A heated debate continues between Congress and the Environmental Protection Agency (EPA) over the cost of EPA regulations, mainly the EPA Clean Air Act, and how they are negatively impacting American business. Small business owners have created buzz in Washington D.C. as they have spoken of their plight before various congressional committees.
The Cost of EPA Regulations
According to a Small Business Administration (SBA) Office of Advocacy report titled “The Impact of Regulatory Costs on Small Firms,” 89 percent of all firms in the U.S. are small businesses, which by the SBA’s definition employ fewer than 20 workers. This document also indicates that in 2008, environmental regulations cost small business four times that of large business, with small businesses spending approximately $4,101 per employee compared with $883 per employee for large firms who by the SBA’s definition employ over 500 workers.
The EPA is required to comply with the Regulatory Flexibility Act. This law serves to force federal agencies to consider the economic impact of regulations on small business. On May 12, 2011, “Coffman: EPA Regulations Hurting Small Business” was published in Targeted News Service. According to the post, Mike Coffman (R-CO), chairman of the Oversight, Investigations and Regulations Subcommittee for the Small Business Committee of the U.S. House of Representatives hosted a hearing in which several small businesses reported they have been negatively impacted by various EPA regulations. Coffman stated, “In the midst of a recession, it really defies all common sense that the EPA would move forward with instituting some 30 new costly regulations, without taking into account the job losses they will create.”
Most opponents of EPA regulations do not have a problem with environmental stewardship, but with the way the EPA regulates. On January 11, 2010, Robin Bravender of Greenwire posted “Small Businesses See Devil in Details of EPA Greenhouse Gas Rule” in the New York Times. Bravender states, “Advocates for small businesses are accusing U.S. EPA of failing to properly assess the effects that its … rule for greenhouse gases will have on smaller emission sources.” The EPA has taken great strides to reduce emissions, but in recent years, the EPA has enacted stricter and costlier regulations. The cost of compliance can be detrimental to small businesses, especially during tough economic times.
Autobody Repair Industry and Air Quality
One industry comprised primarily of small businesses and recently affected by air regulations is the autobody repair industry. According to bodyshopbusiness.com, 76 percent of shop owners employ an average of 7.6 workers per shop.
According to Federal EPA rule 40 CFR 63, Subpart HHHHHH (6H), shops that apply paint containing metals must staff certified painters, and use EPA approved equipment, methods and facilities. Spray booths with special filters are required and cost around $10,000 per booth. Approved specialized spray guns cost an average of $250 per gun.
The cost of compliance for a small business versus a large business is simple math. If a business nets $1 million a year in profit and has to spend $50,000 on new equipment for environmental compliance, its profit is only decreased by 5 percent. However, if a business only nets $100,000 in profit, $50,000 on new equipment is 50 percent of its profit. While spending money to meet environmental regulations may provide the business with an initial tax write-off, most small businesses will be unable to reclaim the money spent on regulations.
In addition to compliance costs, violations can be extremely pricey. Penalties for noncompliance vary by state, but range from $10,000 to $25,000 per day of noncompliance. One fine could drain a large portion of a small shop’s annual income.
Help for Small Businesses in 2012?
On October 9, 2011, Michael McAuliff and Lucia Graves posted “War On The EPA: Republican Bills Would Erase Decades Of Protection” on the “Huffington Post.” According to the authors, “there have been at least 159 votes held against environmental protections” since Republicans gained control of the House last year. According to a list compiled by the Democratic members of the Energy and Commerce Committee, 61 votes have been to dismantle the Clean Air Act and 92 votes have targeted the EPA.
Since Democrats currently control the Senate, they have been able to kill the bills, but “small business friendly” changes to environmental regulations would be likely to pass if Republicans win control of the Senate in 2012.
Clean air is extremely important to the health of U.S. citizens, but there has to be compromise between health and costs. Who can argue against requiring cost considerations and Congressional approval of environmental regulations at a time when every dollar in the government’s budget needs to be scrutinized?