Member Shaheen, thank you,
    as well, and to Mr. Maresca, thank you for being here.
        I, unfortunately, came in later to the discussion on waters
    of the United States, but I do want to stress one of the
    challenges that we have in Colorado. Of course, we are unique
    among the states. We are the only state in the country that
    distributes our water rights the way we do, through a court
    system. We are entirely unique in that in the lower 48 states,
    all of the water flows out of Colorado. No water flows into
    Colorado.
        In conversations with the EPA Administrator, Gina McCarthy,
    at a hearing last year in the Energy and Commerce Committee, I
    asked point blank if she was familiar with Colorado water law
    and her response back was she is not familiar with Colorado
    water law. And, I think the challenges--just one of the many
    challenges that we face, that this rule would apply to rivers
    that are intermittent flow. Two-thirds of Colorado waterways
    are intermittent flow, and yet waters of the United States
    would still affect and impact every single one of them, even
    though they do not have water in them year-round.
        In meetings with Colorado water districts, whether it is
    Northern Colorado Water Conservancy Districts, whether it is
    Denver Water, Colorado Springs Utilities, or the Colorado Farm
    Bureau, every one of them is concerned about the federalization
    of every molecule of water in the State of Colorado, and so I
    think you are right to make sure and demand that these hearings
    proceed in terms of understanding all that the waters of the
    United States rule would do to small businesses, particularly
    in light of the way a state like Colorado manages its water
    rights.
        I wanted to shift focus a little bit to the Endangered
    Species Act. A few years ago, the Small Business
    Administration's Office of Advocacy submitted comments to the
    Fish and Wildlife Service on a proposed rule on designation of
    critical habitat for the New Mexico jumping mouse. The Office
    of Advocacy expressed several concerns about listing the mouse
    under the Endangered Species Act and stated that the
    designation would impose direct costs on the nation's small
    businesses.
        As we have seen in Colorado, we have got the Gunnison and
    greater sage grouse. The Gunnison was just listed. I believe
    there is litigation coming forward from Governor Hickenlooper
    in the state. We have challenges with the lesser prairie
    chicken and, of course, the Preble jumping mouse.
        Just yesterday, the administration announced proposed
    updates to the implementation of the Endangered Species Act,
    which, it is my understanding, are intended to give states a
    greater voice in the listing determinations. How can the Office
    of Advocacy further insert themselves into this type of policy
    making, since small businesses are our nation's job creators?
        Mr. Maresca. Well, with regard--thank you, Senator. With
    regard to the Endangered Species Act, we believe that Fish and
    Wildlife Service could do a better job in considering the
    impacts, not of the listing, necessarily, but of the critical
    habitat designations, and we have been working with that agency
    over many, many different CHDs.
        Senator Gardner. So, how would you improve the critical
    habitat designation? Does that mean taking into account, for
    instance, in the greater sage grouse, the 11 states, would that
    suggestion say, take a look at the large land area that would
    be involved and then doing an economic analysis of the impact
    that land area would have for critical habitat?
        Mr. Maresca. We believe that Fish and Wildlife could take
    better account of the economic analysis. They have broad
    authority to exclude certain parts of an initial CHD, and we
    have been working with the agency on that.
        Senator Gardner. And, your concern about critical habitat,
    of course, is because that land then is taken out of either
    production value or recreational interest activities. Is that
    why, primarily?
        Mr. Maresca. That would be the impact. That would be the
    impact. The point of the Regulatory Flexibility Act is not to
    avoid the outcomes that another statute might require, but that
    whatever regulatory option an agency considers, it considered
    that with the least impact on small businesses.
        Senator Gardner. Okay. Under the Regulatory Flexibility
    Act, do you believe that we are right now properly evaluating
    listings prior--excuse me, that we are taking actions and
    considering them properly under the RFA prior to ESD listing?
        Mr. Maresca. Prior to the listing?
        Senator Gardner. Yes.
        Mr. Maresca. Uh----
        Senator Gardner. And how could we improve that process so
    that Fish and Wildlife Service does this----
        Mr. Maresca. We believe that post-listing, prior to the
    critical habitat designation, improvements could be made.
        Senator Gardner. What kind of improvements?
        Mr. Maresca. Improvements in how Fish and Wildlife
    considers the economic impact and takes that into account.
        Senator Gardner. What would that improvement--what would
    that consideration look like in how they take it into account?
        Mr. Maresca. It would probably--it would--Senator, I
    believe it would take a combined effort by our office and Fish
    and Wildlife to come up with a system that would actually
    accomplish that.
        Senator Gardner. Thank you.
        Thanks, Mr. Chairman.
        Chairman Vitter. Thank you.
        And, before we go on to our second panel, I just wanted to
    follow up on Senator Markey's thoughts. Mr. Maresca, in the
    Regulatory Flexibility Act, is there sort of an ``ends
    justifies the means'' section that says, you know, if the rule
    is really, really good, we do not have to worry about following
    the law, or if we consult stakeholders in a different way, we
    do not have to worry about convening this sort of panel?
        Mr. Maresca. Senator, there is no exception to the
    requirement of convening a panel, at least not without
    consulting with the Chief Counsel for Advocacy. Under a section
    of the RFA, it could be waived, but that is only under
    extraordinary circumstances.
        Chairman Vitter. Okay. Thank you.
        Senator Shaheen, anything else?
        Senator Shaheen. No further questions.
        Chairman Vitter. Great. Thank you very much, Mr. Maresca.
        We will move on to our second panel, and as the second
    panel gets seated, I will invite Senator Ernst to recognize and
    introduce Mrs. Maulsby on the second panel.

     OPENING STATEMENT OF HON. JONI ERNST, A U.S. SENATOR FROM IOWA

        Senator Ernst. Yes. Thank you, Mr. Chairman, very much.
        As the second panel is getting settled, I will go ahead and
    start off by thanking all of you for joining us here today. It
    is good to have you with us.
        I do appreciate your testimony and attention to this
    important widespread economic and regulatory issue. The EPA's
    proposed expanded definition of waters of the United States, or
    as we fondly call it, WOTUS, will add unnecessary bureaucratic
    red tape for our producers in the agriculture and small
    business communities.
        The EPA has stated that the rule has been crafted with the
    intentions of creating clarity and increasing efficiency for
    key stakeholders. However, in reality, the proposed rule has
    only expanded confusion and uncertainty as to how far the
    jurisdiction of the Clean Water Act reaches.
        It is incredibly important that before this rule is
    finalized, we stop it from having any negative consequences on
    our producers and businesses. And, if the EPA still fails to
    listen to the many voices raising concerns, including those of
    many of you in this room today, then we should all come
    together and oppose this rule.
        Today, it is my great pleasure to introduce one of those
    voices. Darcy Maulsby is a fifth-generation corn and soybean
    farmer and small business owner from Lake City, Iowa. Her work,
    both on the farm and in owning a communications and marketing
    business, has given her a unique opportunity to engage local,
    national, and world leaders to promote the benefits of
    agriculture to our economy. Mrs. Maulsby has used her skills in
    journalism and mass communications to reach untold audiences,
    promoting the importance of improving production and
    conservation practices and life in rural America.
        Mrs. Maulsby, Darcy, it is always good to have a fellow
    Iowan in Washington, and thank you very much for testifying
    today. Your words are going to be very important for this
    panel. I will not be able to stay for questions, but I will
    submit those for the record.
        And, just so everybody knows, they did have quite an
    episode a few weeks ago with a tornado that came through Lake
    City, and so, Darcy, we appreciate the extra effort that it
    took for you to come and be with us today, so thank you very
    much, and thanks to everybody on the panel, as well.
        Thank you.
        Chairman Vitter. Thank you, Senator, and let me just round
    out the introductions.
        Randy Noel is President of Reve Incorporated, a custom home
    building company based in La Place, Louisiana.
        Elizabeth Milito is Senior Executive Counsel with the
    National Federation of Independent Business' Small Business
    Legal Center in Washington, D.C.
        And, Benjamin Bulis is President of the American Fly
    Fishing Trade Association on Bozeman, Montana.
        Welcome to all of you. We look forward to your testimony in
    the order in which you have been introduced. Ms. Maulsby.

    STATEMENT OF DARCY DOUGHERTY MAULSBY, FIFTH-GENERATION FARMER,
                     DOUGHERTY FARM, LAKE CITY, IA

        Mrs. Maulsby. Well, good afternoon. I am Darcy Maulsby, a
    fifth-generation farmer and small business owner from Lake
    City. Let me begin by thanking you, Chairman Vitter, Ranking
    Member Shaheen, and members of the committee for allowing me
    the opportunity to share my story with you today. I especially
    want to thank my home state Senator for inviting me to testify.
    Thank you, Senator Ernst--even though she has left the room--
    for this opportunity and the warm introduction.
        Our farm is located in west central Iowa. This is a
    beautiful area where the fields are mainly flat or gently
    rolling and are filled with rich black soil. While this soil is
    extremely productive, it also needs proper management and
    drainage to protect the health of our corn and our soybean
    crops.
        My family and farmers all across Iowa are investing in
    conservation practices that prevent nutrient runoff and
    safeguard water quality. Ever since my ancestors settled in
    Calhoun County in the 1880s, my family has adopted a variety of
    conservation practices to protect our precious natural
    resources. We have installed grass waterways to slow the flow
    of water and keep soil in place. We also use conservation
    tillage to leave cornstalks and soybean stubble in the fields
    over the winter to protect soil from water and wind erosion and
    to control surface runoff.
        We have taken some big steps to implement conservation
    efforts, but one thing we cannot control is Mother Nature. Just
    over a week ago, on Mother's Day, an EF-1 tornado ripped
    through our area. Less than an hour later, a second storm
    blasted our farm with hail and dumped more than an inch-and-a-
    half of rain in a matter of minutes. This created some fairly
    large ponds in some of our fields, since the heavy clay soils
    just could not drain that water fast enough. The ponds are
    temporary, though, and they disappeared in a few days.
        Across my area and much of Iowa, it is not uncommon for
    puddles and ponds to appear after a heavy rain in areas that
    are otherwise dry most of the year. Expanding EPA's regulatory
    authority under the Clean Water Act to include these and
    similar areas will have many negative consequences for my farm
    business. Not only will this rule affect my operation
    personally, but it will have dramatic and far-reaching
    potential and costly economic implications on farmers and
    ranchers all across the United States.
        One of the biggest problems with this rule is the
    uncertainty that it creates. I look around my family farm and I
    wonder what areas would be under EPA's jurisdiction. There are
    many features on farmland that contain or carry water only when
    it rains. Farmers and ranchers consider these areas to be land,
    not water that could be regulated by the EPA. If this agency
    can regulate every body of water on my farm, including those
    that are dry most of the time, then there are effectively no
    limits to the agency's regulatory reach.
        The regulation of these areas means that any activity,
    including everyday farming activities, could be a violation of
    the Clean Water Act, triggering heavy penalties, criminal
    fines, and possibly resulting in jail time. Not only would we
    be subject to enforcement from the EPA and the Corps, but also
    civil lawsuits from those who do not understand agriculture and
    belong to organizations who are opposed to our way of life.
        I am also concerned about how the rule will hinder the
    ability to keep our farm competitive, profitable, and
    sustainable. Tens of thousands of dollars to obtain permits
    along with fees for both lawyers and technical consultants is
    beyond the means of most farmers and ranchers and creates an
    undue burden for most farms, which are largely family owned
    operations. These permits may take months to more than two
    years to obtain. Having to wait to obtain a permit would hinder
    our ability to operate and do what we know is best for our
    land. As a result, the proposed rule puts EPA into the business
    of regulating whether, when, and how a farmer's crops may be
    grown and protected.
        Perhaps the largest cost of this rule is not being allowed
    to apply crop nutrients and crop protection products in and
    around these EPA-controlled areas. We have always worked to be
    good stewards of our land and want to prepare now for a
    sustainable future for our farm. If we cannot do the right
    things for our land and our crops when the job needs to be
    done, farming and ranching will be much more costly and more
    difficult.
        I am also concerned about how permitting delays would hold
    up conservation efforts on our farm and farms nationwide. We
    have already experienced this on my farm when we applied for a
    permit for a drainage improvement. In this case, the permitting
    process was not completed in a timely manner due to delays from
    an agency. This cost us valuable time and hindered our ability
    to enhance our land, and it complicated the process of
    completing routine field work.
        We are continually implementing voluntary conservation
    efforts using our own time, energy, and money. The only thing
    that is clear and certain is that this rule will make it more
    difficult for farm families like mine to make changes in the
    land that will benefit the environment. Working with farmers
    collaboratively is a productive way to improve water quality,
    not more regulations.
        Ultimately, this rule will have a negative impact on the
    productivity and profitability of small farming businesses all
    across the country, those one percent of Americans who grow the
    food, fuel, and fiber for this country and the world.
        As a fifth-generation farmer, I truly care about the legacy
    my family will leave behind. I urge you to think about the
    legacy that will be left behind if this harmful rule is
    implemented. This rule should be repealed in full to protect
    the livelihood and way of life for my family and farm families
    all across this great land. Thank you.
        [The prepared statement of Mrs. Maulsby follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairman Vitter. Thank you very much, Mrs. Maulsby.
        And now, we will hear from Mr. Randy Noel. Welcome.

       STATEMENT OF KARL RANDALL ``RANDY'' NOEL, PRESIDENT, REVE
      INCORPORATED, LA PLACE, LOUISIANA, AND THIRD VICE CHAIRMAN,
                 NATIONAL ASSOCIATION OF HOME BUILDERS

        Mr. Noel. Thank you, Chairman Vitter and Ranking Member
    Shaheen, for the opportunity to address you today. I am a home
    builder in La Place, Louisiana, which is just west of New
    Orleans, and I am also the NAHB, the National Association of
    Home Builders, 2015 Third Vice Chairman, and I represent about
    140,000 people.
        Home building is one of the most regulated activities in
    the country, and as a small business owner, I can tell you from
    30 years of home building experience what it will take to make
    a good rule. It needs to be consistent for all the citizens. It
    needs to be predictable to assure compliance. And, it needs to
    be timely to serve our citizens efficiently. Most important, it
    needs to focus on protecting true wetlands and streams.
        The proposed rule does none of that. For decades,
    landowners and regulators alike have been frustrated by
    confusion over the definition of waters of the United States.
    When EPA and the Army Corps of Engineers proposed this rule, we
    were actually optimistic that it would finally provide clarity
    and certainty. Unfortunately, the proposed rule falls far short
    of that. In a word, it is a mess.
        Instead of clarity, it provides broader definitions of
    existing regulatory categories, such as tributaries, and it
    seeks to regulate new areas that are not currently federally
    regulated, such as adjacent non-wetlands, riparian areas, flood
    plains, and other waters. It appears that the agencies have
    intentionally created overly broad terms so that they would
    have the authority to interpret them any way they would like.
        This rule is so extreme that the federal government would
    actually regulate roadside ditches, or water features that may
    flow only after a heavy rainfall. This rule would leave me
    playing a guessing game of whether my land requires a permit or
    not. That does not work.
        I am a small business owner. I need to know the rules, not
    have to guess at them. And, because of the vague definitions,
    builders would face new, costly delays just waiting for the
    agencies to determine if a roadside ditch is a water of the
    United States.
        My business has already been a victim of a costly
    permitting system. I have been forced to walk away from
    building projects due to excessive permitting and mitigation
    costs. The only winners with the proposed rule would be
    lawyers, because this rule would certainly lead to increased
    litigation.
        I think it is important to note that this proposed rule
    also destroys a key component of the Clean Water Act. The Act
    intended to create a partnership between the federal agencies
    and state governments to protect our nation's water resources.
    Congress correctly recognized that there is a point where
    federal authority ends and state authority begins. The
    agencies' solution is to federalize nearly every water feature.
        States have effectively regulated their own waters and
    wetlands for years. My home State of Louisiana is a perfect
    example of a state that has gone to great lengths in order to
    protect its waters. Louisiana already has multiple laws on the
    books designed to protect our state water resources.
        The agencies also failed to consider the rule's impact on
    small businesses by ignoring, as you pointed out earlier, the
    Regulatory Flexibility Act. Since the agencies failed to
    convene a small business panel, it is clear that they are not
    interested in hearing from small businesses like mine.
        Unfortunately, the EPA completely ignores RFA requirements
    all the time. This is not something unique to this particular
    rule. In the 19 years since the small business panel
    requirement has existed, the EPA has convened approximately 47
    panels. Just last year, the EPA reviewed 51 significant rules.
    It defies belief that in one year, EPA reviewed more
    regulations than the total number of SBREFA panels held over 19
    years. This illustrates how reluctant some agencies are to
    comply with the law.
        And, the agencies' economic analysis of the proposed rule
    is so full of errors that one noted economist said the study
    was virtually meaningless. That should give us all pause.
        I called this a mess, and it is, but we can start to fix
    the mess. The EPA should withdraw the economic analysis and
    prepare a more thorough and accurate analysis. The RFA's legal
    requirements should be followed. And, any final rule should
    provide easily understood definitions and preserve the
    partnership between all levels of government.
        Let us get the agencies to withdraw the rule. Fix this
    mess. Provide the clarity we all need on what constitutes a
    water of the United States.
        Thank you again for the opportunity to testify.
        [The prepared statement of Mr. Noel follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairman Vitter. Thank you very much, Mr. Noel.
        Now, we will hear from Elizabeth Milito with NFIB. Welcome.

       STATEMENT OF ELIZABETH MILITO, SENIOR EXECUTIVE COUNSEL,
              NATIONAL FEDERATION OF INDEPENDENT BUSINESS

        Ms. Milito. Thank you very much, Chairman Vitter and
    Ranking Member Shaheen, for inviting me to participate in the
    hearing today.
        The National Federation of Independent Business is very
    appreciative of the committee's interest in this rule and your
    examination of what we believe was a failure by two federal
    agencies to comply with the Regulatory Flexibility Act. I would
    like to commend the work that SBA's Office of Advocacy has done
    on this rule and I would also like to especially thank Mrs.
    Maulsby and Mr. Noel for coming here and making the trip here
    to Washington to testify today.
        The agencies have proposed to change the Clean Water Act's
    definition for waters of the United States. Though
    traditionally limited to navigable waters and adjacent waters,
    this new proposal would classify land as waters of the United
    States if, at any point during the year, they have any water
    overflow. The new rule would bring seasonal streams, ponds,
    ditches, depressions in fields, and large puddles into the
    Clean Water Act's jurisdiction.
        What does this mean for a small business owner? Well, if
    EPA and the Army Corps assert jurisdiction over your land, it
    will be essentially impossible, or at least tremendously
    expensive, to do anything with your land. This means you will
    not be allowed to alter land formations, which prevents land
    owners from digging or excavating on their properties or even
    laying gravel.
        While it is possible to obtain a special permit to begin
    using portions of land covered by the Clean Water Act, these
    permits are extremely expensive. Clean Water Act permits can
    cost tens of thousands of dollars, if not more. A major U.S.
    Supreme Court decision from 2006 cited the average cost at
    $270,000. And, there are inevitably long waits for permit
    processing with no guarantee that your permit will be approved.
    But, proceeding without a permit could be ruinous. The
    penalties for violations of the Clean Water Act can be up to
    $37,500 per day.
        NFIB and other small business stakeholders firmly believe
    that the agencies did not adequately consider the impact of
    this proposed rule on small businesses and, therefore, failed
    to meet their legal obligations under the RFA.
        EPA and the Corps is alleging that since there is a simple
    definition change, there are no major costs directly imposed on
    small businesses. But, as I have already noted, there are
    certainly costs directly imposed on small businesses through
    the permit process and other compliance requirements. In
    addition, the proposed rule makes it clear that many waters
    will need to be determined on a case-by-case basis, therefore
    providing little, if any, additional certainty. While
    multinational corporations with tremendous capital resources
    can obviously afford the permitting costs, most small
    businesses cannot. Usually, their only option is to swallow
    their losses and forego any development plans.
        In addition to the direct economic consequences on small
    businesses, the proposed rule will also have indirect adverse
    impacts on firms. Even in the absence of an affirmative
    assertion of Clean Water Act jurisdiction, landowners are going
    to be more hesitant to engage in development projects or make
    other economically beneficial uses of their property if the
    proposed rule is allowed.
        Landowners are aware that federal agencies have taken an
    aggressive posture in making jurisdictional assertions in
    recent years. NFIB already receives questions and concerns from
    small business owners who are worried about whether or not the
    agencies have jurisdiction over their land, and we expect to
    hear from many more concerned individuals if the rule is
    finalized. Indeed, under the proposed rule, a landowner may
    have legitimate cause for concern if at any point during the
    year, as Mrs. Maulsby indicated, any amount of water rests or
    flows over a property.
        And, contrary to the agency's assertions, the proposed rule
    will do little or nothing to make Clean Water Act jurisdiction
    clearer or more certain for property owners. The reality is
    that landowners will have to seek out experts and legal
    counsel, which gets costly very quickly, before developing on
    any segment of land that occasionally has water overflow. And,
    the only way to have real clarity is to seek a formal
    jurisdictional determination from the agencies, which is going
    to cost even more money and lead to even more delays, delays
    which might cause a bank to pull financing on a project.
        In short, this proposed rule will be a boon for
    environmental consultants, and potentially lawyers, too, but it
    is going to be a bust for small businesses.
        In closing, I would like to underscore NFIB's frustration
    with the agencies' disregard for their statutory obligation
    under the RFA. We believe the agencies should acknowledge that
    the proposed rule will have a significant economic impact on a
    substantial number of small businesses. Withdraw the proposed
    rule and propose a new rule only after they have performed an
    initial Regulatory Flexibility Act analysis and convened a
    Small Business Advocacy Review Panel.
        Thank you again for the opportunity today. We remain eager
    to work with members of the committee on this issue. Thank you.
        [The prepared statement of Ms. Milito follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairman Vitter. Thank you, Ms. Milito.
        And now, we will hear from Benjamin Bulis with the American
    Fly Fishing Trade Association. Welcome.

     STATEMENT OF BENJAMIN BULIS, PRESIDENT, AMERICAN FLY FISHING
                           TRADE ASSOCIATION

        Mr. Bulis. Thank you. Good afternoon, Mr. Chairman and
    members of the subcommittee. I appreciate the opportunity to
    provide testimony in support of the Clean Water Act today.
        I had the good fortune to be born and raised in the
    beautiful State of New Hampshire. I personally have fished in
    the United States and around the world, but the rivers and
    streams of New Hampshire will always stay close to my heart.
    Now, I have the great fortune to live in Bozeman, Montana,
    which one could argue is the epicenter of the fly fishing
    industry.
        AFFTA represents the business of fly fishing, which
    includes manufacturers, retailers, outfitters, and guides
    across the nation who all share the same bottom line,
    furthering the sport and industry of fly fishing. This cannot
    be accomplished without clean water and vibrant fisheries
    habitat. The formula that drives AFFTA is very simple. Access
    to healthy habitat creates recreational opportunity that drives
    economic activities and jobs.
        Our industry provides the waders, rods, guides, and boats
    that 47 million sportsmen and women utilize every time they
    step foot in their favorite piece of water. Their quality of
    experience, and, thus, our return sales to enhance those days,
    is dependent on access to clean water.
        I am here to express our support for the Army Corps of
    Engineers and the Environmental Protection Agency's efforts to
    restore protections for our nation's headwaters, streams, and
    wetlands under the Clean Water Act. Simply put, the draft clean
    water rule is well crafted and appropriate. It should be
    allowed to move through the federal rulemaking process with the
    support of Congress, and here is why.
        The small waters to which this important draft rule applies
    are the lifeblood for many of our country's prized fisheries.
    The health of these headwaters sets the tone and benefits for
    all waters downstream, supporting and creating even the
    backbone of our nation's marine resources. They flow into
    rivers, streams, and lakes that provide the foundation of our
    industry, thus eventually concluding the voyage in our oceans.
    Our industry's viability depends on intact watersheds, cold,
    clean rivers and streams, and healthy, fishable habitat.
        Given that fishing in America supports approximately
    828,000 jobs, results in nearly $50 billion annually in retail
    sales, and has an economic impact of about $115 billion every
    year, it stands to reason that the health of our nation's
    waters is vital to the continued success of our industry and to
    the health of America's economy.
        We urge you to allow the rulemaking process to continue
    unimpeded. Carefully review the final rule when it comes out
    and then determine what, if any, legislative action is
    warranted.
        We owe it to the more than one million Americans who took
    the time to comment on the proposal to allow the process to
    reach a conclusion. More than 80 percent of those who commented
    on the proposal were in favor of it. Such strong support for
    clean water and healthy watersheds is what our members
    experience every day as we interact with our customers across
    the nation.
        If we fail to protect our headwaters, streams, and
    wetlands, we may destroy the $200 billion annual economy of the
    hunting and fishing industry, as well as put 1.5 million people
    out of work. Of those 1.5 million jobs, many are located in
    rural areas with limited economic opportunity and few other
    employment options.
        In recent years, participation in fly fishing has grown. We
    are seeing robust interest in our sport and it is translating
    to our sales, to the numbers of employees we hire right here in
    America, and to the health of brick-and-mortar retailers all
    over the country.
        The fly fishing industry is the epitome of small business.
    The sustainable domestic industry is dependent on clean,
    fishable water.
        And, again, on behalf of my Association and our members, I
    appreciate the opportunity to testify today, and I would also
    like to thank the committee and staff for their dedication to
    our nation. Thank you.
        [The prepared statement of Mr. Bulis follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairman Vitter. Thank you all very much. We will now go to
    questions.
        Let me start by asking each of you to respond, but as
    concisely as you can, and the question is this, not whether you
    are in favor of clean water, not whether you think the proposed
    rule is a good one, but whether you think the proposed rule
    would have a significant impact on a substantial number of
    small businesses, which is the small business issue we are
    talking about in terms of following the law. Could each of you
    respond, what you think about that.
        Mrs. Maulsby. Yes. From the farmers' standpoint, it would
    have a huge impact on not just my farm and farms across Iowa,
    but farms and ranches across the whole country. It is a very
    serious issue that we are all very concerned about.
        Chairman Vitter. Okay. Mr. Noel.
        Mr. Noel. Absolutely. We drain our neighborhood sometimes
    with roadside ditches and we have to put driveways over them.
    If we are forced to go get permits to put driveways in, it will
    obviously slow down the production of homes and houses for
    people.
        Chairman Vitter. All right. Ms. Milito.
        Ms. Milito. And, yes, I would agree that it will have a
    substantial impact, and I think the agencies' own
    administrative record also shows that it will, too. I mean, it
    is going to increase jurisdiction of the Clean Water Act by
    about three percent.
        Chairman Vitter. Okay. Mr. Bulis.
        Mr. Bulis. Yes. I think without this rule, it will have a
    significant impact on our industry. As I said, the 1.5 million
    jobs that are associated with the hunting and fishing industry,
    those could be at jeopardy.
        Chairman Vitter. Okay. I appreciate your answer to a
    different question, but let me restate my question. Do you
    think this proposed rule will have a significant impact on a
    substantial number of small businesses?
        Mr. Bulis. You know, I cannot speak for these other
    businesses. I can only speak for the fly fishing industry, and
    I am not sure how they would affect their businesses.
        Chairman Vitter. Okay. Ms. Maulsby, in general, how do you
    think the agricultural community has been engaged and their
    concerns have been incorporated into the substance of the
    proposed rule?
        Mrs. Maulsby. One thing that we were disappointed about was
    that there were no hearings held in Iowa, and we would--just
    like Senator Ernst said, we would love to have EPA come out,
    and lawmakers, too. Our farms are open for tours. We would love
    to have people come out and see what we are doing on our land
    for conservation, the steps we are taking to keep the land more
    sustainable, and it is not just me. I have got lots of friends
    and neighbors that feel the same way. So, we would love to have
    people come out and actually see what is going on with
    conservation on the ground.
        Chairman Vitter. Okay. Mrs. Maulsby and Mr. Noel, let me
    ask you this. You all have brought up situations like temporary
    standing water ponds and roadside ditches and small amounts of
    water that driveways may go over, drainage ditches. Now, I know
    in a lot of these meetings and conversations, EPA and the Corps
    say, oh, no, no, no. We are not talking about that. Is there
    anything we can point to and read in the proposed rule that
    makes that very clear?
        Mrs. Maulsby. No. That is the confusion. That is the
    uncertainty. There are no clear-cut answers to that type of
    information, and it is just that uncertainty that is so
    detrimental to the farm community and one of the things we are
    very concerned about with this proposed rule.
        Chairman Vitter. Mr. Noel.
        Mr. Noel. Yes, Senator Vitter. It is disconcerting when you
    ask the Army Corps of Engineers to come out and give you a
    determination, and they are on a sugarcane farm where they have
    rows, and they are low between, right, and that tells me that
    that is wetlands, jurisdictional. And, then another Army Corps
    of Engineers comes out to make a determination and does not say
    it is. So, there is--you cannot plan to do developments and
    homes, et cetera, based on how this rule is written. You will
    have to hire a consultant. You will have to have the Corps come
    out and make a determination, and it delays everything----
        Chairman Vitter. And, that determination----
        Mr. Noel [continuing]. Years.
        Chairman Vitter [continuing]. Could be different every
    time.
        Mr. Noel. Absolutely, and it just--there is no way to run a
    small business not knowing what the rules are.
        Chairman Vitter. Right.
        Mrs. Maulsby. Senator, I would add, too, that timing is
    everything in agriculture, and if you do not have the answers
    you need, your pests can get out of control quickly, your crop
    can be torn out right from under you if things cannot happen in
    a timely manner.
        Chairman Vitter. Sure.
        Mrs. Maulsby. So, it is a very big issue.
        Chairman Vitter. Okay. And, Ms. Milito, let me ask you. If
    an RFA process had been used, what could that have done
    positively in terms of avoiding some of these concerns?
        Ms. Milito. I think the consideration of less costly
    alternatives is the most important thing that the RFA process
    does and can do, as Mr. Maresca hit on. Thank you.
        Chairman Vitter. Okay. Thank you very much.
        I will turn to Senator Shaheen.
        Senator Shaheen. Thank you, Mr. Chairman, and thank you all
    very much for being here. Your testimony was very helpful.
        And, Mr. Bulis, I did not know until we got your biography
    that you are a New Hampshire native, and I appreciate your
    talking about fly fishing in New Hampshire. We think we have
    some great spots to do that. And, obviously, the outdoor
    industry is a very big economic contributor, not just to New
    Hampshire and Montana, but to the entire country. And, so,
    making sure that we have clean water that benefits everyone is
    very important.
        And, I am sure that all of you would agree with that. So,
    just to be clear, I do not assume that anybody here is
    suggesting that we should repeal the Clean Water Act. That is
    not what the concern is.
        So, let me go back. I thought, Mr. Noel, you were very
    helpful in terms of talking about the kinds of rules that would
    be helpful in providing some certainty for small businesses. As
    we all know, this is a proposed rule. It has not been finalized
    yet. And, so, in thinking about not just the process that was
    followed--I appreciate the concerns that have been raised about
    that, and I share some of those--but also in terms of trying to
    do a final rule that would provide more certainty for
    businesses, more understanding and clarity for businesses,
    would you talk a little bit more about that, Mr. Noel, and what
    you would like to see?
        Mr. Noel. Certainly. You know, there was not very much
    clarity before.
        Senator Shaheen. Right, which is part of the problem.
        Mr. Noel. Which is part of the problem. And, in the effort
    to clarify, they have grossly expanded it to cover areas that
    were, in our estimation, not determined to be waters of the
    United States, certainly like roadside ditches or ponds,
    temporary ponds.
        You know, with the work toward trying to come up with some
    very clear definitions, I mean, there was plant life, there was
    water on the soil, et cetera, that kind of led us in a
    direction to help do that. We thought they would be a little
    more specific for that as opposed to the rule that came out
    that said, basically, call us if you own a piece of land and we
    will tell you whether it is wetlands or not, based on whoever
    shows up that day.
        They need to define it in a way that any citizen that reads
    the rule can walk out there and say, yes, this is definitely
    wetlands. Where I live, it is clear what wetlands look like
    because we are surrounded by them in New Orleans and the South
    Louisiana area. But, the roadside ditches, flood plains, which
    we are also dealing with an Executive Order that expands the
    flood plains. And, so, it makes it very difficult to decide to
    buy a piece of land and develop when you have no idea what it
    is going to cost you to mitigate it, and the mitigation costs
    are not in the economic analysis, are significant.
        Senator Shaheen. And, Ms. Milito, can you share your
    thoughts about what would be helpful to small businesses in
    looking at any final rule and how, short of repealing what is
    being proposed, what would be helpful to small businesses in
    providing clarity?
        Ms. Milito. I think--Senator, thank you for the question,
    too, and going back to your point, too, about the Clean Water
    Act itself, yes, I am not here to say that members of NFIB do
    not like clean water. What they do not like, and what we do not
    like about this rule in particular, is the agencies', what I
    would say is kind of flagrant disregard for another law,
    another federal law, the Regulatory Flexibility Act, and what
    that law encompasses, and particularly the Small Business
    Advocacy Review Panel and the opportunity for the two agencies
    to hear from business owners, like Mr. Noel and like Mrs.
    Maulsby, in a very thoughtful and methodical way. So, not a big
    open forum where you have 100 business owners, but to hear
    specific, industry-specific things. So, to hear from the home
    builders with specific proposals.
        Senator Shaheen. And, I am not debating the process----
        Ms. Milito. Yes.
        Senator Shaheen [continuing]. And how that worked. I am
    trying to get a better sense from you of what you would like to
    see in terms of a final rule that would provide more clarity
    for businesses.
        Ms. Milito. And the jurisdictional issue, which NFIB
    addressed in a letter to the agency, too, which I would be very
    happy to provide the committee in addition to a separate letter
    we did on the RFA, I would be happy to do that, too. But, I
    will just----
        Senator Shaheen. That would be very----
        Ms. Milito. Yes, absolutely. That might be----
        Senator Shaheen [continuing]. Very appreciated, if you
    would----
        Ms. Milito. Yes.
        Senator Shaheen [continuing]. Share that, and I am sure the
    Chairman will share that with the members.
        Ms. Milito. Yes. Yes. Absolutely.
        Chairman Vitter. Sure. Absolutely. Without objection.
        [The information of Ms. Milito appears in the Appendix on
    page 66.]
        Ms. Milito. And, just going back, too, that we do feel,
    overall, there was an over-reach and going beyond what Congress
    intended with the Clean Water Act as far as what the agency's
    authority is.
        Senator Shaheen. So, your objection is really the proposed
    rule. It is not that it does not provide clarity, it is more
    that you think it expands what is under existing law and that--
    --
        Ms. Milito. That is part of----
        Senator Shaheen [continuing]. NFIB does not like that.
        Ms. Milito. Our objection is partly with regards to the
    jurisdictional issue, but also with regards to the RFA
    analysis, or lack thereof, that was done by the agencies.
        Senator Shaheen. Okay. Thank you.
        Ms. Milito. Thank you.
        Senator Shaheen. That is helpful.
        And, Mr. Bulis, I am actually out of time, but I just
    wanted to give you the opportunity to comment. I assume--you
    talked very eloquently about the importance of our streams and
    rivers and to the outdoor industry. I assume that there are--we
    can continue to protect those waters and still come up with
    some rule that would do that, that could provide some clarity.
    Have you discussed that within your association and does that
    seem like something that is reasonable to expect?
        Mr. Bulis. Yes. I mean, we have discussed it, and I think
    the biggest thing we need to come up with is a balance, is a
    fair balance, where the--you know, we do not put our
    environment at risk, but we also do not put small business at
    risk. I think that is the most important thing.
        Senator Shaheen. That is a very good way to say it. Thank
    you. Thank you all.
        Chairman Vitter. Thank you. Absolutely.
        Senator Fischer.
        Senator Fischer. Thank you, Mr. Chairman, and welcome to
    all of you. It is such a pleasure to have you here today.
        Earlier this year, I was able to chair a field hearing in
    the State of Nebraska, in Lincoln, Nebraska, on waters of the
    U.S. and the impact on every Nebraskan that those proposed
    rules will have. We were very fortunate on one of the panels to
    have a home builder from the State of Nebraska, and he made a
    comment, Mr. Noel, that really brought this home to me, and,
    again, the impact that it has.
        In Nebraska, we have a broad, broad coalition of
    organizations, of people who are very, very concerned about the
    impact of these regulations, and I always smile and say, as a
    rancher, it is the usual suspects, people in agriculture who
    have deep concerns, but it is also home builders. It is cities,
    it is counties, the cost to taxpayers that these proposed rules
    are going to have. It is our natural resources districts, all
    of these folks have come together in opposition--in opposition
    to this overreach, I believe, by the federal government.
        But, the home builders said that, right now, 25 percent of
    the current cost of a new home is due to current regulations.
    That puts an American dream out of reach for most Americans.
    You know, it is an American dream to purchase a home, and we
    already are looking at 25 percent of the cost being due to
    regulations. What is going to be the impact of these proposed
    rules and more and more and more coming down from the federal
    government?
        Mr. Noel. Well, great question. We struggle now to get an
    entry home built for a first-time homebuyer because of the
    regulations that we deal with, and, you know, they come from a
    multitude of areas--local government, state government, and
    certainly federal government.
        If any--if this rule was to go into effect and we had to
    spend additional money to get jurisdictional issues taken care
    of, it surely would put the first-time buyer out of reach of a
    single-family home because of the----
        Senator Fischer. Yes. We are seeing more apartments built
    than homes.
        Mr. Noel. Right.
        Senator Fischer. You know, so we see the effect, I think,
    of regulations right now. But, that, to me, was very telling.
        Mr. Noel. Well, and home ownership has so many benefits to
    the community----
        Senator Fischer. Yes.
        Mr. Noel [continuing]. And to the American society, that to
    become a renter nation would not be what I think is in the best
    interest of the folks here.
        Senator Fischer. I agree.
        And, Mr. Bulis, when you talk about fly fishing, my brother
    was an avid fly fisherman. I am the Vice Chair of the
    Sportsman's Caucus here in the Senate. I happen to live in an
    area with pristine fly fishing, so it is not all in Montana or
    in New Hampshire. We have that in Nebraska, as well.
        But, I believe that current regulations that we have in
    place seem to be doing the job. That is why we have these
    pristine areas. It has been said earlier, no-one wants to
    change the strides that we have made under the Clean Water Act.
    I think what many of us are concerned about is just the
    overreach that we see here.
        And, when you mentioned the comments that had been received
    by the EPA, about a million comments, 58 percent of those
    comments, the substantive comments that were made, were opposed
    to the rule, and that comes from the EPA's own numbers. So, as
    people really drilled down on these proposed rules, they did
    have deep concerns with it.
        But, I guess, I would ask you, do you believe it is
    necessary that we continue to have those partnerships between
    the states and the federal government when we look at water
    quality and our water resources? You know, the Nebraska
    Department of Environmental Quality implements EPA rules now.
    That is a responsibility we have. And, I would also note that
    the water in Nebraska belongs to the people of Nebraska. It is
    a state resource. It is not a federal resource. It is a state
    resource. And, I think we manage it well. We manage it
    responsibly. I have a concern about that partnership and what
    would happen in the future and I just would like your views on
    that.
        Mr. Bulis. You have the concern with the federal government
    and the state partnership?
        Senator Fischer. Yes. Yes. In the future, if the rules with
    waters of the U.S. go forward.
        Mr. Bulis. I guess it is hard for me to comment on your
    particular state, but there are places across our country where
    we have some really bad water quality issues, Florida being one
    of them, from Lake Okeechobee discharges that are coming out of
    the Caloosahatchee and the Indian River lagoon, where we have
    members in those areas that, when the effluent water comes out
    of Lake Okeechobee, they have these huge blooms of algae that
    form, and there are signs that go up, do not touch the fish, do
    not go in the water.
        I mean, we have places in Chesapeake Bay where a large, or
    one of the contributing factors to the decline of striped bass
    is because of the forage fish that are not living in those
    areas anymore because of the water quality.
        You know, in the Gulf Coast, there are places that are
    coming from the Mississippi River with the effluence that is
    coming off and creating dead zones.
        So, I think that there is a real good--there has got to be
    a way that the states and the federal government work together
    to make sure that the water is the cleanest it possibly can be
    for our people and our environment and the businesses.
        Senator Fischer. And I appreciated your comments about
    striking a balance. Obviously, I believe in a more limited
    federal government, and I believe that a balance is necessary,
    and especially for our small businesses and our taxpayers and
    the burdens that we are going to see on taxpayers with these
    regulations. So, thank you. Thank you----
        Mr. Bulis. I agree with you, and I believe in the limited
    government reach, as well. I mean, in the State of Montana we
    had a reasonable and prudent speed limit, and now that is gone
    because of government.
        Senator Fischer. Thank you.
        Chairman Vitter. Thank you all very much. We really
    appreciate your being here. We really appreciate your
    testimony.
        As I mentioned, I will be following up on this issue with a
    resolution about the EPA and the Corps, in my opinion,
    flagrantly ignoring the Regulatory Flexibility Act. That Act is
    really important for small business. It is one of the core
    protections in the regulatory process for small business. It
    should be one of the things this committee is all about. So,
    following that law is really important. So, we will follow up
    on that.
        And, with regard to the substance of this rule, I just have
    a big concern, as many of you do, that there was lack of
    clarity. So, the agencies clarified all of that completely from
    their point of view, because if the question is, in the future,
    do the agencies have jurisdiction, the answer is going to be
    yes. You do not have to finish the sentence. You do not have to
    go on. You do not have to provide any details. The answer is
    yes. And, then, they will decide when and how to exercise it.
    Obviously, that is not clarity for you all, and I share that
    concern.
        Senator Shaheen, any closing thoughts?
        Senator Shaheen. Just thank you all very much for being
    here, and hopefully we will see a final rule that is proposed
    that strikes the balance that you suggested, Mr. Bulis, between
    protecting our water resources and making sure that small
    businesses are not adversely--too adversely affected. Thank
    you.
        Chairman Vitter. Thank you very much.
        With that, the hearing is adjourned.
        [Whereupon, at 3:26 p.m., the committee was adjourned.]

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