Regulation Avalanche

According to an article by Mike Verespej in Industry Week, beyond the budget crisis, tax reform, and spending cuts, the most troubling Capitol Hill issue for manufacturers this year may be an aggressive regulatory program.

The author points out that the federal debt is now over $16 trillion, and has topped $1 trillion each of the past four years. As a result, taxes and the budget deficit will be the dominant issues in Congress this year. How the federal government eventually resolves the nation’s fiscal issues will have a huge impact on manufacturers.

Other issues on the federal legislative front in 2013 that could greatly affect manufacturers include legislation that would boost energy-efficiency standards for buildings and appliances, and the reform of the Toxic Substances Control Act (EPA’s chemical management system).

In addition, more free trade agreements could reach Capitol Hill as the White House plans to continue discussions with nine other countries on a Trans-Pacific Partnership, and is currently in discussions with the European Union on whether to set in motion negotiations for a free trade agreement between the U.S. and Europe.

However, regulatory issues are uppermost in the minds of most manufacturers and manufacturing trade associations. One executive said his focus is not going to be on Congress, it is going to be on the agencies. Some of his concerns are:

  • Potential initiatives by the National Labor Relations Board to make it easier for unions to organize and more difficult for small businesses to hire counsel during union organizing campaigns
  • The EPA’s plans to issue new regulations to control greenhouse gas emissions in the aftermath of the Supreme Court decision this past summer upholding that authority.
  • EPA efforts to incorporate the “precautionary principle” into its regulations, which puts the burden of proof on manufacturers to prove a substance is not harmful if there is a suspected risk

According to the Manufacturers Alliance for Productivity, the EPA currently has 98 environmental regulations that it is preparing for implementation. That includes new rules for greenhouse gas emissions from new power plants that are expected to be written in a way to eliminate coal as an option. They state that if the EPA continues on its current trajectory of what it is planning to do, it will have a major impact financially on manufacturers.

From the EPA, the six forthcoming regulations expected to have the most impact on manufacturers are:

1. Utility Maximum Achievable Control Technology
2. Boiler Maximum Achievable Control Technology
3. Coal Combustion Residuals
4. Cooling Water Intake Structures
5. Cross-State Air Pollution
6. New National Ambient Air Quality Standards for Ozone

The EPA has estimated that the annual compliance costs from just those six regulations will be between $36 billion and $111 billion annually, and that the capital expenditures for compliance would be between $174 billion to $539 billion. The National Association of Manufacturers pegs annual compliance costs for those six rules at $138 billion and capital expenditures to comply at between $404 billion and $884 billion.

A report issued by the minority members of the Senate Committee on Environment and Public Works says that the regulatory onslaught from the EPA will strangle economic growth, destroy millions of jobs, and dramatically raise the price of goods, the cost of electricity, and the price of gas at the pump.

However, the EPA isn’t the only federal agency that will be active on the regulatory front. There are 14 federal agencies working to develop regulations related to hydraulic fracking, including a Bureau of Land Management proposal expected this spring that will regulate fracking on public lands.

In addition, the U.S. Department of Labor also has more than 100 rulemakings in the pipeline and the nearly three year-old Dodd-Frank financial reform act has 259 mandated rulemakings and 188 suggested rulemakings – with only one-third of them finalized, according to the U.S. Chamber of Commerce. And, the new health care law establishes 159 new agencies, panels, commissions and regulatory bodies, with the Department of Health and Human Services in charge of rulemakings.

According to the U.S. Chamber of Commerce, this avalanche of regulations, and the vast power of the regulators, are matters that must be addressed in a thoughtful way if we hope to remain a productive, innovative, and free economy.

To see the full Industry Week article, “Regulatory Avalanche Worries Manufacturers”, go to this web page at their web site.