SMALL BUSINESS
REGULATORY ENFORCEMENT
FAIRNESS ACT OF 1996
Region 4 Briefing Book
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CONTENTS OF BOOK
TAB 1 The SBREFA ACT
TAB 2 EPA Guidance Document
TAB 3 EPA Enforcement Policy
TAB 4 Briefing Notes
TAB 5 Contact List
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1
. Cardinal
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PUBLIC LAW 104-121—MAR. 29, 1996
A-ll
110 STAT. 857
TITLE II—SMALL BUSINESS
REGULATORY FAIRNESS
Small Uusinoss
Regulatory
Enforcement
orcement
SEC. 201. SIIOltT TITLE.
This title may be cited as the "Small Business Regulatory
PnTAVMAMIAni L* n ¦ MM ARM A Jki 1QAC
Paimcss Actuf
1996.
5 USC 601 note.
Enforcement Fairness Act of 1996".
SEC. 202. FINDINGS.
5 USC 601 note.
Congress finds that—
(1)a vibrant and growing small business sector is critical
to creating jobs in a dynamic economy;
(2) small businesses bear a disproportionate shure of regu-
latory costs and burdens;
(3) ftuidamental changed that are needed in the regulatory
and enforcement culture of Federal agencies to make agencies
mors responsive to small business can be made without com-
promising the statutory missions of the agencies;
(4) three of the top recommendations of the 1995 White
House Conference on Small Business involve reforms to the
way government regulations are developed and enforced, and
reductions in government paperwork requirements; .
(5) the requirements of chapter 6 of title 5, United States
Code, have too often been ignored by government agencies,
resulting in greater regulatory burdens on small entities than
necessitated By statute; and
(6) small entities should be given the opportunity to seek
judicial review of agency actions required by chapter 6 of title
5, United States Coae.
SEC. 203. PURPOSES. 6 USC 601 note.
The purposes of this title are—
(1) to implement certain recommendations of the 1995
White House Conference on Small Business regarding the devel-
opment and enforcement of Federal regulations;
(2) to provide for judicial review of chapter 6 of title 5,
United States Code;
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110 STAT. 858 PUBLIC LAW 104-121—MAR. 29, 1996
(3) lo encourage the effective participation of smalt
businesses in the Federal regulatory process;
(4) to simplify the language of Federal regulations affecting
small businesses;
(5) to develop more accessible sources of information on
regulatory and reporting requirements for small businesses;
(6) to create a more cooperative regulatory environment
among agencies and small businesses that is less punitive
and more solution-oriented; and
(7) to make Federal regulators more accountable for their
enforcement actions by providing small entities with a meaning-
ful opportunity for redress of excessive enforcement activities.
5 use 601 note. Subtitle A—Regulatory Compliance
Simplification
SEC. 211. DEFINITIONS.
For purposes of this subtitle—
(1) the terms "rule" and "small entity" have the same
meanings as in section 601 of title 5, United States Code;
(2) the term "agency" has the same meaning as in section
551 of title 5, United States Code; and
(3) the term "small entity compliance guide" means a docu-
ment designated as such by an agency.
SEC. 212. COMPLIANCE GUIDEd.
(a) Compliance Guide.—For each rule or group of related
rules for which ah agency is required to prepare a final regulatory
flexibility analysis under section 604 of title 5, United States Code,
the agency shall publish one or more guides to assist small entities
in complying with the rule, and shall designate such publications
us "small entity compliance guides". The guides shall explain the
actions a small entity is required to take to comply with a rule
or group of rules. The agency bIibII, in its sole discretion, taking
into account the subject matter of the rule and the language of
relevant statutes, ensure that the guide is written using sufficiently
plain language likely to be understood by affected small entities.
Agencies may prepare separate guides covering groups or classes
of similarly affected small entities, and may coopurate with associa-
tions of smalt entities to develop and distribute such guides.
(b) Comprehensive Source of Information.—Agencies shall
cooperate to make available to small entities through comprehensive
sources of information, the small entity compliance guides and
all other available information on statutory and regulatory require-
ments affecting small entities.
(c) Limitation on Judicial Review.—An agency's small entity
compliance guide shall not be subject to judicial review, except
that in any civil or administrative action against a small entity
for a violation occurring after the effective date of this section,
the content of the email entity compliance guide may be considered
as evidence of the reasonableness or appropriateness of any pro-
posed fines, penalties or damages.
SEC. 213. INFORMAL 8MAIX. ENTITY GUIDANCE.
(a) General.—Whenever appropriate in the interest of admin-
istering statutes and regulations within tho jurisdiction of an agency
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PUBLIC LAW 104-121—MAR. 29, 1996
110 STAT. 859
which regulates small entities, it shall be the practice of the agency
to answer inquiries by small entities concerning information on,
and advice about, compliance with such statutes and regulations,
interpreting and applying the law to specific sets of facts supplied
by the small entity. In any civil or administrative action against
a small entity, guidance given by an agency applying the law
to facts provided by the small entity may be considered as evidence
of the reasonableness or appropriateness of any proposed fines,
penalties or damages sought against such small entity.
(b) Program.—Each agency regulating the activities of small
entities shall establish a program for responding to such inquiries
no later than 1 year after enactment of this section, utilizing exist-
ing functions and personnel of the agency to the extent practicable.
(c) Reporting.—Each agency regulating the activities of small
business shall report to the Committee on Small Business and
Committee on Governmental Affairs of the Senate and the Commit-
tee on Small Business and Committee on the Judiciary of the
House of Representatives no later than 2 years after the date
of the cnuctment of this section on the scope of the agency's pro-
gram, the number of small entities using the .program, and the
achievements of the program to assist small entity compliance
with agency regulations.
SEC. 214. SERVICES OF SMALL BUSINESS DEVELOPMENT CENTERS.
(a) Section 21(c)(3) of the Small Business Act (15 U.S.C.
648(c)(3)) is amended—
(1) in subparagraph (0), by striking "and" at the end;
(2) in subparagraph (P), by striking the period at the end
and inserting a semicolon; and
(3) by inserting after subparagraph (P) the following new
subparagraphs:
"(Q) providing information to small business concerns
regarding compliance with regulatory requirements; and
"(R) developing informational publications, establishing
resource centers of reference materials, and distributing
compliance guides published under section 312(a) of the
Small Business Regulatory Enforcement Fairness Act of
1996.".
(b) Nothing in this Act in any way affects or limits the ability
of other technical assistance or extension programs to perform
or continue to perform services related to compliance assistance.
SEC. 215. COOPERATION ON GUIDANCE.
Agencies may, to the extent resources are available and where
appropriate, in cooperation with the States, develop guides that
fully integrate requirements of both Federal and State regulations
where regulations within an agency's area of interest at the Federal
and State levels impact small entities. Where regulations vary
among the States, separate guides may be created for separate
States in cooperation with State agencies.
SEC. 218. EFFECTIVE DATE.
This subtitle and the amendments made by this subtitle shall
take effect on the expiration of 90 days after the date of enactment
of this subtitle.
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110 STAT. 860 PUBLIC LAW 104-121—MAR. 29, 1996
ousegui mile. Subtitle H—Regulatory Enforcement
Reforms
SEC. 221. DEFINITIONS.
For purposes of this subtitle—
(1) the terms "rule" and "small entity" have the same
meanings as in section G01 of title 5, United States Code;
(2) the term "agency" has the siune meaning as in section
551 of title 5, United States Code; und
(3) the term "small entity compliance guide" means a docu-
ment designated as such by an agency.
SEC. 222. SMALL BUSINESS AND AGRICULTURE ENFORCEMENT
OMBUDSMAN.
The Small Business Act (15 U.S.C. 631 et seq.) is amended—
15 USC 631 note. (1) by redesignating section 30 as section 31; and
(2) by inserting after section 29 the following new section:
15 USC 657. "SEC. 30. OVERSIGHT OF IlEnUI jVTORY ENFORCEMENT.
"(a) Definitions.—For purposes of this section, the term—
"(1) 'Board* means a Regional Small Business Regulatory
Fairness Board established under subsection (c); and
"(2) 'Ombudsman' means the Small Business and Agri-
culture Regulatory Enforcement Ombudsman designated under
subsection (b).
"(b) SBA Enforcement Ombudsman.—
"(1) Not later than 180 days after the date of enactment
of this suction, the Administrator shall designate a Small Busi-
nesa and Agriculture Regulatory Enforcement Ombudsman,
who shall report directly to the Administrator, utilizing person-
nel of the Small Business Administration to the extent prac-
ticable. Other agencies shall assist the Ombudsman and toke
actions as necessary to ensure compliance with the require-
ments of this section. Nothing in this section is intended to
replace or diminish the activities of any Ombudsman or similar
office in any othur agency.
"(2) The Ombua6inan shall—
"(A) work with each agency with regulatory authority
over email businesses to ensure that small business con-
cerns that receive or are subject to an audit, on-site inspec-
tion, compliance assistance efTort, or other enforcement
related communication or contact by agency personnel are
provided with a means to comment on tne enforcement
activity conducted by Buch personnel;
"(B) establish means to receive comments from small
business concerns regarding, actions by agency employees
conducting compliance or enforcement activities with
respect to the small business concern, means to refer com-
ments to the Inspector General of the affected agency in
the appropriate circumstances, arid otherwise seek to main-
tain the identity of the person and small business concern
making such comments on a confidential basis to the same
extent as employee identities are protected under section
7 of the Inspector General Act of 1978 (5 U.S.C. App.);
"(C) based on substantiated comments received from
small business concerns and the Boards, annually report
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PUBLIC LAW 104-121—MAR. 29, 1996 HO STAT. 861
lo and affected agencies evaluating the enforce-
ment activities or agency personnel including a rating or
the responsiveness to small business of the various regional
and program offices of each agency;
"(D) coordinate and report annually on the activities,
findings and recommendations of the Boards to the
Administrator and to the heads of affected agencies; and
"(B) provide the affected agency with an opportunity
to comment on draft reports prepured under subparagraph
(C), und include a section of the final report in which
the affected agency may make such comments as are not
addressed by the Ombudsman in revisions to the draft.
"(c) Regional Smai.l Business Reuui.atoiiy Fairness
Boards.—
"(]) Not later than 180 days after the date of enactment
of this section, the Administrator shall establish a Small Busi-
ness Regulatory Fairness Board in each regional office of the
Small Business Administration.
"(2) Each Board established under paragraph (1) shall—
"(A) meet at least unnually to advise the Ombudsman
on matters of concern to small businesses relating to the
enforcement activities of agencies;
"(B) report to the Ombudsman on substantiated
instances of excessive enforcoment actions of agencies
aguinst small business concerns including any findings or
recommendations of the Board as to agency enforcement
policy or practice; and
"(C) prior to publication, provide comment on the
annual report of the Ombudsman prepared under sub-
section (b).
"(3) Each Board shall consist of five members, who ure
owners, operators, or officers of smsll business concerns,
appointed by the Administrator, after receiving the rec-
ommendations of the chair and ranking minority member of
the Committees oh Small Business of the House of Representa-
tives and the Senate. Not more than three of the Board mem-
bers shall be of the same political party. No member shall
be an officer or employee of the Federal Government, in cither
the executive brancn or the Congress.
"(4) Members of the Board shall serve at the pleasure
of the Administrator for terms of three years or less.
"(5) The Administrator shall select a chair from among
the members of the Board who shall serve at the pleasure
of the Administrator for not more than 1 year as chair.
"(6) A majority of the members of the Board shall constitute
a quorum for the conduct of business, but a lesser number
may hold hearings.
"(d) Powkrs of the Boards.
"(1) The Board may hold such hearings and collect such
information as appropriate for carrying out this section.
"(2) The Board may use the United States mails in the
same manner and under the 6am.e conditions as other depart-
ments and agencies of the Federal Government.
"(3) The Board may accept donations of services.necessary
to conduct its business, provided that the donations and their
sources arc disclosed by the Board.
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110 STAT. 862 PUBLIC LAW 104-121—MAR. 29, 1996
"(4) Memlicra of the Hoard shall serve without compensa-
tion, provided that, members of the Board shall be allowed
travel expenses, including per diem in lieu of subsistence, at
rates authorized for employees of agencies under subchapter
1 of chapter 57 of title 5, United States Code, while away
from their homes or regular places of business in the perform-
ance of services for the Board. .
SEC. 223. RIGHTS OF SMA1.L ENTITIES IN ENFORCEMENT ACTIONS.
(a) In General.—Each agency regulating the activities of small
entities sliull establish a policy or program within 1 year of enact-
ment of this section to provide for the reduction, and under appro-
priate circumstances for the waiver, of civil penalties for violations
of a statutory or regulatory requirement by a small entity. Under
appropriate circumstances, an agency may consider ability to pay
in determining penalty assessments on small entities.
(b) Conditions and Exclusions.—Subject to the requirements
or limitations of other statutes, policies or programs established
under this section shall contain conditions or exclusions which
may include, but shall not be limited to—
(1) requiring the small entity to correct the violation within
a reasonable correction period;
(2) limiting the applicability to violations discovered-,
through participation by the small entity in a compliance assist-
ance or audit program operated or supported by the agency
or a State;
(3) excluding small entities that have been subject to mul-
tiple enforcement actions by the aeency;
(4) excluding violations involving willful or criminal con-
duct;
(5) excluding violations that pose serious health, safety
or environmental threats; and
(6) requiring a good faith effort to comply with the law.
(c) Reporting.—Agencies shall report to the Cominitteo on
Small Business and Committee on Governmental Affairs of the
Senate and the Committee on Small Business and Committee on
Judiciary of the House of Representatives no later than 2 years
atler the dale of enactment of this section on the scope of their
program or policy, the number of enforcement actions against small
entities that qualified or failed to qualify for the program or policy,
and the total amount of penalty reductions and waivers.
SEC. 224. EFFECTIVE DATE.
This subtitle and the amendments made by this subtitle shall
take efTect on the expiration of 90 days after the date of enactment
of this subtitle.
Subtitle C—Equal Access to Justice Act
Amendments
SEC. 231. ADMINISTRATIVE PROCEEDINGS.
(a) Section 504(a) of title 6, United States Code, is amended
by adding at the end the following new paragraph:
"(4) If, in an adversary adjudication arising from an agency
action to enforce a party's compliance with a statutory or regulatory
requirement, the demand by the agency is substantially in excess
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110 STAT. 864 PUBLIC LAW 104-121—MAR. 29, 1996
5 USt; 501 nolo. SEC. 233. EFFECTIVE DATE.
The amendments made by sections 331 and 332 shall apply
to civil actions and adversary adjudications commenced on or after
the date of the enactment of this subtitle.
Subtitle D—Regulatory Flexibility Act
Amendments
SEC. 241. IIECU1.ATORY FLEXIBILITY ANALYSES.
(a) Initial Reculatory Flexibility Analysis.—
(1) SECTION 603.—Section 603(a) of title 5, United States
Code, is amended—
(A) by inserting after "proposed rule", the phrase
or publishes a notice of proposed rulemaking for an
interpretative rule involving the internal revenue laws of
the United States"; and
(B) by inserting at the end of the subsection, the follow-
ing new sentence: "In the case of an interpretative rule
involving the internal revenue laws of the United States,
this chapter applies to interpretative rules published in
the Federal Register for codification in the Coae of Federal
Regulations, but only to the extent that such interpretative'
rules impose on small entities a collection of information
requirement.".
(2) Section sol—Section 601 of title 5, United States Code,
is amended by striking "and" at the end of paragraph (5),
by striking the period at the end of paragraph (6) and inserting
and", nnd by adding at the end the following:
"(7) the term 'collection of information*—
"(A) means the obtaining, causing to be obtained, solic-
iting, or requiring the disclosure to third parties or the
public, of facts or opinions by or for an agency, regardless
of form or format, calling for either—
"(i) answers to identical questions posed to, or
identicul reporting or recordkeeping requirements
imposed on, 10 or more persons, other than agencies,
instrumentalities, or employees of the United States;
or
"(ii) answers to questions posed to agencies,
instrumentalities, or employees or the United States
which are to be used for general statistical purposes;
and
"(D) shall not include a collection of information
described under section 3518(c)(1) of title 44, United States
Code.
"(8) Recordkeeping kequirement.—The term 'record-
keeping requirement' means a requirement imposed by an
agency on persons to maintain specified records.".
(b) Final Regulatory Flexibility Analysis.—Section 604 of
title 5, United States Code, is amended—
(l)in subsection (a) to read aa follows:
"(a) When an agency promulgates a final rule under section
553 of this title, after being required by that section or any other
law to publish a general notice of proposed rulemaking, or promul-
gates a final interpretative rule involving the internal revenue
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PUBLIC LAW 104-121—MAR. 29, 1996 110 STAT. 863
of the decision of the adjudicative officer and is unreasonable when
compared with such decision, under the facts and circumstances
of the case, the adjudicative officer shall award to the party the
fees and other expenses related to defending against the excessive
demand, unless the party has committed a willful violation of
law or otherwise acted in bad faith, or special circumstances make
an award unjust. Fees and expenses awarded under this paragraph
shall be paid only as a consequence of appropriations provided
in advance.".
(b) Section 604(b) of title 5, United States Code, is amended—
(1) in paragraph (1)(A), by striking "$76" and inserting
"$125";
(2) at the end of paragraph (1KB), by insetting before
the semicolon "or for purposes of subsection (a)(4), a small
entity as defined in section 601";
(3) at the end of paragraph (1)(D), by sLviking "and";
(4) at the end of paragraph (1)(E), by striking the period,
and inserting"; and"; and
(5) at tne end of paragraph (1), by adding the following
new subparagraph:
"(F) 'demand' means the express demand of the agency
which led to the adversary adjudication, but does not include
a recitation by the agency of the maximum statutory penalty
(i) in the administrative complaint, or (ii) elsewhere when
accompanied by an express demand for a lesser amount.".
SEC. 232. JUDICIAL PROCEEDINGS.
(a) Section 2412(d)(1) of title 28, United States Code, is
amended by adding at the end the following new subparagraph:
"(D) If, in a civil action brought by the United States or a
proceeding for judicial review of an adversary adjudication described
in section 504(a)(4) of title 5, the demand by the United Stales
is substantially in excess of the judgment finally obtained by the
United States and is unreasonable wnen compared with such judg-
ment, under the facts and circumstances of the case, the court
shall award to the party the fees and other expenses related to
defending against the excessive demand, unless the party has
committed a willful violation of law or otherwise acted in bad
faith, or special circumstances make an award unjust. Fees and
expenses awarded under this subparagraph shall be paid only as
a consequence of appropriations provided in advance.".
(b) Section 2412(d) of title 28, United States Code, is amended—
(1) in paragraph (2)(A), by striking "$75" and inserting
"$125";
(2) at the end of paragraph (2)(B), by inserting- before
the semicolon "or for purposes of subsection (d)(1)(D), a small
entity as defined in Bection 601 of title 6";
(3) at the end of paragraph (2XG), by striking "and";
(4) at the end of paragraph (2)(H), by striking the period
and inserting "; and"; and
(6) at tne end of paragraph (2), by adding the following
new subparagraph:
"(I) 'demand' means the express demand of the United
States which led U> the adversary adjudication, but shall not
include a recitation of the maximum statutory penalty (i) in
the complaint, or (ii) elsewhere when accompanied by an
express demand for a lesser amount.".
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110 STAT. 8G6 PUBLIC LAW 104-121—MAR. 29, 1996
tliia chapter, an action for judicial review under this section shall
be filed not luter than—
"(i) one year after the date the analysis is made available
to the public, or
"(ii) where a provision of law requires that an action chal-
lenging a final agency regulation be commenced before the
expiration of the l-yea>* period, the number of days specified
in such provision of law that is after the date the analysis
is made available to the public.
"('!) In granting any relief in an action under this section,
the court shall order the agency to take corrective action consistent
with this chapter and chapter 7, including, but not limited to—
"(A) remanding the rule to the agency, and
"(B) deferring the enforcement of the rule against small
entities unless the court finds that continued enforcement of
the rule is in the public interest.
"(5) Nothing in this subsection shall be construed to limit
the authority of any court to stay the effective date of any rule
or provision thereof under any other provision of law or to grant
any other relief in addition to the requirements of this section.
"(b) In an action for the judicial review of a rule, the regulatory
flexibility analysis for such rule, including an analysis prepared
or corrected pursuant to paragraph (a)(4), shall constitute part
of the entire record of agency action in connection with such review.
"(c) Compliance or noncompliance by an agency with the provi-
sions of this chapter shall be subject to judicial review only in
accordance with this section.
"(d) Nothing in this section bars judicial review of any other
impact statement or Bimilar analysis required by any other law
if judicial review of such statement or analysis is otherwise per*
initted by law.".
SEC. 213. TECHNICAL AND CONFORMING AMENDMENTS.
(a) Section 605(b) of title 5, United States Code, is amended
to read as follows:
"(b) Sections 603 and 604 of this title shall not apply to any
proposed or final rule if the head of the agency certifies that
the rule will not, if promulgated, have a significant economic impact
Federal Register, on a substantial number of small entities. If the head of the agency
publication. makes a certification under the preceding sentence, the agency
shall publish such certification in the Federal Register at the time
of publication of general notice of proposed rulemaking for the
rule or at the time of publication of the final rule, along with
a statement providing the factual basis for such certification. The
agency shall provide such certification and statement to the Chief
Counsel for Advocacy of the Small Business Administration.".
(b) Section 612 of title 5, United States Code, ia amended—
(1) in subsection (a), by striking "the committees on the
Judiciary of the Senate and the House of Representatives,
the Select Committee on Small Business of the Senate, ana
the Committee on Small Business of the House of Representa-
tives" and inserting "the Committees on the Judiciary and
Small Business of the Senate and House of Representatives".
(2) in subsection (b), by striking "his viewB with respect
to the" and inserting in lieu thereof, "his or her views with
respect to compliance with this chapter, the adeouacy of the
rulemaking record with respect to small entities and the".
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PUBLIC LAW 104-121—MAR. 29, 1996 110 STAT. 8G5
laws of the United States as described in section 6<).'i(a), the agency
shall prepare a final regulatory flexibility analysis. Each final regu-
latory flexibility analysis shall contain—
"(1) a succinct statement of the need for, and objectives
of, the rule;
"(2) a summary of the significant issues raised by the
public comments in response to the initial regulatory flexibility
analysis, a summary of* the assessment of the agency of such
issues, and a statement of any changes made in the proposed
rule as a result of Buch comments;
"(3) a description of and an estimate of the number of
small entities to which the rule will apply or an explanation
of why no such estimate is available;
"(4) a description of the projected reporting, recordkeeping
and other compliance requirements of the rule, including an
estimate of the classes of small entities which will be subject
to the requirement and the type of professional skills necessary
for preparation of the report or record; and
"(5) a description of the steps the agency has taken to
minimize the significant economic impuct on small entities
consistent with the stated objectives of applicable statutes,
including a statement of the factual, policy, and lecal reasons
for selecting the alternative adopted in the final rule and why
each one of the other significant alternatives to the rule consid-
ered by the agency which affect the impact on small entities
was rejected."; and
(2) in subsection (b), by striking "at the time" and all
that follows and inserting "such analysis or a summary
thereof.".
SEC. 242. JUDICIAL REVIEW.
Section 611 of title 5, United States Code, is amended to
read as follows:
"§611. Judicial review
"(a)(1) For any rule subject to this chapter, a small entity
that is adversely affected or aggrieved by final agency action is
entitled to judicial review of agency compliance with the require-
ments of sections 601, 604, 605(b), 606(b), and 610 in accordance
with chapter 7. Agency compliance with sections 607 and 609(a)
shall be judicially reviewable in connection with judicial review
of eection 604.
"(2) Each court having jurisdiction to review such rule for
compliance with section 653, or under any other provision of law,
shall have jurisdiction to review any claims of noncompliance with
sections 601, 604,605(b), 608(b), and 610 in accordance with chapter
7. Agency compliance with sections 607 and 609(a) shall be judicially
reviewable in connection with judicial review of section 604.
"(3)(A) A small entity may seek such review during the period
beginning on the date of final agency action and ending one year
later, except that where a provision of law requires that an action
challenging a final agency action be commenced before the expira-
tion of one year, such lesser period shall apply to an action for
judicial review under this section.
"(B) In the case where an agency delays the issuance of a
final regulatory flexibility analysis pursuant to section 608(b) of
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110 STAT. 868 PUBLIC LAW 104-121—MAR. 29, 1996
record a written rinding, willi realms therefor, that Ihosc require-
ments would not advance the effective participation of small entities
in the rulemaking process. For purposes of this subsection, the
factors to he considered in making such a finding are as follows:
"(1) In developing a proposed rule, the extent to which
the covered agency consulted with individuals representative
of aiTecled small entities with respect to the potential impacts
of the rule and took such concerns into consideration.
"(2) Special circumstances requiring prompt issuance of
the rule.
"(3) Whether the rcmiircments of subsection (b) would pro-
vide the individuals identified in subsection (b)(2) with a
competitive advantage relative to other small entities.".
5useC09nolo. (b) SMALL DUSINESS Advocacy ClIAIRPEItSONS—Not luter than
30 days after the date nf enactment of this Act, the head of each
covered agency that has conducted a final regulatory flexibility
analysis shall designate a small business advocacy chairperson
using existing personnel to the extent possible, to be responsible
fur implementing this section and to act as permanent chair of
the agency's review panels established pursuant to this section.
5 USC C01 noli". SEC. 245. EFFECTIVE DATE.
This subtitle shall become effective on the expiration of 90
days after the date of enactment of this subtitle, except that such
amendments shall not apply to interpretative rules for which a
notice of proposed rulemaking was published prior to the date
of enactment.
Subtitle E—Congressional Review
SEC. 251. CONCItKSSlONAI. HEV1EW OF AGENCY IttJLEMAKING.
Title 5, United States Code, is amended by inserting imme-
diately after chapter 7 the following new chapter:
"CIIAPTElt 8—CONGRESSIONAL REVIEW OF AGENCY
RULEMAKING
"Slc.
"601. Congressional review.
"802. Congressional disapproval procedure.
"803: Special rule on statutory, regulatory, and judicial deadlines.
"804. Definitions.
*805. Judicial review.
"806. Applicability; severability.
"807. Exemption for monetary policy.
"808. Effective date of certain rules.
"§ 801. Concessional review
Reports. "(a)(1)(A) Before a rule can take effect, the Federal agency
promulgating such rule shall submit to each House of the Congress
and to tne Comptroller General a report containing—
"(i) a copy of the rule:
"(ii) a concise general statement relating to the rule, includ-
ing whether it is a major rule; and
"(iii) the proposed effective date of the rule.
"(B) On the date of the submission of the report under subpara-
graph (A), the Federal agency promulgating the rule shall submit
to the Comptroller General and make available to each House
of Congress—
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PUBLIC LAW 104-121—MAR. 29, 1996 110 STAT. 867
SEC. 244. SMAl.l, BUSINESS ADVOCACY IIEVIEW PANIXS.
(a) Smau. Business Outreach and Interagency Cookdina-
TION.— Section 609 of title 6, United States Code, is amended—
(1) before "techniques," by inserting "the reasonable use
of';
(2) in paragraph (4), after "entities" by inserting "including
soliciting and receiving comments over computer networks'^
(3) By designating the current text us sunscction (a); ana
(4) by adding the following:
"(b) Prior to publication of an initiul regulatory flexibility analy-
sis which a covered agency is required to conduct by this chapter—
!'{1) a covered agency shall notify the Chief Counsel for
Advocacy of the Small Business Administration and provide
the Chief Counsel with infonnation on the potential impacts
of the proposed rule on small entities and the type of sinull
entities that might be affected;
"(2) not later than 15 days after the date of receipt of
the materials described in paragraph (1), the Chief Counsel
shall identify individuals representative of affected email enti-
ties for the purpose of obtaining advice and recoinmendutions
from those individuals about the potential impacts of the pro-
posed rule;
"(3) the agency shall convene a review panel for such
rule consisting wholly of full time Federal employees of the
office within tlie agency responsible for carrying out the pro-
posed rule, the Oltice of Information and Regulatory Aflairs
within the Office of Management and Budget, and the Chief
Counsel;
"(4) the panel shall review any material the agency has
prepared in connection with this chapter, including any draft
ftroposed rule, collect advice and recommendations of each
ndividuol small entity representative identified by the agency
after consultation with tne Chief Counsel, on issues related
to subsections 603(b), paragraphs (3). (4) and (5) and 603(c);
"(5) not later than 60 days alter the date a covered agency
convenes a review panel pursuant to paragraph (3), the review
panel shall report on the comments of the small entity rep-
resenlativea and Its findings as to issues related to subsections
603(b), paragraphs (3), (4) and (5) and 603(c), provided that
such report shall be made public as part of the rulemaking
record; and
"(6) where appropriate, the agency shall modify the pro-
posed rulu, the initial regulatory flexibility analysis or the
decision on whether an initial regulatory flexibility analysis
is required.
"(c) An agency may in its discretion apply subsection ,(b) to
rules that the agency intends to certify under subsection 605(b),
but the agency believes may have a greater ihan de minimis impact
on a substantial number of small entities.
"(d) For purposes of this section, the term 'covered agency*
means the Environmental Protection Agency and the Occupational
Safety and Health Administration of the Department of Labor.
"(e) The Chief Counsel for Advocacy, in consultation with the
individuals identified in subsection (b)(2), and with the Adminis-
trator of the Office of Information and Regulatory Affairs within
the Office of Management and Budget, may waive the requirements
of subsections (bX3), (b)(4), and (b)(6) by including in the rulemaking
-------
110 STAT. 870 PUBLIC LAW 104-121—MAR. 29, 1996
rule may not lie issued, unless the reissued or new rule is specifi-
cally authorized by a law enacted after the date of the joint resolu-
tion disapproving the original rule.
"(c)(1) Notwithstanding any other provision of this section
(except subject to paragraph (3)), a rule that would not take effect
by reason of subsection (a)(3) may take effect, if the President
makes a determination under paragraph (2) and submits written
notice of such determination to tne Congress.
"(2) Paragraph (1) applies to a determination made by the
President hy Executive order that the rule should take effect
because such rule is—
"(A) necessary because of an imminent threat to health
or safely or other emergency;
"(B) necessary for tne enforcement of criminal laws;
"(C) necessary for national security; or
"(D) issued pursuant to any statute implementing an inter-
national trade ugreement.
"(3) An exercise by the President of the authority under this
subsection shall have no efTect on the procedures under section
802 or the effect of a joint resolution of disapproval under this
section.
"(d)(1) In addition Lo the opportunity for review otherwise pro;
vided under this chapter, in the case of uny rule for which a
report was submitted in accordance with subsection (a)(1)(A) during
the period beginning on the date occurring—
"(A) in the case of the Senate, 60 session days, or
"(B) in the case of the House of Representatives, 60 legisla-
tive days,
before the date the Congress adjourns a session of Congress through
the date on which the same or succeeding Congress first convenes
its next session, section 802 shall apply to such rule in the succeed-
ing session of Congress.
"(2)(A) In applying section 802 for purposes of such additional
review, a rule described under paragraph (1) shall be treated as
though—
Federal Register, "(i) such rule were published in the Federal Register (as
publication. a rule that shall take effect) on—
"(I) in the case of the Senate, the 15th session day,
or
"(II) in the case of the House of Representatives, the
15th legislative day,
after the succeeding session of Congress first convenes; and
"(ii) a report on such rule were submitted tj Congress
under subsection (a)( 1) on such date.
"(B) Nothing in thi3 paragraph shall be construed to affect
the requirement under subsection (aXl) that a report shall be
submitted to Congress before a rule can take effect.
"(3) A rule described under paragraph (1) shall take efTect
as otherwise provided by law (including other subsections of this
section).
Effective date. "(eMl) For purposes of this subsection, section 802 shall also
appiv to any major rule promulgated between March 1, 1996, and
the date of the enactment of this chapter.
"(2) In applying section 802 for purposes of Congressional
review, a rule described under paragraph (1) shall be treated as
though—
-------
PUBLIC LAW 104-121—MAR. 29, 1996
110 STAT. 869
"(i) a complete copy of the cost-benefit analysis of the
rule, if any;
"(ii) the agency's actions relevant to sections G03, 604,
605, 607,and 609;
"(iii) the agency's actions relevant to sections 202, 203,
204, und 205 or the Unfunded Mandates Reform Act of 1995;
and
"(iv) any other relevant information or requirements under
any other Act and any relevant Executive orders.
"(C) Upon receipt of a report submitted under subparagraph
(A), each House shall provide copies of the report to the chairman
and ranking member of each standing committee with jurisdiction
under the rules of the House of Representatives or the Senate
to report a bill to amend the provision of law under which the
rule is issued.
"(2)(A) The Comptroller General shall provide a report on each Uqmrts.
major rule to the committees of jurisdiction in each House of the
Congress by the end of 15 calendar days after the submission
or publication date as provided in section 802(b)(2). The report
of the Comptroller General shall include an assessment of the
agency's compliance with procedural steps required by paragraph
(1KB).
"(B) Pederul agencies shall cooperate with the Comptroller Gen-
eral by providing information relevant to the Comptroller General's
report under subparagraph (A).
"(3) A major rule relating to a report submitted under para- Effective dotea.
graph (1) shall take elTect on the latest of—
"(A) the later of the date occurring 60 days after the date
on which—
"(i) the Congress receives the report submitted under
paragraph (1); or
"(ii) the rule is published in the Federal Register, if Federal Register,
so published; publication.
"(B) if the Congress passes a joint resolution of disapproval
described in section 802 relating to tho rule, and the I'reBident
signs a veto of such resolution, the earlier date—
"(i) on which either House of Congress votes and fails
to override the veto of the President; or
"(ii) occurring 30 session days after the date on which
the Congress received the veto and objections of the Presi-
dent; or
"(C) the date the rule would have otherwise taken effect,
if not for this section (unless a joint resolution of disapproval
under section 802 is enacted).
"(4) Except for a major rule, a rule shall take effect as otherwise Effective date,
provided by law ailer submission to Congress under paragraph
"(5) Notwithstanding paragraph (3), the effective date of a Effective dotes,
rule shall not be delayed by operation of this chapter beyond the
date on which either House of Congress votes to reject a joint
resolution of disapproval under section 802.
"(b)(1) A rule shall not take efTect (or continue), if the Congress
enacts a joint resolution of disapproval, described under section
802, of the rule.
"(2) A rule that does not take efTect (or does not continue)
under paragraph (1) may not be reissued in substantially the same
form, and a new rule that is substantially the same as such a
-------
110 STAT. 872
PUBLIC LAW 104-121—MAR. 29, 1996
lo, the joint resolution shall remain the unfinished business of
the Senate until disposed of.
"(2) In the Senate, debate on the joint resolution, and on all
debatable motions and appeals in connection therewith, shall be
limited to not more than 10 hours, which shall be divided equally
between those favoring and those opposing the joint resolution.
A motion further to limit debate is in order and not debatable.
An amendment to, or a. motion to postpone, or a motion to proceed
lo the consideration of other business, or a motion to recommit
the joint resolution is not in order.
"(3) In the Senate, immediately following the conclusion of
the debate on a joint resolution described in subsection (a), and
n single quorum call at the conclusion of the debate if requested
in accordance with the rules of the Senate, the vote on final passage
of the joint resolution shall occur.
"('I) Appeals from the decisions of the Chair relating to the
application of the rules of the Senate to the procedure relating
to a joint resolution described in subsection (a) shall be decided
without debate.
"(e) In the Senate the procedure specified in subsection (c)
or (d) shall not apply Lo the consideration of a joint resolution
respecting u rule—
"(1) after the expiration of the GO session days beginning
with the applicable submission or publication date, or
"(2) if the report under section 801(a)(1)(A) was submitted
during the period referred to in section 801(d)(1), after the
expiration of the 60 session days beginning on the 15th session
day after the succeeding session of Congress first convenes.
"(0 If, before the passage by one House of a joint resolution
of that House described in subsection (a), that House receives
from the other House a joint resolution described in subsection
(n), then the following procedures shall apply:
"(1) The joint resolution of the other House shall not be
referred to a committee.
"(2) With respect to a joint resolution described in sub-
section (a) of the House receiving the joint resolution—
"(A) the procedure in that House shall be the same
as if no joint resolution had been received from the other
House; but
"(B) the vote on final passage shall be on the joint
resolution of the other House.
"(g) This section is enacted by Congress—
"(1) as an exercise of the rulemaking power of the Senate
and House of Representatives, respectively, and aa such it
is deemed a part of the rules of each House, respectively,
but applicable only with respect to the procedure to be followed
in that House in the case of a joint resolution described in
subsection (a),, and it supersedes other rules only to the extent
that it is inconsistent with such rules; and
"(2) with full recognition of the constitutional right of either
House to change the rules (so far as relating to the procedure
of that House) at any time, in the same manner, and to the
same extent as in the case of any other rule of that House.
-------
PUBLIC LAW 104-121—MAR. 29, 1996 110 STAT. 871
"(A) such rule were published in the Fudenil Kegister on I-'uiIumI Krister,
the date of enactment of this chapter; and publication.
"(B) a report on such rule were suhmittud to Congress
under subsection (a)(1) on such date.
"(3) The effectiveness of a rule described under paragraph (1)
shall be as otherwise provided by law, unless the rule is made
of no force or effect under section 602.
"(f) Any rule that takes effect und later is made of no force
or effect by enactment of a joint resolution under section 802 shall
be treated as though such rule had never taken effect.
"(g) If the Congress does not enact a joint resolution of dis-
approval under section 802 respecting a rule, no court or agency
may infer any intent of the Congress from any action or inaction
of the Congress with regard to such rule, related statute, or joint
resolution of disapproval.
"§802. Congressional disapproval procedure
"(a) For purposes of this section, the term 'joint resolution*
means only a joint resolution introduced in the period beginning
on the date on which the report referred to in section 801(a)(1)(A)
is received by Congress and ending 60 days thereafter (excluding
days either House of Congress is udjourned for more than 3 days
during a session of Congress), the matter afler the resolving clause
of which is as follows: 'That Congress disapproves the rule submit-
ted by the relating to , and such rule shall have no
force or effect.' (The blank spaces beinp appropriately filled in).
"(b)(1) A joint resolution described u> subsection (a) shall be
referred to the committees in each House of Congress with jurisdic-
tion.
"(2) For purposes of this section, the term 'submission or
publication date' means the later of the date on which—
"(A) the Congress receives the report submitted under sec-
tion 801(a)(1); or
"(B) the rule is published in. the Federal Register, if so Federal Register,
published. publication.
'(c) In the Senate, if the committee to which is referred a
joint resolution described in subsection (a) has not reported such
oint resolution (or an identical joint resolution) at the end of
20 calendar days after the submission or publication date defined
under subsection (b)(2), such committee may be discharged from
further consideration of such joint resolution upon a petition sup-
ported in writing by 30 Members of the Senate, and such joint
resolution shall be placed on the calendar.
"(dXl) In the Senate, when the committee to which a joint
resolution is referred has reported, or when a committee is dis-
charged (under subsection (c)) from further consideration of a joint
resolution described in subsection (a), it is at any time thereafter
in order (even though a previous motion to the same effect has
been disagreed to) for a motion to proceed to the consideration
of the joint resolution, and all points of order against the joint
resolution (and against consideration of the joint resolution) are
waived. The motion is not subject to amendment, or to a motion
to postpone, or to a motion to proceed to the consideration of
other business. A motion to reconsider the vote by which the motion
is agreed to or disagreed to shall not be in order. If a motion
to proceed to the consideration of the joint resolution is agreed
-------
110 STAT. 874 PUBLIC LAW 104-121—MAR. 29, 1996
invalid, the application of such provision lo other persons or cir-
cumstances, and the remainder of this chapter, Bhall not be affected
thereby.
"§ 807. Exemption for monetary policy
"Nothing in this chapter shull apply to rules that concern
monetary policy proposed or implemented by the Board of Governors
of the Federal Reserve System or the Federal Open Market Commit-
tee.
"§ 808. Effective date of certain rules
"Notwithstanding section 801—
"(1) any rule that establishes, modifies, opens, closes, or
conducts a regulatory program for a commercial, recreational,
or subsistence activity related to hunting, fishing, or camping,
or
"(2) any rule which an agency for good cause finds hind
incorporates the finding and a lirief statement of reasons there-
for in the rule issued) mat notice and public procedure thereon
arc impracticable, unnecessary, or contrary to the public
interest,
shall take effect at such time as the Federal agency promulgating
the rule determines.".
SEC, 252. EFFECTIVE DATE.
5 USC 801 note. The amendment made by section 351 shall take effect on the
dale of enactment of this Act.
SEC. 25.). TECHNICAL AMENDMENT.
The table of chapters for part 1 of title 6, United States Code,
is amended by inserting immediately after the item relating to
chapter 7 the following:
"8. Congressional llevlew of Agency Rulemaking 81)1".
-------
PUBLIC LAW 104-121—MAR. 29, 1996
110 STAT. 873
"§803. Special rule on statutory, regulatory, and judicial
(leadlines
"(a) In the case of any deadline for, relating to, or involving
any rule which does not take effect (or the effectiveness of which
la terminated) because of enactment of a joint resolution under
section 802, that deadline is extended until the date 1 year after
the date of enactment of the joint resolution. Nothing in this sub-
section shall be construed to affect a deudlinc merely by reason
of the oostponement of a rule's effective date under section 801(a).
"(b) The term 'deadline' means any date certain for fulfilling
any obligation or exercising any authority established by or under
any Federal statute or regulation, or by or under any court order
implementing any Federal statute or regulation.
"§804. Definitions
"For purposes of this chapter—
"(1) The term 'Federal agency' means any agency as that
term is defined in section 551(1).
"(2) The term 'major rule' means any njle that the Adminis-
trator of the Office of Information and Regulatory Affairs of
the Office of Management and Budget finds has resulted in
or is likely to result in—
"(A) an annual effect on the economy of $100,000,000
or more;
"(13) a major increase in costs or prices far consumers,
individual industries, Federal, State, or local government
agencies, or geographic regions; or
"(C) significant adverse effects on competition, employ-
ment, investment, productivity, innovation, or on the ability
of United States-based enterprises to compete with foreign-
based enterprises in domestic and export markets.
The term does not include any rule promulgated under the
Telecommunications Act of 1996 and the amendments made
by that Act.
"(3) The term 'rule' lias the meaning given such term
in section 551, except that such term does not include—
"(A) any rule of particular applicability, including a
rule that approves or prescribes for the future rates, wages,
priceB, services, or allowances therefor, corporate or finan-
cial structures, reorganizations, mergers, or acquisitions
thereof, or accounting practices or disclosures bearing on
any of the foregoing:
"(B) any rule relating to agency management or person-
nel; or
"(C) any rule of agency organization, procedure, or
practice that does not substantially affect the rights or
obligations of non-agency partieB.
"§805. Judicial review
"No determination, finding, action, or omission under this chap-
ter shall be Bubject to judicial review.
"§ 606. Applicability; severability
"(a) This chapter shall apply notwithstanding any other provi-
sion of law.
"(b) If any provision of this chapter or the application of any
provision of this chapter to any person or circumstance, is held
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£ Cardinal
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EPA Interim Guidance
for Implementing the
Small Business Regulatory Enforcement Fairness Act
and Related Provisions of the
Regulatory Flexibility Act
February 5, 1997
Prepared by the EPA SBREFA Task Force
NOTICE
The statements in this document are intended solely as guidance. This document is not intended, nor
can it be relied upon, to create any rights enforceable by any party in litigation with the United States.
EPA may decide to follow the guidance provided in this document, or to act at variance with the
guidance, based on its analysis of the specific facts presented. This guidance may be revised without
public notice to reflect changes in EPA's approach to implementing the Small Business Regulatory
Enforcement Fairness Act or the Regulatory Flexibility Act, or to clarify and update text.
February 5,1997 -
-------
Interim Guidelines for Implementing SBREFA
Table of Contents
Introduction: Overview of Agency Compliance Procedures
Flowchart
Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
Chapter 7
SBREFA Action Development Process Overview
Analytical Requirements of the Regulatory Flexibility Act
Identifying Small Entity Representatives
Small Business Advocacy Review Panels
Compliance Guides
Congressional Review
[Ed. Note: Reserved for Informal Small Entity Guidance (SBREFA §213)1
[Ed. Note: Reserved for Periodic Review of Rules (RFA §610)]
Februarys, 1997 ~2
-------
Introduction
Overview of Agency Compliance Procedures
I. BACKGROUND and AGENCY POLICY
EPA has long been concerned with the effect of environmental "regulations on small
entities and has a strong record of reaching out to small entities and addressing their concerns in
the Agency's rulemaking process. Under Administrator Carol Browner, the Agency has
redoubled its efforts to enhance the involvement of stakeholders in the rule development process;
emphasizing outreach to the regulated community, environmental groups, the general public and
in particular, to the many small entities within these broader categories.
The President signed the Small Business Regulatory Enforcement Fairness Act (SBREFA)
into law on March 29, 1996. SBREFA amended the Regulatory Flexibility Act (RFA) to
strengthen the RFA's analytical and procedural requirements. SBREFA also made other changes
to agency regulatory practice as it affects small entities. Finally, SBREFA established a new
mechanism for expedited congressional review of virtually all agency rules.
Since SBREFA became law, EPA has worked diligently to develop and implement
procedures necessary for full implementation and compliance with SBREFA's multiple and
various provisions. To insure the Agency gave top priority to this effort, the Deputy
Administrator and the Regulatory Policy Council established a cross-Agency Task Force
consisting of five primary subgroups to develop comprehensive procedures for EPA's
implementation of SBREFA. The subgroups covered each major SBREFA component
immediately applicable to our day-to-day administration: 1) Regulatory Flexibility, 2) Small Entity
Outreach, 3) Small Business Advocacy Review Panels, 4) Compliance Guides, and 5)
Congressional Review. Each subgroup carefully reviewed the relevant statutory requirements and
prepared recommendations and options for Agency review. The efforts of the Task Force
subgroups are reflected in the chapters of this document.
Since its enactment in 1980, the RFA has required every federal agency to prepare
regulatory flexibility analyses for any notice-and-comment rule it issues, unless the agency certifies
that the rule "will not, if promulgated, have a significant economic impact on a substantial number
of small entities." One important function of this guidance is to establish workable criteria for
determining whether a particular rule will not have a "significant impact" on a "substantial
number" of small entities. Prior to the enactment of SBREFA, EPA exceeded the requirements of
the RFA by instructing regulatory managers to prepare regulatory flexibility analyses for every
rule that would have aay impact, no matter how minor, on any number, no matter how small, of
small entities. It remains our policy that program offices should assess the impact of every rule on
small entities and minimize any impact to the extent feasible, regardless of the size of the impact
or number of small entities affected. In view of the changes made by SBREFA, however, the
February 5, 1997 -- 3
-------
Agency has decided to implement the RFA as written; that is, regulatory flexibility analyses as
specified by the RFA will not be required if the Agency certifies that the rule will not have
significant economic impact on a substantial number of small entities. This approach will allow
EPA to manage its scarce resources such that the Agency can continue considering the potential
small entity impacts of all its rules while preparing full regulatory flexibility analyses for those
rules warranting such analyses under the RFA.
n. OVERVIEW
When you initiate a regulatory development project, SBREFA and RFA compliance
should be near the top of the list of issues you address in your project plan or Analytic Blueprint1.
To help you understand how the requirements of SBREFA and RFA fit into the Agency's Action
Development Process2, we prepared an overview flowchart and it appears below. Keep in mind
that although the chapters are organized sequentially, some SBREFA compliance activities must
be performed concurrently and the flowchart illustrates this.
A. Analyzing a Rule's Impact on Small Entities
As you start the rule development process, the first thing you need to do for SBREFA and
RFA compliance is determine what, if any, impact your rule will have on small entities. In order
to do this, you need to screen your proposed and final rules by answering a series of questions
posed and discussed in detail in Chapter 1 of this guidance:
Q1. Is the rule subject to notice-and-comment rulemaking requirements?
Q2. What types of entities will be subject to the rule?
Q3. What types of small entities will be subject to the rule, if any?
Q4. Will any small entities potentially be subject to the rule?
Q5. Will small entities be adversely affected by the rule?
Q6. Will the rule have a significant economic impact on a substantial number of small
entities?
B. Implementing Small Entity Outreach
If the screening analysis of your rule indicates that the rule will have some impact on some
small entities, Chapter 2 will provide you with information and guidance for identifying possible
representatives of potentially affected small entities.
C. Small Business Advocacy Review Panels
1 See "Guidance for Analytic Blueprints", 06/15/94, or contact OPPE's Regulatory
Management Division (RMD) on 202-260-5480
2 See "EPA's Action Development Process: Regulatory aind Policy Development; Guidelines
for Implementation", July 1994, also available from RMD.
February 5, 1997 -- 4
-------
If your proposed rule will not be certified as having no significant economic impact on a
substantial number of small entities, SBREFA imposes some additional requirements for working
with the potentially affected community, as well as the Small Business Administration and the
Office of Management and Budget. In Chapter 3 you will find detailed information about how
you should go about complying with the requirement to convene a Small Business Advocacy
Review Panel.
D. Small Entity Compliance Guides
If your final rule is not certified as having no significant economic impact on a substantial
number of small entities, SBREFA also requires you to prepare a small entity compliance guide.
Chapter 4 answers questions regarding what constitutes such a guide and provides a template to
use in designing a compliance guide for your rule.
E. Congressional Review
Aside from the foregoing requirements which relate to the impact your rule will have on
small entities, SBREFA also requires that the Agency submit virtually all of its final actions to
both houses of Congress and GAO for review. Chapter 5 explains how congressional review
works and what you must include in your rulemaking package for purposes of congressional
review.
F. Ongoing Informal Small Entity Guidance
When planning for the post-promulgation stage of your rule, refer to the discussion in
Chapter 6 regarding the SBREFA provision on giving informal advice to small entities in
response to inquiries. You should keep in mind that information and advice you provide to small
entities can later be used in any civil or administrative action against a small entity as evidence of
the reasonableness and appropriateness of any proposed fines, penalties, or damages.
G. Periodic Review of Rules
The SBREFA amendments to RFA made judicially reviewable the provisions found in
§610 requiring the Agency to review rules which have or will have a significant economic impact
upon a substantial number of small entities. Chapter 7 explains the Agency's plans for continued
and re-invigorated compliance with this requirement.
We hope you find the guidance in this document helpful and easy to use. We plan to
update it as needed, so if you have comments or suggestions for improvements, please send them
to Stuart Miles-McLean in the Regulatory Management Division of OPPE.
February 5, 1997 -- 5
-------
SBREFA Action Developrnent Process Overview
Any
Adverse Impact
on Any Small
Entity?
Begin Initial
Analytic
Assessment
[Chapter 1]
Initiate Action
Development1
Initiate
.Yes ^
Outreach to
Small Entities
[Chapters 2+3]
Certify Rule?2
Yes
Prepare Initial
Regulatory
—~
Flexibility
Analysis
[Chapter 1]
Prepare Draft
Report,
Convene Small
Business
—~
Advocacy
Review Panel
and Finalize
Report
[Chapter 3]
Notes:
General: References to "Chapters" in the flowchart refer to the chapters in the attached guidance document
(see Table of Contents).
1 In keeping with the scope of SBREFA, the only actions to which this flowchart applies are rules (as opposed
to adjudications) that apply to unnamed entities and/or are required to undergo notice-and-comment
rulemaking procedures. As explained more fully in Chapter 1, only rules of general applicability are subject to
the congressional review provisions of SBREFA, and only rules subject to notice-and-comment requirements
are subject to the regulatory flexibility analysis requirements of the Regulatory Flexibility Act as amended by
SBREFA. Consult with OGC regarding applicability for each action.
2 Under the Regulatory Flexibility Act, the Agency must prepare an Initial Regulatory Flexibility Analysis
(IRFA) and meet other requirements, unless it certifies that the rule "will not, if promulgated, have a
significant economic impact on a substantial number of small entities"
Prepare final
NPRM
package for
OMB review
and/or Agency
signature and
routing to
Federal
Register
Draft
Certification
Statement and
Factual
explanation
thereof
[Chapter 1 ]
Page 1
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SBREFA Action Development Process Overview
No
Certify Rule?
Yes
Issue
Compliance
Guide
[Chapter 4]
Prepare Final
Regulatory
Flexibility
Analysis
[Chapter 1]
Draft
Certification
Statement
and Factual
explanation
thereof
[Chapter 1]
Prepare
Congressional
Review Report
[Chapter 5]
Prepare
Compliance
Guide (or
development
schedule)
[Chapter 4]
Begin Work
on Final
Rule:
Consider
comments
and Select
options
Provide
ongoing
Informal
Small Entity
Guidance3
[Chapter 6]
Prepare final
package for
OMB review
and/or
Agency
signature
and routing
to Federal
Register
Periodically
Review Rules
which have a
Significant
Impact on a
Substantial
Number of
Small Entities
[Chapter 7]
RMD submits
signed rule to
Federal
Register for
publication and
to Congress
and GAO for
Congressional
Review
[Chapter 5]
Notes:
3 SBREFA Section 213: Informal Small Entity Guidance (a) it shall be the practice of the agency to answer
inquiries by small entities concerning information on, and advice about, compliance with such statutes and
regulations, interpreting and applying the law to specific sets of facts supplied by the small entity. In any civil or
administrative action against a small entity, guidance given by an agency applying the law to facts provided by
the small entity may be considered as evidence of the reasonableness or appropriateness of any proposed
fines, penalties or damages sought against such small entity. Page 2
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Chanter 1
Analytical Requirements of the Regulatory Flexibility Act
Section
Subject
Page
I.
Introduction
1
n.
Statutory Background
2
m.
Analyzing a Rule's Impact on
Small Entities
8
IV.
Fulfilling the RFA's Analytical
Requirements
20
I. INTRODUCTION
Since its passage in 1980, the Regulatory Flexibility Act (RFA) has generally required
every federal agency to prepare regulatory flexibility analyses for any notice-and-comment rule it
issues, unless the agency certifies that the rule "will not, if promulgated, have a significant
economic impact on a substantial number of small entities," which include small businesses, small
governments and small nonprofit organizations. The RFA was amended in 1996 by the Small
Business Regulatory Enforcement Fairness Act (SBREFA) in ways that strengthened the RFA's
analytical and procedural requirements. This chapter of the guidance provides EPA program
offices with advice and direction on how to comply with the analytical requirements of the RFA as
amended by SBREFA and the Agency's policy for implementing those requirements. In many
respects, the advice and direction provided here go beyond what the law requires, and instead
reflect Agency policy about how best to ensure that small entity concerns are considered in the
rulemaking process. As the Agency gains additional experience implementing the RFA as
amended by SBREFA, it will review this guidance and revise it as appropriate.
Prior to SBREFA's enactment, the Agency issued guidance regarding implementation of
the RFA. The most recent guidance (dated April 1992) advised EPA program offices to prepare
regulatory flexibility analyses for any rule that would have "any impact" on "any number" of small
entities, which is more than the RFA requires. It remains the Agency's policy that program offices
should assess the impact of every rule on small entities and minimize any impact to the extent
feasible, regardless of the size of the impact or number of small entities affected. Further, the
outcome of that assessment and the steps taken to minimize any impact should be discussed or
summarized in the preamble to the rule. In view of the changes made by SBREFA, however, the
Agency has decided to implement the RFA as written; that is, regulatory flexibility analyses as
specified by the RFA will not be required if the Agency certifies that the rule will not have a
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significant economic impact on a substantial number of small entities.
This chapter of the guidance suggests criteria and thresholds for determining whether a
particular rule will not have a significant economic impact on a substantial number of small
entities. The guidance recognizes that there can be no one-size-fits-all methodology for making
this determination. It therefore recommends specific approaches but leaves Agency program
offices and senior managers flexibility to use alternative methods or reach different conclusions
where appropriate in the context of a particular rule for reasons stated in the rulemaking record.
Where the Agency does not certify that a rule will have no significant economic impact on
a substantial number of small entities, regulatory flexibility analyses meeting the applicable
statutory requirements must generally be prepared for the rule. This guidance also provides
advice and direction on how to prepare such analyses. It bears repeating, however, that even
where the Agency certifies that a rule will not have significant economic impact on a substantial
number of small entities, the Agency's policy is that an assessment of the rule's impact on any
small entities must still be made and efforts to minimize that impact undertaken. The Agency is
committed to maintaining a rulemaking process that avoids placing any undue regulatory burden
on any small entities.
H. STATUTORY BACKGROUND
A. What is the purpose of the RFA?
The purpose of the RFA is to ensure that in developing rules, agencies identify and
consider ways of tailoring regulations to the size of the regulated entities to minimize any
significant economic impact a rule may impose on a substantial number of small entities. The
RFA does not require that an agency necessarily minimize a rule's impact on small entities if there
are legal, policy, factual or other reasons for not doing so. The RFA requires only that agencies
determine, to the extent feasible, the rule's economic impact on small entities, explore regulatory
options for reducing any significant economic impact on a substantial number of such entities, and
explain its ultimate choice of regulatory approach.
B. What are "small entities"?
The RFA defines small entities as including "small businesses," "small governments" and
"small organizations." The RFA further defines each type of small entity, and authorizes agencies
to adopt alternative definitions where appropriate in accordance with specified procedures.
I. What is a "small business"?
The RFA references the definition of "small business" found in the Small Business Act,
which itself authorizes the Small Business Administration (SBA) to further define "small business"
by regulation. The SBA's small business definitions are codified at 13 CFR 121.201, and the SBA
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reviews and reissues those definitions every year.3 The SBA defines small business by category of
business using Standard Industrial Classification (SIC) codes, and in the case of manufacturing,
generally defines small business as a business having 500 employees or less. For many types of
manufacturing, however, the SBA's size standards define small business as a business having up to
750, 1000 or 1500 employees, depending on the particular type of business. In the case of
agriculture, mining, and electric, gas and sanitary services, the SBA size standards generally
define small business with respect to annual receipts (from $0.5 million for crops to $25 million
for certain types of pipelines).
The RFA also authorizes any agency to adopt and apply an alternative definition of small
business "where appropriate to the activities of the agency" after consulting with the Chief
Counsel for Advocacy of the SBA and after opportunity for public comment. The agency must
publish any alternative definition in the Federal Register.
2. What is a "small government"?
The RFA defines "small governmental jurisdiction" as the government of a city, county,
town, school distinct or special district with a population of less than 50,000. Similar to the
definition of small business, the RFA authorizes agencies to establish alternative definitions of
small government after opportunity for public comment (consultation with the SBA is not
required). Any alternative definition must be "appropriate to the activity of the agency" and
"based on such factors as location in rural or sparsely populated areas or limited revenues due to
the population of such jurisdiction." Any alternative definition must be published in the Federal
Register.
3. What is a "small organization"?
The RFA defines "small organization" as any "not-for-profit enterprise which is
independently owned and operated and is not dominant in its field." Here again, agencies are
authorized to establish alternative definitions "appropriate to the activities of the agency" after
providing an opportunity for public comment (consultation with the SBA is not required). Any
alternative definition must be published in the Federal Register.
C. What types of regulatory actions are subject to the RFA's analytical requirements?
As a threshold matter, the RFA requirement to prepare a regulatory flexibility analysis (or
a certification of no significant economic impact on a substantial number of small entities) applies
only to proposed rules subject to notice-and-comment rulemaking requirements under the
Administrative Procedure Act (APA) or any other statute and to final rules subject to notice-
3SBA's most recent revisions to its "size standards" can be found in the January 31, 1996
Federal Register (61 FR 3175). Several minor corrections were published on February 20, 1996
(61 FR 6421). The SBA has an Internet site with the current version of its size standards at
"http://www.sbaonline.sba.gov/gopher/Financial-Assistance/Size-Standards."
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and-comment rulemaking requirements under the APA or any other statute and issued under
the APA. Agency actions that are not rules (e.g., orders or adjudication) and rules that the
Agency is not required to propose before promulgating are not subject to the RFA requirement
to prepare either a regulatory flexibility analysis or a certification.
Most EPA rulemakings are subject to the APA, which generally requires that an agency
propose and take comment on a rule before issuing it. The APA, however, exempts from notice-
and-comment requirements any rule of agency organization, procedure or practice and any rule
for which the agency finds "for good cause" that notice and an opportunity to comment are
"impracticable, unnecessary, or contrary to the public interest."
The procedures for some EPA rulemakings are governed by other statutes. For example,
many Clean Air Act (CAA) rulemakings are subject to the procedural requirements of section
307(d) of the CAA instead of the APA. In such cases, those statutes should be consulted to
determine if the rule is subject to the RFA analytical requirements.
It should be noted that "direct final rules" — rules that the Agency issues as final rules
without first proposing them, but that are converted to proposed rules if anyone files an adverse
comment -- are generally subject to notice-and-comment requirements.
D. What are the RFA's analytical requirements?
The RFA requires that an agency prepare an initial regulatory flexibility analysis
(IRFA) for a proposed rule, unless the head of the agency certifies that the rule will not have a
significant economic impact on a substantial number of small entities. Similarly, the RFA requires
that an agency prepare a final regulatory flexibility analysis (FRFA) for a final rule, unless the
agency head certifies that the rule will not have a significant economic impact on a substantial
number of small entities. The RFA further requires that an agency provide factual support for any
certification it makes. In short, an agency must prepare for every proposed and final rule subject
to the RFA's analytical requirements a regulatory flexibility analysis except to the extent the
agency prepares and supports a certification that the rule will not have a significant economic
impact on a substantial number of small entities.4
1. How does the RFA define "significant economic impact on a substantial number of small
entities"? What are the legal requirements for certifying a rule?
^Preparing an IRFA for a proposed rule does not legally foreclose certifying that the final rule
will have no significant economic impact on a substantial number of small entities. Similarly,
certifying that the proposed rule will have no significant economic impact on a substantial number
of small entities does not legally foreclose preparing a FRFA for the final rule. In applying the
analysis-or-certification requirement separately to proposed and final rules, the RFA implicitly
recognizes that an agency's findings about small entity impacts may change from the proposed to
final rulemaking stage, as the agency leams more about potential impacts from public comments
on the proposed rule and makes changes to the final rule.
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February 5,1997--11
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The RFA does not define "significant economic impact on a substantial number" of small
entities. Agencies therefore have substantial discretion in determining what is not a significant
economic impact on, and a substantial number of, small entities. This interim guidance suggests
analytical methods, criteria and thresholds for making that determination. As noted above, if an
agency certifies that a rule will not have a significant economic impact on a substantial number of
small entities, it must support that certification with a factual explanation. Implementation of this
guidance will provide the factual predicate for certifying a rule.
The RFA authorizes the head of an agency to certify a rule. EPA's Administrator has
delegated that authority to the Agency official who has been delegated the authority to sign the
rule for which a certification has been prepared, except that the authority to certify under the RFA
cannot be redelegated below the Office Director level.
When an agency certifies a rule, it must publish that certification in the Federal Register at
the same time it publishes the proposed or final rule to which the certification applies.
2. What are the legal requirements for Initial Regulatory Flexibility Analyses (TRFAsI?
When an agency cannot or does not certify that a proposed rule will not have a significant
economic impact on a substantial number of small entities, it must prepare an IRFA for the
proposed rule.5 While an agency may delay or even waive preparation of an IRFA under
emergency circumstances, it generally must complete the IRFA in time for the IRFA or a
summary of it to be published along with the proposed rule.6 An IRFA must contain the
following:
an explanation of why the rule may be needed;
a short statement of the objectives of and legal basis for the proposed rule;
[NOTE that these first two items are virtually always addressed by the NPRM preamble
or other rulemaking documents, so the IRFA need not repeat this information but may
simply cross-reference the preamble or other documents]
• a description of, and where feasible, an estimate of the number of small entities to
5When EPA does not certify a proposed rule, it must also convene a Small Business Advocacy
Review Panel. A suggested approach for implementing the review panel requirement is contained
in Chapter 3 of this guidance.
6The RFA authorizes an agency head to waive or delay the completion of an IRFA if the
agency publishes in the Federal Register, by the time the final rule is published, a finding
supported by reasons that the final rule is being promulgated in response to an emergency that
makes compliance or timely compliance with the IRFA requirement impracticable.
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which the proposed rule will apply;
a description of the proposed reporting, record keeping and other compliance
requirements, including an estimate of the types of small entities which will be
subject to the requirement and the type of professional skills necessary for
preparation of the report or record;
an identification, to the extent practicable, of all relevant federal rules which may
duplicate, overlap or conflict with the proposed rule; and
• a description of "any significant regulatory alternatives" to the proposed rule which
accomplish the stated objectives of the applicable statutes and which minimize any
significant economic impact of the proposed rule on small entities; the analysis is to
discuss significant regulatory alternatives such as:
~ establishing different compliance or reporting requirements or timetables
that take into account the resources of small entities;
clarifying, consolidating or simplifying compliance and reporting
requirements under the rule for small entities;
using performance rather than design standards; and
exempting small entities from coverage of the rule or any part of the rule.
As indicated above, an IRFA or a summary of the IRFA must be published in the Federal
Register along with the proposed rule for which it was prepared. IRFAs are subject to public
comment.
3. What are the legal requirements for Final Regulatory Flexibility Analyses fFRFAsl?
When an agency cannot or does not certify that a final rule will not have a
significant economic impact on a substantial number of small entities, it must prepare a FRFA for
the final rule. While the agency may delay the preparation of a FRFA under emergency
circumstances, it generally must finish the FRFA in time to publish it or a summary of it along
with the final rule.7 A FRFA must contain the following:
a short statement of the need for, and objectives of the rule;
7The RFA authorizes an agency head to delay the completion of a FRFA for up to 180 days
after the final rule is published in the Federal Register, if the agency head publishes in the Federal
Register along with the final rule a finding supported by reasons that the final rule is being
promulgated in response to an emergency that makes timely compliance with the FRFA
requirement impracticable.
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February 5,1997 --13
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a summary of the significant issues raised by the public commenters in response to
the tRFA, a summary of agency's response to those issues and a statement of any
changes to the rule made as a result of those comments;
[NOTE that the first item is virtually always addressed by the final rule's preamble, so the
FRFA may simply cross-reference the preamble; to the extent the summary and response
to comments document prepared for the rule fulfills the requirements of the second item,
the FRFA may also cross-reference that document]
a description of and an estimate of the number of small entities to which the rule
will apply, or an explanation of why an estimate is unavailable;
a description of the projected reporting, record keeping and other compliance
requirements of the rule, including an estimate of the types of small entities that
will be subject to the requirement and the type of professional skills necessary for
preparation of the report or record; and
[NOTE that the foregoing item has a counterpart in the IRFA. To the extent the final rule
adopts the proposed rule unchanged, the FRFA may cross-reference the IRFA for
purposes of complying with this requirement, except as public comments indicate that the
IRFA's analysis must be changed]
a description of "the steps the agency has taken to minimize the significant
economic impact on small entities consistent with the stated objectives of
applicable statutes, including a statement of the factual, policy, and legal reasons
for selecting the alternative adopted in the final rule and why each one of the other
significant regulatory alternatives to the rule considered by the agency which affect
the impact on small entities was rejected."
As indicated above, a FRFA or a summary of the FRFA must be published in the Federal
Register along with the final rule for which it was prepared. A copy of the FRFA must also be
made available to the public.
E. May courts review agency compliance with the RFA?
SBREFA made agency compliance with many of the RFA's requirements judicially
reviewable. With respect to the RFA's analytical requirements, small entities adversely affected by
a final rule may now obtain judicial review of any certification of no significant impact the agency
made or any FRFA the agency prepared. While compliance with the IRFA requirement is not
judicially reviewable, preparation of a solid IRFA will be important to preparing a legally
defensible FRFA.
in. ANALYZING A RULE'S IMPACT ON SMALL ENTITIES
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This section describes a screening process for determining whether a regulatory flexibility
analysis or a certification of no significant impact should be prepared for a proposed or final rule.8
The screening process is laid out step-by-step so that the relevant issues are addressed in an order
that will ensure that appropriate determinations are made. The process should be followed for
both the proposed and final version of a rule, since the RFA generally requires that a regulatory
flexibility analysis or certification be prepared for each version. The last section describes how to
fulfill the RFA's analytical requirements depending on whether the screening analysis indicates that
a regulatory flexibility analysis or a certification should be prepared.
Phrased as questions, the steps of the screening process are as follows:
Q 1. Is the rule subject to notice-and-comment rulemaking requirements?
As noted above, if a rule is not required to undergo notice-and-comment rulemaking
procedures, it is not subject to the RFA's analytical requirements and the Agency need not
prepare an IRFA or a certification of no significant economic impact on a substantial number of
small entities. However, as a matter of Agency policy, even if a rule is not subject to the RFA,
where the program office foresees that the rule will have an adverse economic impact on small
entities, it should assess and make efforts to minimize that impact.
Even when a rule is not subject to the RFA, the preamble to the proposed rule, if any, and
the preamble of the final rule should include a "Regulatory Flexibility" section that explains 1) that
the rule is not subject to the RFA, and 2) what adverse impact, if any, the rule will have on small
entities and what the Agency has done to minimize those impacts. For rules not subject to the
RFA, suggested language for the rule's preamble is as follows:
The Agency has determined that the rule being [proposed OR issued] today
is not subject to the Regulatory Flexibility Act (RFA), which generally requires
an agency to conduct a regulatory flexibility analysis of any significant impact
the rule will have on a substantial number of small entities. By its terms, the
RFA applies only to rules subject to notice-and-comment rulemaking
requirements under the Administrative Procedure Act (APA) or any other
statute. Today's rule is not subject to notice and comment requirements
under the APA or any other statute. [Insert at this point one or two
sentences explaining why the rule isn't subject to notice-and -comment
requirements - e.g., the rule is subject to the APA, but the Agency has
invoked the "good cause" exemption under APA §553(b), or the rule is
subject not to the APA but to [name the statute that applies], which does not
require that the Agency provide notice and comment before issuing this rule.]
8As noted earlier, the RFA requirement for a regulatory flexibility analysis or a certification
applies only to legally enforceable rules. If the action the Agency is taking is other than a rule, the
RFA does not apply and the screening analysis described in this section of the guidance need not
be conducted.
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February 5,1997 --15
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The Agency nonetheless has assessed the potential of this rule to adversely
impact small entities. [Insert at this point one or two sentences either
describing what we think those impact will be and what the Agency has done
to address them, or explaining why the rule will not adversely impact any
small entities.]
Q 2. What types of entities will be subject to the rule's requirements?9
If the rule is subject to notice-and-comment rulemaking requirements, the program office
should next identify what types of entities (regardless of size) would be subject to the rule's
requirements, as follows:
a. Businesses: Identify the types of businesses potentially subject to the rule's
requirements and determine the SIC code for those types of businesses, since the
SBA's size standards apply to specified SIC codes.
b. Governments: Identify all forms of small governments potentially subject to the
rule, including cities, counties, towns, townships, villages, tribes and special
districts.
c. Nonprofit Organizations: Identify what entities such as nonprofit hospitals,
colleges, universities and research institutions are potentially subject to the rule.
9The RFA requires analysis of a rule's economic impact on the small entities that will be
subject to the rule's requirements. Indeed, an IRFA or FRFA cannot be prepared for a rule
that does not establish requirements applicable to small entities. As noted in the "Statutoiy
Background" section of this chapter, the RFA requires that an IRFA or FRFA identify the types,
and estimate the numbers, of small entities "to which the proposed [or final] rule will apply," and
describe the rule "requirements" to which small entities "will be subject" and any regulatory
alternatives, including exemptions and deferrals, which would lessen the rule's burden on small
entities.. See sections 603 and 604 of the RFA. Rules that do not establish requirements
applicable to small entities (e.g., rules establishing or revising national ambient air quality
standards under the CAA or water quality standards under the Clean Water Act) are thus not
susceptible to RFA analysis and may be certified as not having a significant economic impact on a
substantial number of small entities, within the meaning of the RFA.
For a rule that will establish requirements applicable to small entities, only the impacts of
the rule on the small entities subject to the rule's requirements need to be analyzed for RFA
purposes. In the case of a rule applying to auto service stations, for example, it is not necessary
to analyze the potential impact of the rule on suppliers of service stations, except to the extent
that the rule may result in higher costs to suppliers that will be passed along to service stations.
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February 5, 1997 --16
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Q 3. What types of small entities, if any, will be subject to the rule's requirements?
Of the types of entities potentially subject to any of the rule's requirements, the program
office should next determine the extent to which those types of entities include small entities. In
identifying small entities, the program office should apply the RFA definitions of small entities or,
where appropriate, any appropriate alternative definitions10 that the Agency has adopted or
intends to adopt in accordance with the RFA, as follows:
a. Small businesses: Determine whether the Agency properly adopted (i.e., after
consulting with SBA and an opportunity for public comment) any alternative
definition for any of the types of small businesses potentially subject to the rule, in
the context of the regulatory program to which the rule relates or any other EPA
regulatory program.
If the Agency has properly adopted an alternative definition, the program
office may use that alternative definition to the extent it (continues to)
make sense in the context of the relevant regulatory program. If using the
existing definition does not make sense, the program office may develop a
different alternative definition in accordance with the RFA or use the SBA
definition instead.
If the Agency has not adopted any alternative definition, the program office
may develop an alternative definition in accordance with the RFA or use
the SBA definition instead.
b. Small governments: Apply the statutory definition or any alternative definition
the program office intends to establish (the Agency has not previously established
any alternative definitions of small governments for RFA purposes).
c. Small organizations: Apply the statutory definition or any alternative definition it
intends to establish (the Agency has not previously established any alternative
definitions of small organizations for RFA purposes).
Q 4. Will any small entities potentially be subject to the rule's requirements?
If no small entities will be subject to any of the rule's requirements, the program office
10The RFA grants agencies broad discretion to develop and apply alternative definitions of
small business, small governments and small nonprofit organizations. In exercising this discretion,
however, care should be taken to develop alternative definitions that identify small entities as
opposed to entities that emit a small volume of pollution. It may be appropriate for the Agency to
provide regulatory flexibility or relief to small-volume polluters on general policy grounds, but the
focus of the RFA is on entities whose size or resources are small in comparison to other entities of
their type.
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may certify that the proposed and final rules will not have a significant economic impact on a
substantial number of small entities on that basis. The certifications should be published and
explained in the preambles of the proposed and final rules and supported in the rulemaking record
as appropriate. No further analysis is required to support the certifications, unless the Agency
receives comments on the proposed rule's certification that indicate its basis is flawed. If one or
more small entities will be subject to the rule's requirements, further analysis is required as
outlined below.
Q 5. Will small entities be adversely affected by the rule's requirements?
EPA believes that only rules that will have a significant adverse economic impact on small
entities require an IRFA and FRFA, since the primary purpose of both analyses is to identify and
address regulatory alternatives "which minimize any significant economic impact of the proposed
[or final] rule on small entities." (sections 603 and 604, emphasis added). Thus, rules that relieve
regulatory burden, or otherwise have a positive economic effect on the small entities subject to
the rule, do not require an IRFA or a FRFA.
If the rule will not have any adverse effect on any small entity subject to the rule's
requirements, the program office may certify that the proposed and final rules will not have a
significant economic impact on a substantial number of small entities on that basis. The
certifications should be published and explained in the preambles of the proposed and final rules
and supported in the rulemaking record as appropriate. No further analysis is required to support
the certification, unless the Agency receives comments on the proposed rule's certification that
indicate its basis is flawed. If one or more small entities subject to the rule will be adversely
affected by the rule, further analysis is required as outlined below.
It should be noted that a particular rule may reduce some burdens on small entities and
create or increase others. Where the rule reduces the burden on one type of small entity while
increasing the burden on another type of small entity, the decrease and increase in burden
generally may not be netted. Where the same types of small entities will experience both the
decrease and increase in burden, netting may be appropriate.
Q 6. Will the rule have a significant economic impact on a substantial number of small
entities?
For a proposed or final rule that will have an adverse effect on one or more small entities,
the program office must next determine the extent of the impact and the number of small entities
so impacted. Both qualitative information and quantitative analysis will be relevant in making this
determination.
a. What is the role of qualitative information?
Before investing in detailed quantitative analysis, the program office should attempt to
describe the steps a small entity will have to take to comply with the requirements of the rule. In
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so doing, the program office will better clarify the nature of the impacts (e.g., installation of new
technological processes, institution of new maintenance practices). It may then be able to deduce
whether the potential impacts are of sufficient magnitude and scope to warrant preparation of an
IRFA or FRFA.
Where a qualitative assessment indicates that a rule is likely to have a significant economic
impact on a substantial number of small entities, the program office may choose to prepare an
IRFA and FRFA on that basis and so avoid the need for a full screening analysis. Where a
qualitative assessment indicates that a rule will not have a significant economic impact on a
substantial number of small entities, the program office may be able to certify the rule on that
basis or may need to conduct a quantitative analysis to confirm the results of the qualitative
assessment. For example, where the information necessary to conduct a quantitative analysis is
not reasonably available, it may be appropriate to certify the rule based on the qualitative
assessment alone. Since the decision to certify a rule is judicially reviewable, the program office
should expect that certifying a rule will usually require quantitative analysis when quantitative
analysis is feasible. The program office should consult with the Small Business Advocacy
Chairperson when it anticipates relying on qualitative analysis to certify a rule.
b. How should a quantitative analysis be conducted?
I. What measures of economic impact should be used?
The table below (Table 1) lists suggested economic criteria for assessing the impact of a
rule on small entities. The suggested criteria are drawn from standard economic analyses and vary
by type of small entity in view of the different economic characteristics of small businesses,
governments and nonprofit organizations. Further, for each type of small entity, several different
criteria are listed. The criteria vary in terms of the type of data involved, and thus a program
office may choose to apply one criterion over the others based on the type of information
available. The table nevertheless indicates a preferred criterion for each type of small entity (i.e.,
B1, G1 and Nl). Where the program office has the necessary information, it should generally use
the preferred criterion. The program office may nonetheless use one of the other criteria, or even
a criterion not included in the table, where it has sound reasons for doing so and it explains those
reasons in the rulemaking record.
ii. To what extent should the analysis differentiate between different kinds of small
businesses, small governments or small nonprofits?
A rule may apply to more than one kind of business, government or nonprofit
organization. For example, a rule may apply the same requirements to printers, dry cleaners and
auto-body shops. In assessing the impact of such a rule on "small business," it may be appropriate
to analyze the rule's impact on each kind of business separately, particularly where the rule may
impose significantly higher costs on some kinds of businesses than on others.
TABLE k tanmenM QnantitatiTB Criteria lor Evaluating the Economic Impact ol a Sola on Small Entitles
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Type ol Entity and Criteria (preferred criteria in bold italics)
SMALL SnSIIESSES
B.l
Annualized compliance costs as a percentage of sales ("Sales Test")
B.2
Dstit-financeil capital compliance cons relative to current rash How ["Cash Flow Test"]
B.J
Annualized compliance costs as a percentage ol talorwax profits ("Profit Test"]
SMALL BOTEfiHUEHTS
G.l
Annualized compliance costs as a percentage of annual government revenues ("Revenue Test")
C.2
Annualized compliance costs to household (per capita] as a percentage ol median household [per capita] Income ["Income Test"]
SMALL lOIFEOriT QEOAHB&TIOIS
N.l
Annualized compliance costs as a percentage of annual operating expenditures ("Expenditure
Test")
1.2
Annualized compliance costs as a percentage of total assets ["Asset Test"]
iii. For proposed rules, what should be analyzed if more than one regulatory
approach is being proposed or seriously considered?
For proposed rules, one of the criteria listed, or any other economic criterion the program
office decides to use, should be applied to the regulatory approach being proposed. Where the
program office plans to propose in the alternative (i.e., propose two or more approaches from
among which one will be selected for promulgation in the final rule), it should apply the criteria to
each of the proposed alternatives or at least to the alternative that would likely have the greatest
impact on small entities.
Similarly, where the program office plans to propose one regulatory approach but seek
comment on variations of that approach or on different approaches altogether, it might be useful
to analyze not only the proposed approach but also the most potentially burdensome variation or
approach that has a significant chance of being promulgated. Doing so will avoid the situation
where adoption of an alternative requires preparation of a FRF A without the benefit of an IRFA
or public comment on an IRFA. While the RFA does not require that an agency re-propose a rule
with an accompanying IRFA in such situations, EPA may decide in particular cases that for policy
reasons the rule should be re-proposed with an accompanying IRFA. The workgroup chair
should contact the program office's steering committee representatives and OGC contact when
uncertain about the appropriate scope of an IRFA for a proposed rule.
iv. In assessing costs, should compliance with existing legal requirements be
assumed? Should incremental or cumulative costs be assessed?
In calculating the costs the rule will impose on small entities, the program office should
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presume that small entities (like all potentially covered entities) are complying with all existing
statutory or regulatory requirements that are applicable to them. In the case of a rule revising an
existing rule, the program office should assess only the incremental cost of the rule revision. In
general, the cost of the existing rule was assessed, and a regulatory flexibility analysis or
certification prepared, when that rule was developed.
c. As measured using the economic criteria suggested above, what degree and extent
of impact constitute "a significant economic impact on a substantial number of
small entities"?
Application of the criteria suggested above to a particular rule will yield quantitative
estimates of the rule's impact on small entities. Table 2 presents a matrix that categorizes the rule
based on the magnitude of its impact (as measured using the preferred criteria in Table 1") and
the number of entities expected to experience an impact of a particular magnitude.12 Each
category establishes either a process for determining, or a presumption regarding, whether the
rule can be certified as having no significant impact on a substantial number of small entities. The
categories further specify the Agency official authorized to rebut any applicable presumption. The
categories are as follows:
Category 1: The rule is presumed not to have a significant economic impact on a
substantial number of small entities, but the Assistant Administrator of the
program office developing the rule may, at his or her discretion, decide to
prepare a regulatory flexibility analysis for the rule.
Category 2: No presumption applies. If the program office developing the rule believes
the rule should be certified as not having a significant impact on a
substantial number of small entities, it must so recommend through its
steering committee representative to the Small Business Advocacy
"When applying one of the alternative quantitative criteria listed in Table 1, the program office
must consult with the Small Business Advocacy Chairperson (SBAC) and other relevant Agency
offices (including those identified by the SBAC) in determining the level at which the impact may
warrant preparation of a regulatory flexibility analysis.
12As explained previously, the legal test for certifying a rule is whether the rule "will not, if
promulgated, have a significant economic impact on a substantial number of small entities." The
test thus has two steps ~ first, will the impact on any small entities subject to the rule be
significant, and second, will the number of small entities significantly impacted be substantial?
The Agency may certify a rule if its impact is significant but only with respect to a small number
or percentage (i.e., not a "substantial number") of the small entities subject to the rule's
requirements. The Agency may also certify a rule if its impact falls on a substantial number of
small entities, but its impact is not significant. The Agency may not certify a rule if a substantial
number of the small entities subject to the rule's requirements will be significantly impacted by the
rule.
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February 5,1997 -- 21
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Chairperson (SBAC) and provide the SBAC with information and analysis
supporting its recommendation. The SBAC will then determine whether he
or she agrees with the program office's recommendation. Any disputes
between the program office and the SBAC will be referred to the Deputy
Administrator for resolution.
Category 3: The rule is presumed to be ineligible for certification, so an IRFA or FRFA
should be prepared. However, the Assistant Administrator for the program
office developing the rule may recommend to the Deputy Administrator
(DA) that the rule nevertheless be certified as not having a significant
impact based on information and analysis developed by the program
office.13 The SBAC will inform the DA of his or her views.
The scope of each category is defined by various thresholds for three variables: the
magnitude of the impact, the absolute number of small entities that will experience that impact,
and the percentage of all the small entities subject to the rule that will experience that impact. It is
important to keep in mind, however, that the thresholds are only guidelines for determining
whether a rule will not have a significant impact on a substantial number of small entities. The
RFA itself does not establish a formula for making this determination, and indeed, it would be
impossible to develop a formula that would yield an appropriate answer in the context of every
rule. For that reason, the thresholds are used to define categories that establish no more than a
presumption; program offices and the Agency as a whole will have to exercise judgment in
deciding whether to prepare an IRFA or FRFA for, or certify, a given rule. With more
information and experience, the Agency may conclude that the thresholds defining the categories
should themselves be changed. For the time being, however, the Agency believes that the
thresholds used in Table 2 are appropriate indicators of whether a rule is unlikely to have a
significant impact on a substantial number of small entities.
i. Should the Table 2 matrix be applied separately to each type of small entity
subject to the rule?
Where the rule will apply to more than one type of small entity (i.e., small businesses,
small governments or small nonprofit organizations), Table 2's matrix should be applied separately
to each type of small entity subject to the rule. For example, for a rule that will impose the same
(or substantially similar) requirements on small businesses and small governments, the rule's
impact on small businesses should be analyzed using an economic criterion appropriate to small
businesses, and its impact on small governments should be analyzed using a criterion appropriate
to small governments. The results of each analysis should then be fed into the matrix separately.
13To overcome the presumption that a rule falling in category 3 will have a significant impact,
additional quantitative analysis may be necessary. For examples of types of additional quantitative
analysis that could provide Anther information, see sections IV and VI, and Appendix E, of "EPA
Guidelines for Implementing the Regulatory Flexibility Act," prepared by OPPE and dated April
1992.
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The rule will thus be categorized twice - once for its impact on small businesses and a second
time for its impact on small governments.
Under this approach, it is possible that the rule may be a Category 1 rule with respect to
one type of small entity and a Category 2 (or 3) rule with respect to the other. This would be the
case, for example, where the rule's impact would be less than 1% of sales for small businesses
(Category 1), but 2% of revenues for over 1000 small governments (Category 2). Where a rule
falls into more than one category depending on the type of small entity, the rule should be placed
in the highest category into which it falls. Thus, in the above example, the rule would be
considered a Category 2 rule, and the Agency would approach the decision about whether to
prepare a regulatory flexibility analysis or a certification for the rule in accordance with the
guidelines for Category 2 rules. The RFA does not require that the Agency decide whether to
prepare an analysis or a certification based on the rule's impact on the type of small entity most
affected by the rule, but EPA has chosen to take this approach to ensure that potentially
significant impacts on any one type of small entity are identified and addressed.
Where a rule applies to more than one type of small entity and separate application of the
table places the rule in Category 1, one further analytic step is required to categorize the rule:
aggregation of the results of the impact analyses on the different types of affected small entities
and application of the matrix to the aggregated results. This step is necessary because the table
uses absolute numbers as well as percentages to assess whether the rule will impact a substantial
number of small entities. The absolute numbers establish a suggested floor and ceiling for what
may constitute a substantial number, so that, for example, a rule that impacts over 1000 small
entities is identified as potentially affecting a "substantial number" of small entities even if that
number represents less than 20% of affected small entities. The Agency chose these absolute
numbers as indicative of a substantial number not only with respect to any one type of small
entity, but with respect to all small entities taken together. Thus, a rule with an impact of 2% of
sales, revenues or assests with respect to 334 small businesses, 334 small governments and 334
small nonprofits, where 334 is less than 20% of each type of small entity, would be a Category 1
rule if each type of small entity were looked at separately, but should be a Category 2 rule since
more than 1000 small entities may be significantly affected by the rule.
The issue of applying the matrix to each type of small entity may be taken one step further
— that is, should the matrix be applied separately to different kinds of small businesses, small
governments or small nonprofits? A rule may apply the same requirements to dry cleaners and
autobody shops, but the rule's economic impact may be much greater on one than on the other
type of business. As indicated above, it would be appropriate in such a case to analyze the impact
of the rule separately for the two types of business. For purposes of deciding whether to prepare
a regulatory flexibility analysis or a certification, however, the impacts of the rule, once assessed
for the two types of business, should be aggregated and the aggregates fed into the matrix. If a
decision is then made to conduct a regulatory flexibility analysis for the small businesses subject to
the rule, the analysis may address the two kinds of businesses separately. Indeed, such a
disaggregated analysis is likely to improve the program office's ability to identify ways of tailoring
rule requirements to the different characteristics of the affected small businesses.
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Any regulatory flexibilty analysis or certification prepared for a rule should generally cover
the rule's impact on all types of small entities subject to the same (or substantially similar) rule
requirements, even if only one type of small entity may be significantly affected in substantial
numbers.. The Agency believes that if one type of small entity warrants analysis, it is generally
prudent to include all types of affected small entities in the regulatory
flexibility analysis and the panel process that accompanies preparation of the initial regulatory
flexibility analysis for the rule.
At the same time, any regulatory flexibility analysis prepared for a rule may analyze and
address the rule's impact on each type of small entity separately, particularly where the degree and
extent of impact varies with the type of small entity. Further, a regulatory flexibility analysis need
only explore regulatory alternatives for those types of small entities that would otherwise be
significantly impacted by the rule in substantial numbers. The RFA provisions for initial
regulatory flexibility analyses require that the Agency discuss any significant regulatory
alternatives which "minimize any significant economic impact" of the proposed rule (section
603(c) (emphasis added)). For final rules, the RFA requires that final regulatory flexbilility
analyses describe "the steps the agency has taken to minimize the significant economic impact on
small entities" (section 604(a)(5) (emphasis added)). Thus, the Agency is legally required to
describe and address significant regulatory alternatives only with respect to those types of small
entities that may be significantly affected by the rule in substantial numbers. As a policy matter,
however, program offices should continue to consider and adopt ways of minimizing a rule's
burden on any small entities to the extent practicable.
ii. Are Table 2's listed outcomes mutually exclusive?
As indicated above, the matrix relates three variables in assigning rules to particular
categories. For example, the matrix categorizes a rule based on whether it will have an impact of
more than 1% of sales or revenues on less than 100, 100 to 999, or 1000 or more small entities
and whether the absolute number of small entities so impacted is 20% or more of all affected
small entities. In applying the matrix to a rule, it is important to note that the outcomes set forth
in the matrix are not mutually exclusive. A rule may have an impact of 2% of sales or revenues
for 1000 small entities representing 40% of affected small entities (placing it in category 2) and
4% of sales or revenues for 500 small entities representing 20% of small entities (placing it in
category 3). Where a rule's impact falls into more than one category, the rule should be placed in
the highest categoiy.
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TABLE 2: Summary of Quantitative Information Used to Identify
Applicable Categories1
Quantitative Criteria
Regulatory
Process
Category2
Economic Impact
Condition
(based on preferred
criteria from Table 1)
Number of Small
Entities
Experiencing
Economic Impact
Condition
Number of Small
Entities Experiencing
Economic Impact
Condition as a
Percentage of All
Affected Small Entities
Less than 1% for all
affected small entities
Any number
Any percent
Category 1
1% or greater for one or
more small entities3
Fewer than 100
Any percent
Category 1
100 to 999
Less than 20%
Category 1
100 to 999
20% or more
Category 2
1000 or more4
Any percent
Category 2
3% or greater for one or
more small entities
Fewer than 100
Any percent
Category 1
100 to 999
Less than 20%
Category 2
100 to 999
20% or more
Category 3
1000 or more4
Any percent
Category 3
1 Nothing in this table on applying quantitative measures of economic impacts and enumerating the
number of impacted small entities should be interpreted as indicating that the certification decision is
strictly or solely based upon application of the above quantitative steps. Additional information and
other factors may be relevant in deciding whether to prepare a regulatory flexibility analysis or certify
under the RFA.
2 There may be cases where the extent of the impact (measured in quantitative or qualitative terms)
is particularly severe, even though the number of affected small entities totals fewer than 100 or 20%
of all affected small entities. In such cases, the lead office should consider placing the rule in a
higher category than would otherwise be applicable.
3 For purposes of applying this portion of the table, the number of small entities that will experience
an impact of 1% to 3% must be aggregated with the number of small entities that will experience an
impact of 3% or greater. The total number of small entities that will experience an impact of 1% or
greater must be used here in order to determine whether the number of small entities so impacted is
large enough to warrant preparation of a regulatory flexibility analysis.
4 As the number of small entities that will be affected by a rule by more than 1% of sales or
revenues approaches 1000 in number, the substantial number criteria of 20% of affected small
entities may become less relevant in determining whether a regulatory flexibility analysis or a
certification should be prepared.
d. After applying the matrix, what then?
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As noted above, the thresholds and criteria set forth by this guidance cannot be applied
mechanistically. Additional information and other factors may be relevant in deciding whether or
not to certify a rule under the RFA.
I. Would an alternative definition of "substantial number" be appropriate?
When application of the matrix indicates that a rule will not impact a "substantial number"
of small entities, it is appropriate for the program office to consider whether alternative
approaches to defining "substantial number" should apply for one of the following reasons:
• Where the extent of the impacts, measured in economic or non-economic terms,
would be of sufficient magnitude (e.g., potential collapse of a viable regionally-
concentrated fraction of an industrial sector) to warrant using either a smaller
absolute number (i.e., a figure lower than 100) or a smaller fraction of small
entities (i.e., a figure lower than 20%).
Where the size and distribution of entities within the industiy, the distribution of
revenues, market share, etc., suggest an alternative definition for businesses. In
such cases, it may not be possible or appropriate to determine whether a
"substantial number" will be affected until after collecting the data necessary to
prepare an IRFA or FRFA and analyzing the data for this purpose.
ii. Should relative impacts be analyzed?
Comparing a rule's impacts on small entities versus large entities (i.e., a rule's
disproportionate impact on small entities) may be one analytical means of providing additional
insight into whether a rule will have a "significant impact" on a "substantial number" of small
entities. Analytical tests and criteria for making relative comparisons are listed in section V of
"EPA Guidelines for Implementing the Regulatory Flexibility Act," prepared by OPPE and dated
April 1992.
iii. Are there other qualitative considerations relevant at this stage?
Qualitative information may also be factored into this phase of determining whether a rule
will not have a significant impact on a substantial number of small entities. Qualitative assessment
of the impacts on small entities ensures consideration of legitimate non-quantitative factors that
may or may not be supported through data. Qualitative analysis can take on the appearance of a
quantitative analysis, such as when the program office uses its judgement to make use of related
summary data or "model" financial data in the absence of more detailed information. For
example, where data cannot be obtained for the particular type of small entity subject to the rule,
the program may choose to use quantitative information on another type of small entities whose
behavior and financial characteristics are similar to those subject to the rule. Another example
might entail the creation of baseline financial characteristics for a set of small entities drawing
upon quantitative information available on larger entities in the same industrial or governmental
sector. General patterns of comparison between larger and smaller entities may be drawn upon so
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February 5, 1997 -
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as to infer the small entities' financial characteristics. In general, where quantitative infoimation is
sought, the goal is to obtain the type of data that allows for the most reliable form of quantitative
analysis to be used by the program office. But where data limitations persist, adoption of creative
reliable alternatives is encouraged.
iv. Should the screening analysis be reviewed within the Agency?
The Assistant Administrator of the office preparing a screening analysis is responsible for
ensuring the integrity and validity of the analysis. Among the mechanisms that the AA (and
workgroup chair for the rule) may rely upon in preparing an analysis are review by workgroup
members and consultation with the Division of Economy and the Environment in OPPE's Office
of Economy and the Environment, the Small Business Advocacy Chairperson, the Small Business
Ombudsman and/or the Small Community Coordinator, as appropriate.
IV. FULFILLING THE RFA'S ANALYTICAL REQUIREMENTS
Once a determination is made regarding whether to prepare a regulatory flexiblity analysis
or a certification for a proposed or final rule, the program office must fulfill the applicable RFA
analytical requirement. Since the screening process itself entails qualitative and quantitative
analysis, it will provide the basis for certifications of no significant impact and much ~ but by no
means all — of the information necessary for preparing IRFAs and FRFAs. This section of the
guidance discusses how to fulfill the requirements for certifications, IRFAs and FRFAs.
A. Certification of No Significant Impact
For any proposed or final rule the Agency intends to certify as having no significant impact
on a substantial number of small entities, the following statement must be included in the
Regulatory Flexibility section of the rule's preamble: "I certify [or 'The Agency certifies'] that the
rule will not have a significant economic impact on a substantial number of small entities."14 That
statement must be followed by at least a summary of the factual basis for the certification. If only
a summary is provided, a full explanation must be provided elsewhere in the rulemaking record
and the summary should reference that explanation. To keep Federal Register notices from
becoming too long and unwieldly, program offices should include only summaries where the full
explanation is lengthy.
'"As noted previously, the Agency official authorized to sign a rule generally is also authorized
to certify the rule under the RFA, so use of the "I certify" language is appropriate. There are
instances, however, where Agency officials below the Office Director (OD) level are authorized
to sign a rule. However, officials below the OD level are not authorized to sign certifications. In
such instances, the phrase "I certify" should be replaced with "the Agency certifies," the signed
certification should be placed in the docket, and the preamble should state that the signed
certification is available in the docket for the rulemaking.
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The factual basis for a certification will vary with the particular rule. In the case of rules
that will impact no small entities or that will have no adverse impact on small entities, the factual
statement need only make that point and summarize or reference the analysis that supports it. In
the case of other rules being certified, the factual statement should consist of a summary of the
Agency's impact findings based on the results of the screening analysis described above. The
factual statement should not cite to this guidance for substantiation that the rule's estimated
impacts will not be significant nor fall on a substantial number of small entities. While the Agency
considers the thresholds contained in this guidance to be generally appropriate indicators of
"significant impact" and a "substantial number," they are not talismanic. The program office and
Agency as a whole must still exercise judgment in deciding whether to certify a rule and then
explain that judgment in light of the specific circumstances of the rule. Any explanation of a
certification should thus state what the impacts are and indicate that the Agency considers those
impacts insignificant. For example, for a rule with an impact of less than 1% for a relatively small
number of small entities, the Regulatory Flexibility section of the preamble should so state and
conclude (unless a contraiy determination has been made in light of circumstances unique to the
rule) that the Agency does not consider such an impact to amount to a "significant impact on a
substantial number of small entities."
As noted earlier, for any rule that will have some impact on some number of small entities,
but not a "significant impact" on a "substantial number" of such entities, the Agency's policy is to
assess and minimize those impacts to the extent possible, even though preparation of an IRFA or
FRFA is not required. In keeping with that policy, the program office should also include in the
Regulatory Flexibility section of the preamble a discussion or summary of the ways in which the
rule has been developed or designed to minimize impacts on small entities, or a cross-reference to
the part of the preamble or rulemaking document that contains such a discussion.
B. Initial Regulatory Flexibility Analysis
For any proposed rule subject to the RFA that the Agency does not certify as having no
significant impact, an IRFA must be prepared.15 The RFA spells out what IRFAs must contain,
and the statutory background section of this chapter sets forth the required elements.
As indicated in the statutory background section, several IRFA requirements will generally
be met by other portions of the proposed rulemaking preamble, so cross-references to those
portions will suffice. Other IRFA requirements will be fulfilled by summarizing and referencing
the information and analysis developed by the screening process. At the same time, a critical
IRFA element typically will not be covered by other portions of the rulemaking preamble or the
l5In preparing an IRFA or FRFA, the program office need not and should not attempt to
establish or "certify" that the proposed or final rule will have a significant impact on a substantial
number of small entities. The RFA requires an agency to make a finding of insignificance where it
does not prepare an IRFA or FRFA; the RFA does not require an agency to make a finding of
"significance" where it prepares an IRFA or FRFA. Put another way, where an agency prepares
an IRFA or FRFA, it need not characterize the impact of the rule, only analyze it.
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screening analysis. For that element, the Agency must identify and describe "any significant
alternatives to the proposed rule which accomplish the stated objectives of applicable statutes and
which minimize any significant economic impact of the proposed rule on small entities." The RFA
lists examples of "significant alternatives" that agencies should explore and discuss in the IRFA.
This portion of the IRFA is not primarily an exercise in economic analysis but one of program
design and scope. Program offices should therefore anticipate that policy-making staff and
officials will have a large role in the preparation of this section.
The IRFA should be summarized in the Regulatory Flexibility section of the proposed
rule's preamble. The summary of the IRFA should note in particular the ways in which the
Agency designed the proposed rule to reduce burdens on small entities. The full IRFA should be
placed in the rulemaking docket and the preamble summary should indicate where the IRFA can
be found.
Besides summarizing the IRFA. the Regulatory Flexibility section of the preamble should
also describe or summarize the actions the Agency took to involve small entities in the rule's
development, including outreach to small entity stakeholders and convening of a small business
advocacy review panel. Including this information in the proposed rule's preamble will simplify
preparation of the report the Agency must prepare for Congress and the General Accounting
Office on the final rule.
C. Final Regulatory Flexibility Analysis
For any final rule subject to the RFA that the Agency does not certify as having no
significant impact, a FRFA must be prepared. The RFA spells out what FRFAs must contain, and
SBREFA's amendments of the RFA strengthened several of the analytical elements of a FRFA.
The statutory background section of this guidance sets forth the required elements of a FRFA.
As indicated in the statutory background section, several requirements for a FRFA will
generally be met by other portions of the final rulemaking preamble, so cross-references to those
portions will suffice. Other FRFA requirements will be fulfilled by summarizing and referencing
the information and analysis developed by the screening process. To the extent that the final rule
does not differ from the proposed rule and the Agency obtained little or no additional information
relevant to the regulatory flexibility analysis of the rule, the FRFA can rely on cross-references to
still-current sections of the IRFA.
Similar to the APA requirement to respond to comments on a proposed rule, the RFA
requires that a FRFA summarize the significant issues raised by public'comments on the ERFA,
summarize the agency's assessment of such issues and describe any changes the agency made in
response to the comments. To the extent that the program office prepares for a rule a single
response-to-comments document that fulfills the requirements for a FRFA, it may rely on and
cross-reference that document in the FRFA.
As with the IRFA, probably the most critical component of the FRFA is the requirement
that an agency explain the "factual, policy and legal reasons" it selected the regulatory approach
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promulgated in the final rule and why it rejected "each one of the other significant alternatives to
the rule considered by the agency which affect the impact on small entities." While the RFA does
not require that an agency necessarily minimize regulatory burdens on small entities, it does
require that the agency describe the "steps the agency has taken to minimize the significant
economic impact on small entities consistent with the stated objectives of applicable statutes."
Both the requirements to explain the agency's choice of regulatory approach and describe what
the agency has done to minimize any significant impact make it incumbent on the Agency to
carefully consider ways of reducing significant impacts on small entities in reaching final decisions
on a rule and to document that consideration. To the extent that both requirements are met by the
main body of the preamble of the final rule, the FRFA may cross-reference it.
The FRFA should be summarized in the Regulatory Flexibility section of the final rule's
preamble. The summary of the FRFA should note in particular the ways in which the Agency
reduced the impact of the final rule on small entities to the extent feasible. The full FRFA must be
placed in the rulemaking docket and the preamble summary should indicate where the FRFA can
be found.
Besides summarizing the FRFA, the Regulatory Flexibility section of the final rule's
preamble should describe the actions the Agency took to ensure that small entities had a
meaningful opportunity to comment on the rule. That section should also reference the
counterpart section of the proposed rule's preamble for a description of the Small Business
Advocacy Review Panel convened for the rule (if applicable). Including this information and
reference regarding the Agency's outreach efforts in the final rule's preamble will facilitate
preparation of the report the Agency must prepare for submitting the mle to Congress and the
General Accounting Office under the congressional review provisions of SBREFA.
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Chapter 2
Identifying Small Entity Representatives
Section
Subject
Page
L
Introduction
1
n.
Statutory Background
1
III.
Coordinating Organization
2
IV.
Recommended Actions
2
V.
Points of Contact
4
I. INTRODUCTION
The Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) amended
the Regulatory Flexibility Act (RFA) to bolster the RFA's requirements that agencies ensure that
small entities (i.e., small businesses, small governments and small nonprofit organizations) have a
meaningful opportunity to participate in the development of rules that will have a significant
economic impact on a substantial number of small entities. Detailed below is a strategy outlining
how program offices in EPA can identify representatives of small entities that may be affected by
Agency rulemakings. In particular, the strategy describes the respective roles of the program
offices and the Small Business Ombudsman Program (SBOP), the Office of Regional Operations
and State/Local Relations' (OROSLER's) State/Local Relations Division, and the Office of
Communications, Education and Public Affairs' (OCEPA's) Public Liaison Division in
developing, distributing and coordinating lists of potential small entity "contacts."
D. STATUTORY BACKGROUND
As explained in detail in Chapter 1, the RFA has long required that an agency prepare a
regulatory flexibility analysis for any notice-and-comment rule, unless the agency certifies that the
rule will not have a significant economic impact on a substantial number of small entities. The
RFA has also required that an agency "assure that small entities have been given an opportunity to
participate in the rulemaking process" for any rule "which will have a significant economic impact
on a substantial number of small entities" (current RFA section 609(a)). Any rule requiring a
regulatory flexibility analysis thus requires agency outreach efforts, as well. The agency is to
assure small entity participation through the "reasonable use of techniques such as" those listed in
RFA section 609(a) as amended by SBREFA. The list includes:
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February 5,1997 -- 31
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use of computer networks to solicit and receive comments;
publication of the notice of proposed rulemaking in publications likely to be obtained by
small entities;
direct notification of interested small entities;
• conduct of open conferences or public hearings concerning the rule for small entities;
inclusion in an advance notice of proposed rulemaking, if issued, of a statement that the
proposed rule may have a significant economic effect on a substantial number of small
entities; and
the adoption or modification of agency procedural rules to reduce the cost and complexity
of participation in the rulemaking for small entities.
SBREFA strengthened the RFA's outreach provisions in two principal ways. First, the
RFA now requires EPA to convene "Small Business Advocacy Review Panels" prior to proposing
a rule, unless the EPA certifies that the rule will not, if promulgated, have a significant economic
impact on a substantial number of small entities. As described in detail in Chapter 3, the panels
are required to consult with representatives of small entities that will be subject to the rule.
Second, the amended RFA allows small entities to sue agencies in court for failure to comply with
specified RFA provisions, including section 609(a), which, as noted above, requires agencies to
"assure" that small entities have an opportunity to participate in rulemakings that will have a
significant economic impact on a substantial number of small entities.
m. COORDINATING ORGANIZATION
EPA's SBO, located in OPPE's Office of Regulatory Management and Information
(ORMI), will coordinate and provide primary support and assistance to the program offices at
EPA Headquarters in their outreach activities to small entities under the RFA as amended by
SBREFA. Additional support and assistance will be available from OROSLR's State/Local
Relations Division and the OCEPA's Public Liaison Division.
Assistance will include supporting the distribution of information on the SBREFA, the
RFA as amended and relevant issues to small entity contacts, as well as helping to coordinate and
maintain a comprehensive list of small entity contacts for use by the individual program offices.
Points of contact and telephone numbers within EPA's SBO, OROSLR, and OCEPA are
provided below.
IV. RECOMMENDED ACTIONS
A. The SBO will distribute information on SBREFA to the individuals and organizations on
its small entities contact list. SBO stays in active communication with these contacts on
an ongoing basis.
The SBO maintains and continually updates a master list of key small entity contacts,
which will be made accessible to the program offices through the EPA computer network.
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• National small entity trade association executives and contact persons
Contacts for the State Section 507 Program, including the Small Business
Ombudsman, Small Business Assistance Program, and the Compliance Advisory
Panels
• EPA Regional Small Business Liaisons
B. The EPA SBO will communicate with the Small Business Administration (SBA) to review
their lists of contacts, and revise such lists, as appropriate, to ensure they are consistent.
In addition, the SBO will coordinate review of this "revised" list with the EPA Program
Office Workgroup Chairpersons, or their designees, to supplement this list as needed,
based on the program offices historical and planned outreach efforts.
C. Through the efforts of the EPA SBO, the Section 507 Program State Small Business
Ombudsman and Technical Assistance Programs will be strongly encouraged to maintain a
similar contact list for their states, and to share this list with the EPA SBO on an as-
needed basis.
D. OROSLR and OCEPA will help support and provide assistance to the program offices in
their outreach to small entities. Assistance will include:
supporting the distribution of information on SBREFA and relevant issues to their
small entities contacts
helping to coordinate, maintain, and update a comprehensive list of small entities
contacts for use by the EPA program offices.
E. Each program office at EPA Headquarters Office should develop and maintain a
comprehensive contact list of small entity representatives, keyed to their program area of
responsibility. For example:
small business trade associations; and
• organizations representing townships, counties and municipalities, and decision-
making individuals within these organizations (public and private non-profit)
This contact list should be utilized to help identify knowledgeable individuals who may
serve as small entity contacts for Agency rulemakings affecting small entities.
F. For any rule for which the Agency prepares a regulatory flexibility analysis (see Chapter
1), the program office responsible for developing the rule should keep a record of their
outreach efforts and include that record in the rulemaking docket by the time the rule is
promulgated, for purposes of judicial review.
G. Each program office should maintain a list to track their regulatoiy actions which will, or
are likely to, require a regulatory flexibility analysis under the RFA. The list should
include at least the items listed below.
Title of Action
SAN No.
• Level of Action/Tier;
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Name, Telephone/Fax Nos. of Principal Contact
• Deadlines (proposed and final)
• Current Schedule (proposed and final)
SIC Codes/Small Entities impacted
• Small Entity Rep(s); Name(s), Organization(s), and Phone/Fax No(s)
V. POINTS OF CONTACT
A. The primary point of contact is the Small Business Ombudsman Program.
EPA Small Business Ombudsman Program
Karen V. Brown, EPA Small Business Ombudsman
telephone: (703) 305-5938, fax: (703) 305-6442
Individual
Telephone Number
Media/Regulatory Speciality
Robert Rose
(703)305-5511
Clean Air Act, and other
James Malcolm
(703) 305-7015
Toxic Substances and Hazardous Wastes
Larry Tessier
(703) 305-7645
Asbestos, Radon, and Lead
Arnold Medbery
(703)305-5171
Clean Air Act, Water, Asbestos
Thomas Nakley
(703) 305-5046
Clean Water Act
B. Also providing guidance assistance and support in outreach to small entities under
SBREFA are the two programs involved with small governments and small communities,
and non-profit organizations:
Small Governments and Small Communities
Michele Hiller, Director
State/Local Relations Division (1502)
Office of Regional Operations and State/Local Relations (OROSLR)
(202) 260-3870
Non-profit Organizations
Amy Dewey, Acting Director
Public Liaison Division (1702)
Office of Communications, Education and Public Affairs (OCEPA)
(202) 260-4454
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Chanter 3
Small Business Advocacy Review Panels
Section
Subject
Page
I.
Introduction
1
n.
Statutory Background
2
m.
Overview of Suggested Panel Process
4
IV.
Preliminary Notification
5
v.
Formal Notification
6
VI.
Panel Review
9
I. INTRODUCTION
As explained in detail in Chapter 1, SBREFA amended the RFA to, among other things,
require EPA to convene a "Small Business Advocacy Review Panel" for any proposed rule for
which the Agency prepares an initial regulatory flexibility analysis. The RFA requires that an
agency prepare an initial regulatory flexibility analysis for any proposed rule, unless the agency
certifies that the rule "will not, if promulgated, have a significant economic impact on a substantial
number of small entities." Accordingly, if the Agency does not certify a proposed rule under the
RFA, it must convene a Small Business Advocacy Review Panel. Although the statutory name
for the panel refers only to small business, panels are to solicit and consider the concerns of small
governmental jurisdictions and small nonprofit organizations, as well as small businesses,
depending on which types of "small entity" are affected by the rule.
This document sets forth a step-by-step approach to implementating the Small Business
Advocacy Review Panel requirement. While SBREFA establishes the basic outlines of the panel
process (see statutory background section below), it also leaves to agency discretion many details
of that process, including when to convene a panel prior to proposing a rule. EPA has exercised
that discretion to develop a suggested process that will typically involve small entity
representatives early in the rule's development when their comments and insights can inform the
Agency's thinking about fundamental issues of rule design and scope, as well as more specific
issues posed by the particular regulatory program at issue. In many respects, the suggested
guidance goes beyond what is legally required. At the same time, EPA recognizes the need for
flexibility in implementing this guidance. Many rulemakings subject to the panel requirement may
be so far along that the panel process must take place later in the rulemaking than this guidance
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suggests. The process is also new. EPA anticipates learning from its experience implementing
the process and revising this guidance as appropriate.
The suggested panel process is divided into several parts. It may not be necessaiy to
complete each part of the process if, during the course of rule development, it is determined that
the rule will not have a significant impact on a substantial number of small entities. However,
even where an action will not have a significant impact on a substantial number of small entities,
but will have an impact on one or more small entities, it is important that the Agency engage in
consultation with the relevant small entity community.
H. STATUTORY BACKGROUND
Since the RFA was enacted in 1980, section 609 has required agencies to facilitate small
entities' participation in rulemakings that will have a significant economic impact on a substantial
number of small entities (see Chapter 2 for further discussion of general outreach requirement).
With SBREFA, section 609 has been expanded to require EPA and the Occupational Health and
Safety Administration (OSHA) to convene Small Business Advocacy Review Panels to ensure
that small entity representatives are involved in the development of EPA and OSHA proposed
rules.
Under section 609(b) as added by SBREFA, EPA must convene a Small Business
Advocacy Review Panel for any rule for which the Agency prepares an initial regulatory flexibility
analysis. If EPA certifies that the proposed rule will not have a significant impact on a substantial
number of small entities, it need not convene a panel. (Section 609(c) authorizes EPA to convene
a panel for a rule that the Agency intends to certify, but that the Agency believes may have "a
greater than de minimis impact on substantial number of small entities.") Section 609(b) requires
that the panel process occur before publication of the initial regulatory flexibility analysis, which
must be published at the same time the proposed rule is published, except in cases of emergeny.
Accordingly, panels must generally be convened before the rule is proposed.
Section 609(b) establishes the following framework for the panel process:
For any rule subject to the panel requirement, the Agency is to notify the Chief Counsel
for Advocacy of the Small Business Administration (SBA) and provide the Chief Counsel
with information about the potential impact of the rule on small entities and the type of
small entities likely to be affected.
The Chief Counsel has 15 days from receiving notification of a rule to identify individuals
representative of the small entities likely to be affected by the rule.
EPA is to convene a review panel consisting only of full-time federal employees, including
representatives of the Agency office responsible for developing the rule, the Office of
Management and Budgets' Office of Information and Regulatoiy Affairs (OIRA), and the
SBA Chief Counsel for Advocacy.
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February 5,1997 -- 36
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• The panel is to review any material the Agency has prepared in connection with the RFA,
including any draft proposed rule, and to collect the advice and recommendations of small
entity representatives selected by the Agency, after consultation with the Chief Counsel
for Advocacy, on issues related to specified elements of the initial regulatory flexibility
anlysis for the proposed rule under development. The specified elements are:
• a description of, and where feasible, an estimate of the number of small entities to
which the proposed rule will apply;
• a description of projected reporting, recordkeeping and other compliance
requirements of the proposed rule, including an estimate of the classes of small
entities which willl be subject to the requirement and the type of professional skills
necessary for preparation of the record or report;
• an identification, to the extent practicable, of all relevant Federal rules which may
duplicate, overlap or conflict with the proposed rule, and
• a description of any significant alternatives to the proposed rule which accomplish
the stated objectives of applicable statutes and which minimize any significant
economic impact of the proposed rule on small entities (see Chapter 1 for
examples of potential alternatives).
Not later than 60 days after EPA convenes the panel, the panel is to report on the
comments of the small entity representatives and the panel's findings with regard to the
issues related to the initial regulatory flexibility analysis elements listed above. The panel
report is to be included in the rulemaking record.
• In light of the panel report, the Agency is to modify, where appropriate, the proposed rule,
the initial regulatory flexibility analysis or the decision on whether an initial analysis is
required.
The Chief Counsel for Advocacy may waive the panel requirement for a rule if the Chief
Counsel finds that convening a panel would not advance the effective participation of small
entities in the rulemaking process. (Note, however that the waiver applies only to the requirement
to convene a panel; it does not relieve the Ageny from notifying the Chief Counsel of the rule or
the Chief Counsel from identifying small entity representatives.) Factors the Chief Counsel is to
consider include the extent to which the agency has already conulted with small entity
representatives and taken their concerns into account; "special circumstances necessitating prompt
issuance of the rule;" and whether the panel process would provide the small entity
representatives involved in the process a competitive advantage over other small entities. Before
granting the waiver, the Chief Counsel must consult with OIRA and the small entity
representatives the Chief Counsel identified after receiving notification of the rule. The Chief
Counsel must also include a written explanation of the waiver decision in the rulemaking record.
Under SBREFA section 244(b), panels are to be chaired by a Small Business Advocacy
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February5, 1997-37
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Chairperson designated by the Adminstrator. The Chairperson is to be responsible for
implementing the review panel process and to act as permanent chair of the Agency's review
panels. Administrator Browner appointed Tom Kelly, Director of the Office of Regulatory
Planning and Management of OPPE, to serve as the Agency's first Small Business Advocacy
Chairperson.
m. OVERVIEW OF SUGGESTED PANEL PROCESS
The first steps of the process are actually designed to determine whether a panel must be
convened for a particular rule. As noted above, unless the Agency certifies that the rule will not
have a significant economic impact on a substantial number of small entities, a panel must be
convened. Accordingly, the program office responsible for the rule should identify the rule's
potential impact on small entities at soon as possible, and consider ways of structuring the rule to
avoid any undue burden on small entities. To the extent the program office is successful in
designing the rule to avoid any significant impact on a substantial number of small entities, a panel
need not be convened.
If the rule may have a significant impact on a substantial number of small entities, the
program office should proceed with the next steps of the panel process, which include identifying
and initiating discussions with representatives of small entities potentially affected by the rule, and
providing early, informal notification of the rule to the Chief Counsel for Advocacy through the
Agency's Small Business Advocacy Chairperson. (The Chief Counsel's Office may also be
helpful in identifying small entity representatives for early consultation.) This part of the process
should typically occur before the rule has been drafted, to make it easier for small entity
suggestions to be incorporated into the rule's design. Indeed, early discussions with small entity
representatives and the Chief Counsel's Office may bring to light other ways of structuring the
rule to avoid any significant impact on substantial numbers of small entities, in which case a panel
need not be convened.
If, on the other hand, such discussions or other information (including the screening
analysis described in Chapter 1) suggest that a panel should be convened, the program office,
through its Steering Committee Representative, should request that the Agency's Small Business
Advocacy Chairperson (SBAC) provide the Chief Counsel for Advocacy with formal notification
of the rule. Formal notification does not commit the Agency to convening a panel. The program
office may still learn as a result of further consultations with small entity representatives and the
Chief Counsel's Office or further analysis that the rule will not have a significant economic impact
on a substantial number of small entities, and thus that neither an initial regulator)' flexibility
analysis nor a panel is required.
After receiving the Chief Counsel's official suggestions for small entity representatives, the
program office should select the final slate of representatives to be contacted for the panel report.
(Presumably, the representatives will be the same as, or at least include, any of the small entity
representatives the program office has previously contacted.) The program office should then
collect the representatives' advice and recommendations for inclusion in the report (the small
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February 5,1997 -- 38
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entity representatives are not members of the panel itself). Typically, this stage of the process will
also take place before the rule is drafted, but an outline describing the important components of
the rule and any significant alternative approaches should be provided to the representatives.
To the extent the representatives' comments and any other information confirm that the
rule is likely to have impacts warranting preparation of an initial regulatory flexibility analysis, the
program office should prepare a draft panel report containing the representatives' comments and
the findings required by section 609(b). The SBAC will then convene the panel by sending the
draft panel report to the panel members for their review. The panel members will confer with one
another and the small entity representatives as needed to prepare a final report. The final report
will be made available to the public and considered by Agency managers in making final decisions
about the the scope and terms of the proposed rule.
Waivers of the panel requirement will only be considered in exceptional circumstances
(e.g., when a rule is subject to a near-term legal deadline) or where the Agency has already
engaged in extensive outreach to representatives of potentially affected small entities. All waiver
requests will be submitted through the Agency SBAC.
IV. PRELIMINARY NOTIFICATION
[NOTE: An important resource for the panel process will be the lists of potential small
entity representatives that Program Offices develop under Chapter 2 to support their
rulemaking activities generally. Such lists will identify sources of potential representatives
of small entities actually or potentially affected by the Program Office's regulatory
programs (e.g., small business trade associations, small governmental jurisdictions and
small nonprofit organizations).]
A. For each rule, or group of related rules, the Program Office identifies as early as
possible what types of small entities are likely to be adversely affected by the rule,
and what those adverse impacts are apt to be (to the extent feasible at this early
stage).
If it appears that the rule most likely will not have a significant adverse impact on a
substantial number of small entities, the Program Office should nonetheless
conduct whatever outreach is necessary to address the small-entity impacts that do
exist and to gather the information necessary for a certification of "no significant
impact". If the outreach reveals that the rule may in fact have a significant impact
on a substantial number of small entities, the Program Office should proceed with
the process outlined below.
If it appears that the rule may have a significant adverse impact on a substantial
number of small entities, the Program Office should consider whether and how the
rule could be structured to avoid significant impacts on a substantial number of
small entities. For this purpose, the Program Office should consider consulting
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February 5,1997 -- 39
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with the SBAC, EPA's Small Business Ombudsman (SBO) or other relevant
Agency office (e.g., Office of Regional Operations and State/Local Relations
(OROSLER)) and appropriate small entity representatives identified by means of
the lists developed under Chapter 2 or by the SBAC, SBO or OROSLER. If it
continues to appear that the rule may have significant impacts, proceed with the
steps outlined below.
B. To the extent it appears that the rule may have significant impacts on small entities,
the Program Office's Steering Committee Representative (SC Rep) requests that the
Agency SBAC give the SBA Chief Counsel for Advocacy (hereinafter "SBA Chief
Counsel") preliminary notification that EPA is developing a rule that may have
significant small entity impacts, and that a formal request to identify small entity
representatives is likely.16
At this time, the Agency SBAC will also provide the SBA Chief Counsel with a
Program Office staff contact (normally this will be the workgroup chair), and will
ask the SBA Chief Counsel for an SBA staff contact.
Once this preliminary notification has been made, the Program Office staff is free
to confer directly with SBA staff regarding appropriate small entity
representatives.
V. FORMAL NOTIFICATION
A. To the extent it continues to appear that the rule may have significant impacts on
small entities, the Program Office SC Rep requests that the Agency SBAC provide
formal, written notification to the SBA Chief Counsel that a rule is being developed
that may have a significant adverse impact on a substantial number of small entities.
Formal notification triggers the Chief Counsel's obligation to identity small entity
representatives with 15 days of the notification's receipt.
• The Program Office should provide the SBAC with the following information for
purposes of the notification:
16If the Program Office is interested in pursuing a waiver of the panel requirement for the rule,
the Program Office SC Rep should consult with the Agency SBAC, who will submit any waiver
requests to the SBA Chief Counsel. If the Agency decides to request a waiver, the Program
Office and SBAC will still need to complete the formal notification step of the process as outlined
below. The SBAC will also informally notify the SBA Chief Counsel of the Agency's intent to
request a waiver before formally requesting it. If the Chief Counsel grants the waiver, the
Program Office may skip the remaining steps of the panel process, but should conduct as much
outreach as time permits or as appropriate under the circumstances.
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* a description of the problem the rule is trying to solve;
* a list of the types of small entities likely to be affecte;
* a list of potential small-entity representatives already identified, if any; and
any other material that has already been shared with small-entity
representatives.
The notice will emphasize that the request to identify small entity representatives
does not represent an EPA finding that the rule will have a significant impact
on a substantial number of small entities, nor does it commit EPA to
preparing a formal regulatory flexibility analysis or convening a formal
advocacy review panel. The small entity representatives can provide input to
help the Agency ultimately determine if either of these activities are actually
required, and offer ideas to help minimize the impact to the point that the
regulatory flexibility analysis and panel requirements are no longer triggered.
B. Through the Agency SBAC, the Program Office receives a list of suggested small
entity representatives from the SBA Chief Counsel and, after appropriate
consultation with SBA staff, decides on the official list of small entity representatives
While the RFA authorizes the Agency to select the small entity representatives for
the panel process, the small entity representatives identified by the SBA Chief
Counsel generally should be included. Before any SBA-suggested representative is
not included on the official list, the Program Office SC Rep should consult with the
Agency SBAC.
The Program Office can include on the official list entities not suggested by the
Chief Counsel, but it would be wise to inform SBA staff so they will know who all
the representatives are. If possible, it is desirable to reach a consensus with the
Chief Counsel on the universe of small-entity representatives.
C. The Program Office conducts outreach to official small entity representatives.
• The small entity representatives must be provided with enough information about
the rule for them to be able to judge the likely impacts of the rulemaking on small
entities. Outreach materials could (but need not) include any draft of the rule or
preamble text, but such materials may not be available because the panel process
will normally be conducted early in the rulemaking, when it is most effective.
Each small entity representative must be solicited for information, advice and
recommendations on issues relating to the elements of an initial regulatory
flexibility analysis listed in the "Statutory Background" section above.17
17Small entity representatives can be consulted individually, particularly since the RFA requires
that the panel collect the advice and recommendations of "each" representative. If, however, the
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The small-entity representatives should be encouraged to put their comments and
suggestions in writing.
• Program staff should keep detailed records of the small entity reprsentatives'
participation for later use in developing the rule and any regulatory flexibility
analysis or certification for the rule (since the outreach process may lead to, and
help substantiate, a determination that the rule will not have a significant impact on
a substantial number of small entities), and as documentation of the Agency's
outreach efforts.
Any materials provided to, or received from, small entity representatives should be
included in the docket for the rulemaking at the earliest practicable time so that all
parties interested in the rulemaking will have access to those materials.
If the outreach process indicates that there will be "no significant adverse impact
on a substantial number of small entities", the Program Office should develop a
formal certification for the rule and skip the remaining steps of the panel process.
(Refer to Chapter 3: Analytical Requirements of the Regulatory Flexibility Act
for further guidance on preparing the certification statement.) Otherwise, proceed
with the remaining steps of the process.
D. The Program Office prepares a draft report for the Panel.
The draft report should include the following:
a description of the outreach effort conducted by the Program Office;
a summary of the information, comments and advice received from each
small entity representative in response to the outreach solicitation described
above;
draft findings as to issues related to the elements of the initial regulatory
flexibility analysis listed in the "Statutory Background" section; and
as an appendix, copies of the written comments submitted by the small
entity representatives to the Agency.
The draft report will not contain a discussion of the regulatory option or options
actually selected by the Agency, since the report will normally be prepared before
such decisions are made, in order to inform those decisions.
VI. PANEL REVIEW
program office chooses to consult with small entity representatives as a group or in a group
setting, issues under the Federal Advisory Committee Act (FACA) may be raised and OGC
should be consulted.
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A. At the request of the Program Office SC Rep, the Agency SBAC Convenes the
Advocacy Review Panel
The panel will be chaired by the Agency SBAC, with the Workgroup Chair (or
designated alternate) for the rule serving as the Panel Co-Chair. The other two
panel members will be a representative of the SBA Chief Counsel and a
representative of OMB/OIRA.
The panel will be convened upon distribution of the draft panel report (described
above) by the Agency SBAC to the panel members. The draft report will be used
as a vehicle for initiating review.
The panel is to review any RFA-related materials and any draft proposed rule, if
those materials have been prepared by the time the panel convenes. Since panels
will typically convene before a draft rule is prepared, the panel members should be
provided with an outline describing the important components of the rule and any
significant regulatoiy alternatives identified by the Agency.
The product of the panel will be a final report based on its deliberations. The panel
need not reach consensus in order to issue a final report; the views of each of the
members can simply be reflected in that report.
The final report will not contain a discussion of the option or options actually
selected by the Agency, since the report will normally be prepared before such
decisions are made, in order to inform those decisions.
• The panel has 60 days from the date it is convened to produce its official final
report. The panel is not required to take the full 60 days, and should issue its
report as soon as possible, to provide timely input to the development of the
proposed rule.
It is expected that the panel process will normally be concluded well in advance of
Workgroup Closure (or equivalent stage for Tier 3 rules), in order to be most
useful to the development of the proposed rule.
B. The Agency considers the results of the Panel report as it develops the proposed rule
and Initial Regulatory Flexibility Analysis
• The Panel report will be considered by the Agency in selecting proposed
regulatory options to address small entity concerns.
The panel report should be placed in the docket for the rulemaking so that it will
be accessible to all parties interested in the rulemaking.
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After the Panel report is issued, the Agency should generally continue its outreach
efforts as the proposed rule is prepared.
The results of the outreach and panel process, and their role in the Agency's
deliberations, should be documented in the initial regulatory flexibility analysis
prepared for the rule and briefly summarized in the Regulatory Flexibility Section
of the preamble of the proposed rule.
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Chapter 4
Development and Distrihution of SBREFA Compliance Guides
Section Subject Page
I. EPA's Approach to Compliance Guides 1
n. SBREFA Compliance Guide Template 6
L EPA'S APPROACH TO COMPLIANCE GUIDES
A. What does SBREFA require?
1. When the Agency prepares a regulatory flexibility analysis for a final rule, SBREFA
Section 212 also requires the Agency to:
a. designate one or more publications regarding such a rule or group of rules as small
entity compliance guides;
b. explain in the guide actions a small entity must take to comply with a rule or group
of rules; and
c. distribute the guides to small entities through "comprehensive sources of
information."
2. While compliance guides are not themselves judicially reviewable, they may be considered
as evidence of the reasonableness or appropriateness of any penalties or damages in any
civil or administrative action against a small entity. Accordingly, the statute gives us broad
discretion with regard to implementation of these requirements for designation,
development and distribution of the guides. The sections that follow describe how the
Agency has chosen to exercise this discretion, the specifics of which may not necessarily
be required by SBREFA. As we gain experience, we may issue additional guidance.
B. What is the goal in writing a compliance guide?
The primary goal of the guide is to help small entities- whether they are small businesses,
communities or non-profits- to comply with the regulation. You should therefore write
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your guide with your audience in mind and recognize that this segment of our regulated
community may have trouble with standard government writing styles. We suggest that
you write in plain and simple language insofar as possible. (While small entities are the
primary audience for the guides, some of the compliance information may also be
applicable to large entities and you may choose to present these similarities/differences as
you develop your guide).
C. Who participates in the development of the Guides?
1. The lead rule-writing office is responsible for developing the rule-specific compliance
guide as part of the rulemaking process.
2. The regulatory development workgroup, as well as representatives from OECA, OGC,
OSBO, OPPT's Pollution Prevention Division, and regional offices can also provide
assistance/support, or develop sections of the guide, as appropriate. If your regulatory
development workgroup is not represented by the appropriate offices, you should work
through your Steering Committee representative to identify them.
3. Small entity representatives should typically be involved in reviewing the draft compliance
guide after the rule is promulgated so that we have the benefit of their comments and
advice in preparing the final version of the guide.
a. With the exception stated below (b.), draft compliance guides should not be
released to outside parties prior to the rule's promulgation.
b. In those unusual circumstances where the outline of the compliance guide is clear
to the lead program at the pre-proposal stage, then they may seek review and
feedback from small entity stakeholders at that stage.
c. You should share the draft compliance guide and solicit comment from small entity
stakeholders after promulgation, but will need to balance such review with a
commensurate concern for timely issuance of the guide.
D. When should I begin developing the guide and when will it need to be completed?
1. You should integrate development of the guide into the rulemaking process. Generally,
begin work on your guide as soon as you have enough information to do so. This point
will vary from rule to rule; sometimes it is clear even before the rule is proposed, and in
other cases not enough is known until just prior to final promulgation. In either event,
you should not schedule additional time during the rulemaking process for
development of the guide. The Agency will not ask for extension of any court
deadlines in order to complete compliance guides.
2. Keep in mind that the goal is to make the guide available after promulgation in sufficient
time for it to be of practical help to small entities in evaluating and implementing their
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compliance options before the compliance deadline. You should make every effort to
issue the guide within two months of the promulgation of the final rule.
E. What are the other timing considerations in developing and issuing the Guide?
1. The constraints on outside participation during the final rule phase in development of the
Guide leave a relatively short time after promulgation to both take comment from small
entity stakeholders and issue the final Guide. This makes advance planning and drafting
essential.
Tip: Identify your small entity reviewers early in the process. You should
consider using those small entity representatives who participated in the
development of the proposed rule.
2. If the issuance of your guide may be delayed beyond a month or two, you should issue a
Fact Sheet or other brief description of the rule as an interim measure.
3. If your rule has a distant compliance date (e.g., two years or more), you may want to re-
issue the Guide closer to the compliance date.
F. What sorts of questions should I ask my small entity reviewers?
Some suggestions include:
Is the format appropriate?
Is the guide clear and easy to read and understand?
Does the guide accurately describe the rule as published?
Is the guide useful in planning for compliance?
G. How do I document development of the Guide?
1. If you are doing an Analytic Blueprint you should include plans for developing the guide,
including a time line, and the resources needed. If there is no Blueprint, you should
integrate it into your action or work plan.
2. When you submit your final rule to the Administrator for signature, you must also submit
a schedule for development and completion of the compliance guide.
3. Include your distribution strategy for the guide in the Communications Plan. This is in
addition to your notification plan for the announcement of the rule.
4. Ultimately, the lead office will input information related to the development of the guide
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into OPPE's Regulatory Information System, which is currently under development. Lead
offices may also develop internal methods for tracking the development of the guides.
H. What internal Agency concurrence do I need for the Guide and how do I get it?
You need concurrence from both OGC and OECA. Normally, you will ask members of
your workgroup from these offices to assure that appropriate levels of management in
their offices approve the draft. (OGC and OECA will determine the level of concurrence
they need within their offices). If you don't have OGC and/or OECA members on your
workgroup, contact your Steering Committee representative who will obtain/identify
contacts for you.
I. When the Guide is in final form, who can help me with distribution?
1. In addition to internal office distribution mechanisms, you should provide Guides to the
Office of the Small Business Ombudsman, the Office of Regional and State/Local
Relations, the Office of Communications, Education and Public Affairs. These offices will
distribute the Guide to their small entity contacts. (You should assure, to the extent it is
feasible, that these offices do not have duplicate distribution lists.)
2. Distribution must be consistent with the recommendations of the Enhanced Public Access
Task Force.
3. Other small business assistance providers include:
State Technical Assistance Programs for Pollution Prevention
State Small Business Assistance Programs
• Small Business Development Centers
Manufacturing Extension Partnership Centers funded by NIST
Northeast Waste Management Officials Association
Illinois Hazardous Waste Research and Information Center
• Waste Reduction Resource Center for the Southeast, and
the Small Business Administration, USDA and OSHA
J. How do we ensure that guides are kept up to date?
1. As a statutory matter, compliance guides may have evidentiary uses in litigation so it is
important that guides be reviewed and revised as needed. It is the responsibility of the
lead office to assure compliance guides are kept current. There is one case in which you
must review an existing guide and several others when revisions may be desirable:
a. Because we must generally review within ten years of promulgation any final rules
for which we conducted regulatory flexibility analyses, the guide will be reviewed
concurrently with the rule on or before the 10-year anniversary.
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b. Other circumstances which may occasion revisions include:
• Changes in the rule which affect compliance
Comments from the public suggesting revisions, or from OECA based on
their experience in enforcing the regulation. (See Appendix, Section C for
instructions on soliciting customer feedback).
Litigation citing a guide as a reason to challenge the appropriateness of
proposed penalties.
2. You should indicate in every guide that there may be subsequent revisions to the guide
and include information about obtaining the revised guide. Place the most current guide in
the appropriate docket, on a special section in EPA's internet page, or other electronic
bulletin boards.
Note: OECA may, at a later date, develop sector-specific, multimedia guides which would
integrate rule-specific guides. OECA will notify program offices if and when it undertakes this
project and will coordinate development of such guides through the Agency's Regulatoiy
Steering Committee.
4--5
February 5, 1997 -- 49
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n. TEMPLATE FOR COMPLIANCE GUIDES
An Agency workgroup has developed the following template to help you in structuring
your compliance guide, and you should use it in accordance with the guidance given earlier in the
chapter. While SBREFA does not mandate a particular format, we urge you to adopt it so that
we may have general consistency across the Agency and to assure that significant compliance
issues are adequately covered. If your rule does not, for some reason, lend itself to this template,
you may use it as a checklist to ensure that all potentially relevant compliance issues are covered.
The template is organized as follows:
Non-italicized text indicates sections which should normally be included in the compliance
guide.
• We have also included standard language which you may choose to use if it is appropriate
to your rule, and it is presented in italics. You should adapt this standard language to the
specifics of your rule as necessary.
Program offices have lead responsibility unless otherwise designated in bold.
Please make your best effort to write your guide in plain language using the guidance at
http://www.blm.gov/nhp/NPR/plaineng.html.
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February 5.1997 - 50
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[Insert standard publication header, including the date and appropriate publication number]
SMALL ENTITY COMPLIANCE GUIDE
[insert title of rule or program...]
I. INTRODUCTION
This document is published by the Environmental Protection Agency (EPA) as our
official compliance guide for small entities, as required by the Small Business Regulatory
Enforcement Fairness Act of1996. Before you begin using the guide you should know that the
information in this guide was compiled and published on [INSERT PUBLICATION DATE],
EPA is continually improving and upgrading its rules, policies, compliance programs, and
outreach efforts. You can determine whether EPA has revised or supplemented the information
in this guide by calling [INSERT HOTLINE NUMBER OR INTERNET ADDRESS].
A. Who Should Use this Guide?
1. To the extent possible, the guide should identify all the types/categories of small entities
that will be subject to the rule's requirements. Bear in mind that other entities may be
indirectly affected but may not be required to comply. This section needs to make this
distinction clear to the reader.
Tip: Use the compliance table from the "Summaiy" section of your
rule's preamble to convey this information. Be sure to modify it if
necessary to target small entities.
2. In many cases, the guide will also be useful to larger entities subject to the rule. You may
wish to point out any similarities or differences at this stage but you should not go into
great detail on this subject.
B. What does the Guide Cover?
C. How do I use the Guide?
D. How do I Obtain a Complete Copy of the Rule?
List an 800 number, Federal Register citation or the Government Information Locator
Service.
H. WHAT DOES THE REGULATION REQUIRE?
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Februarys, 1997-51
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A. What environmental/human health issue(s) does this rule address and why it is
important?
B. Summary of the New Regulation
1. Using plain English, summarize the rule in a narrative format. This should be a simplified
adaptation of the issues you discussed in the rule's preamble.
2. Additionally, provide a visual description (e.g., chart or flowchart) of the rule's
requirements as it applies to small entity operations or processes. "Operations" include
traditional facility-based operations and non-traditional based operations such as farms,
communities or schools.
C. Compliance Timetable
Identify in easy-to-read format (e.g., flowchart, time line, timetable) compliance dates for
notifications and other requirements.
D. How Does this Regulation Relate to Other Federal, State, and Local Requirements?
1. Each Program should develop specific template language concerning program delegations
and relationships to other requirements generally, or, where appropriate, referring back
to general provisions applicable to all regulations in a subgroup to which the new
regulation belongs (e.g., New Source Performance Standards under the Clean Air Act).
Programs have the flexibility to expand this section as appropriate, to address this issue
more specifically.
2. Meanwhile, here is suggested template language which may be appropriate in many cases:
This compliance guide explains your federal compliance
obligations with respect to rule. There may be other state or
local requirements which apply to you which are different from, or
more stringent than, the federal requirements. For example, some
environmental statutes allow EPA to delegate environmental
programs to a state. The state may then promulgate its own rules
which may supersede the federal requirements. For more
information on the rules that apply in your State, please contact
[INSERT CONTACT POINT].
ill. STEP-BY-STEP PROCEDURES FOR COMPLIANCE WITH THIS RULE
This is where you break down the rule into discrete subject areas using a step-by-step,
4—8 February5,1997 - 52
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question/answer approach. Questions in this section will depend on the particular rule. All the
following questions are EXAMPLES of the types of questions that may be appropriate to include.
A. How can I tell if I am subject to this rule?
B. What requirements am I subject to?
C. When do I need to comply ? (elaborate on flowchart, as appropriate)
D. What do I need to do to comply?
Be sure to address such questions as:
• How does this rule affect my existing permit?
How much will it cost to comply with this rule?
E. What, when and how must I monitor or test?
F. What records do I need to keep and for how long?
Include sample forms and calculations.
G. What, when and to whom must I report?
Include sample forms.
H. How do I minimize harm if I think I am out of compliance? (Program lead/OECA
support)
I. Where do I go for help?
Give information on federal, State and local contacts, Agency hotlines, or State Small
Business Assistance Program contacts.
J. What is pollution prevention and how can it affect my operations? (OPPT lead)
1. Discuss pollution prevention and its benefits, including how it may be used to help a
facility/operation save money and/or possibly avoid regulation.
2. To the extent that there are other pollution prevention opportunities, including those
which may make good business sense or could exempt a small entity from certain
requirements, the program, with support from OPPT, has the option to expand this section
and include this information.
K. Are there opportunities for flexibility or waivers ?
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If this is applicable in a given rule, these opportunities can be.highlighted here. For
example, there are circumstances in which the Safe Drinking Water Act allows temporary
variances or exemptions from maximum contaminant levels.
IV. OPTIONAL QUESTIONS AND ANSWERS ABOUT
FACILITY/OPERATIONS/PROCESSES
Here you want to anticipate questions of potential concern to the regulated community,
including how the rule fits into the overall regulatoiy program. Questions will depend on the
rule; the questions below are only EXAMPLES. [Tip: A self-audit checklist can be very helpful
to small entities and may be used alone or in conjunction with a question and answer format.]
A. How do I conduct a self-audit of my facility/firm/operation to help me evaluate
whether I am in compliance with this rule?
Provide Self-Audit Checklist (Program/OECA)
B. What are the implications of this rule for my existing permits?
Adapt this to your particular rule or program.
C. How Does this Rule Change How I Handle/ Store Wastes? (if guide were written for
RCRA rule)
V. THE COMPLIANCE ASSURANCE PROCESS (OECA LEAD)
This section should describe in clear, non-threatening terms why compliance is important,
the potential consequences of violating the law, and how the entity can work with us to identify
and correct its compliance problems, often without the need for a formal enforcement action or
penalty.
Draft this section to ensure that small entities understand:
how EPA determines compliance
• what they must do if they discover a violation, and
the available compliance assistance/enforcement options.
Include only information that is directly relevant to the rule. You may attach more
detailed information, or information you feel may be helpful, in an Appendix.
A. How Is My Operation's Compliance With Environmental Requirements
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Februarys, 1997 --54
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Determined?
Discuss compliance assistance, inspections, self-monitoring and the role of citizens.
B. If I Discover a Violation, How Can I Work With The Agency to Correct It?
Discuss compliance incentives policies: Small Communities Policy, Policy on Compliance
Incentives for Small Businesses, Self-Disclosure Policy.
C. If the Agency Discovers a Violation, What Might Be Its Response?
To maximize compliance, EPA implements a balanced program of
compliance assistance, compliance incentives, and traditional law enforcement.
EPA knows that small businesses which must comply with complicated new statutes
or rules often want to do the right thing, but may lack the requisite knowledge,
resources, or skills. Compliance assistance information and technical advice helps
small businesses to understand and meet their environmental obligations.
Compliance incentives, such as our Small Business Policy, encourage persons to
voluntarily discover, disclose, and correct violations before they 're identified by the
government. EPA 's strong law enforcement program protects all of us by targeting
persons who neither comply nor cooperate to address their problems.
EPA uses a variety of methods to determine whether businesses are
complying, including inspecting facilities, reviewing records and reports, and
responding to citizen complaints. If we learn a person is violating the law, EPA (or
a State, if the program is delegated) mayfile an enforcement action seeking penalties
of up to $fINSERT STATUTORY MAXIMUM AMOUNT], per violation, per day.
The proposed penalty in a given case will depend on many factors, including the
number, length, and severity of the violations, the economic benefit obtained by the
violator, and its ability to pay. EPA has polices in place to ensure penalties are
calculated fairly. These policies are available to the public. In addition, any
company charged with a violation has the right to contest EPA's allegations and
proposed penalty before an impartial judge or jury.
In summary, EPA recognizes that we can achieve the greatest possible
protection by encouraging small businesses to work with us to discover, disclose, and
correct violations. That's why we've issued self-disclosure, small business, and
small community policies to eliminate or reduce penalties for small and large entities
which cooperate with EPA to address compliance problems. In addition, we've
established compliance assistance centers to serve over a million small businesses.
For more information on these and other EPA programs for small businesses, please
contact [INSERTPOINT OF CONTACT].
D. What is the legal status of this guide?
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February 5.1997 --55
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A judge can look at a compliance guide in determining what penalty is
appropriate and reasonable, although the content of the guide cannot otherwise be
reviewed by the court.
In this Compliance Guide, we have tried to make clear what you must do to
comply with the applicable law and regulation. This is the minimum required by
SBREFA. You'll notice, however, that here and there we have also included
suggestions for alternative approaches that may make compliance easier and
possibly even reduce, costs. We hope you find this presentation of regulatory
requirements useful and the additional information helpful in reaching and
maintaining compliance.
APPENDIX
A. Glossary of Environmental Terms .
Define terms which are relevant to the rule but which may be too basic to be defined in
the rule itself. For example, "permit," "pollution prevention,1' "process."
B. Where to Obtain More Information
This section gives supplemental information. Examples might include other existing
quality compliance guidance, pollution prevention guidance, pollution prevention case
studies, other media contacts, trade associations, or university assistance programs.
C. Questionnaire - How Useful Was This Guide?
Each guide should contain a brief questionnaire to solicit feedback from users as to the
usefulness, readability, and improvements needed for the guide. Questionnaires will be
returned to OPPE/RMD and then forwarded to the Agency contact. Please use the
following page:
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February 5,1997 - 56
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Date:
Title of Rule or Program:
Name of Commenter (optional): ;
Please take a moment to let us know if you found this guide useful by answering the
following questions. Thank you, your feedback is important to us.
1. I could easily understand what requirements I must meet.
2. The guide is written in understandable language.
3. The guide helped me understand the steps I must take to comply with the rule.
4. If you have suggestions to improve the guide, please indicate below:
PleaseJoldon dashed line^affixpostag^andrenmbjonail^Thank-you.
Affix
Postage
Here
U.S. EPA
Regulatory Management Division
Mail Code 2136
401 M St. SW
Washington, DC 20460
4--13
February 5,1997 -- 57
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Chanter 5
Congressional Review of Rules
Section
Subject
Page
I.
INTRODUCTION
1
n.
STATUTORY BACKGROUND
1
m.
AGENCY IMPLEMENTATION OF
CONGRESSIONAL REVIEW PROVISIONS
7
I. INTRODUCTION
As discussed in previous chapters, SBREFA revamped various aspects of federal
regulatory practice with respect to small entities. SBREFA also established a new mechanism for
expedited congressional review of agency rules. This congressional review component of
SBREFA is legally and conceptually distinct from SBREFA's small entity provisions.
Congressional review applies to virtually any rule, whether or not the rule has any effect on small
entities.
This chapter describes the congressional review provisions of SBREFA, the role of federal
agencies in submitting rules for review, and the effect of congressional review and disapproval on
rules. It also explains EPA's process for submitting Agency rules for review.
H. STATUTORY BACKGROUND
A. What is the purpose of congressional review?
In enacting subtitle E of SBREFA, Congress provided itself with an expedited means of
reviewing and potentially disapproving final rules issued by federal agencies. Congress has always
had authority to pass legislation rescinding an agency's rule. As long as the President does not
veto such legislation, or Congress overrides any veto, the rule at issue is nullified. Before
SBREFA, however, such legislation was subject to Congress' usual procedural rules, which
ensure a careful — but often lengthy — review of legislative proposals. With SBREFA, a member
of Congress can introduce a joint resolution to disapprove a particular rule within a specified
period of time and have that joint resolution considered using expedited procedures. Moreover,
for any rule meeting SBREFA's definition of "major rule", Congress has 60 days
to act before the rule can take effect. SBREFA thus enables Congress to more effectively oversee
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February 5,1997 - 58
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agency implementation of the laws Congress enacted.
B. What agency actions are subject to congressional review?
With several exceptions, all agency final rules are subject to congressional review.
SBREFA defines "rule" by reference to section 551 of the Administrative Procedure Act (APA).
Proposed rules are not subject to congressional review.
SBREFA exempts the.following from the definition of rule:
rules of particular applicability (i.e., rules applying to named entities),
• rules relating to agency management or personnel; and
rules of agency organization, procedure or practice that do not substantially affect
the rights or obligations of non-agency parties.
C. What is the agency's role in congressional review?
Before a rule can take effect, the agency issuing the rule must submit to each House of
Congress and to the Comptroller General of the United States a rule report containing:
• a copy of the rule;
• a concise general statement relating to the rule, including whether the rule is a
"major rule;" and
the proposed effective date of the rule.
At the same time, the agency must also submit to the Comptroller General and make available to
each House of Congress:
a complete copy of any cost-benefit analysis of the rule;
• the agency's actions relevant to specified provisions the Regulatory Flexibility Act
(RFA);
• the agency's actions relevant to specified provisions of the Unfunded Mandates
Reform Act (UMRA); and
• any other relevant information or requirements under any other Act and any
relevant Executive Order.
D. What is a "major rule"?
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A "major rule" is a rule that the Office of Information and Regulatory Affairs (OERA) of
the Office of Management and Budget (OMB) finds has resulted in or is likely to result in:
• an annual effect on the economy of SI00 million or more;
a major increase in costs or prices for consumers, individual industries, Federal,
State, or local government agencies, or geographic regions; or
• significant adverse effects on competition, employment, investment, productivity,
innovation, or on the ability of United States-based enterprises to compete with
foreign-based enterprises in domestic and export markets.
E. How does SBREFA affect the effective date of rules?
1. In general
SBREFA generally provides that before a rule can take effect, a report containing a copy
of the rule (described above) must be submitted to both Houses of Congress and the Comptroller
General of the United States. Only the rule report must be submitted for the rule to take effect.
While SBREFA requires that any cost-benefit analysis and information about agency compliance
with the RFA, UMRA, etc., be submitted at the same time as the report, it does not make the
rule's effective date contingent on submission of this additional information.
Once the rule report has been submitted to Confess and the Comptroller General, a rule
that is not major under SBREFA may take effect as it otherwise would under applicable law. A
rule that is major under SBREFA may take effect no earlier than 60 days after the agency
submits the rule report for congressional review or the rule is published in the Federal Register,
whichever is later.18
If a joint resolution of disapproval is enacted with respect to either a non-major or major
rule, the rule cannot take effect or, if the rule has taken effect, it cannot continue in effect and is
deemed to have never taken effect.
18 If Congress passes a joint resolution disapproving a major rule within the 60-day period
following the rule's submittal or publication, and the President vetoes the joint resolution, the
rule's effective date is delayed somewhat longer to provide Congress with an opportunity to
override the President's veto without the rule taking effect in the interim. The delay is extended
until either House of Congress votes and fails to override the veto or 30 session days have passed
without either House taking action on the veto, whichever is earlier. If Congress fails to act
within 30 session days, the rule may take effect as it otherwise would, although Congress may still
override the veto. Congress may also pass a joint resolution of disapproval after the 60-day
period following the rule's submittal or publication, but passage of a resolution after the 60-day
period does not extend the delay of the rule's effective date. The rule may take effect after the
60-day period as it otherwise would.
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2. Exceptions
SBREFA provides several exceptions to its delay of the effective date of rules subject to
congressional review. Two of the exceptions are potentially applicable to EPA rules. First, a
non-major or major rule may take effect as it otherwise would when the issuing agency for
good cause finds that notice-and-comment rulemaking procedures for that rule are "impracticable,
unnecessary, or contrary to the public interest."19 The agency must incorporate the finding and an
explanation of the finding in the rule's issuance.
Second, a major rule may take effect before it otherwise would under SBREFA where
the President makes a determination by Executive Order that the rule should take effect because
such rule is
necessary because of an imminent threat to health or safety or other emergency;
• necessary for the enforcement of criminal laws;
necessary for national security; or
issued pursuant to any statute implementing an international trade agreement.
The President must submit written notice of the determination to Congress.
A rule qualifying for either of these exemptionstoay thus take effect prior to being
submitted to Congress (and in the case of major rules, prior to the expiration of the 60-day period
that would otherwise apply). However, rules qualifying for either exemption must still be
submitted for congressional review.
It should also be noted that these exemptions provide relief only from SBREFA's delay of
the effective date of rules. They do not and cannot "resuscitate" a rule that has been nullified by
an enacted joint resolution of disapproval. For example, a major rule exempted from SBREFA's
60-day delay provision by an Executive Order may nonetheless be nullified by a joint resolution of
disapproval that Congress enacts either with the President's consent or over his veto.
F. What is the effect of congressional disapproval?
1. Qn the rule
As indicated above, enactment of a joint resolution of disapproval nullifies the rule.
"This is the same finding an agency makes to exempt a rule from APA notice-and-comment
requirements that would otherwise apply. This is not the same finding an agency makes to
exempt a rule subject to the APA from the general APA requirement that a final rule be published
not less than 30 days before its effective date.
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Enactment requires passage by both Houses of Congress and presentment to the President; if the
President vetoes the resolution, Congress must override the veto by two-thirds vote of each
House. If a resolution is enacted before the rule has taken effect, the rule cannot take effect. If a
resolution is enacted after the rule has taken effect, the rule cannot continue in effect and is
treated as though it had never taken effect.
2. On statutory or court-ordered deadlines
SBREFA provides that "any deadline for, relating to, or involving" a disapproved rule is
extended "until the date [one] year after the enactment of the joint resolution" disapproving the
rule. In the case of a final rule subject to a statutoiy or court-ordered deadline, disapproval of the
rule thus extends the deadline for one year.
3. On the agency's authority to issue a replacement rule
SBREFA expressly provides that an agency may not reissue a disapproved rule in
"substantially the same form," unless specifically authorized to do so by a law enacted after the
date of the joint resolution disapproving the original rule.
G. How does Congress review rules under SBREFA?
This portion of the outline covers SBREFA provisions that govern Congress and the
Comptroller General, not agencies. Knowledge of these provisions may nevertheless provide
useful perspective for developing rules.
1. Distribution to congressional committees
Upon receiving a rule report, each House of Congress is directed to provide a copy of the
report to the congressional committees with jurisdiction to report a bill to amend the law under
which the rule was issued.
2. Reports on m^'or rules
For any major rule, the Comptroller General, who heads the General Accounting Office
(GAO), must provide a report on the rule to the relevant committees of Congress within 15 days
of the rule's publication in the Federal Register or its receipt by Congress, whichever is later. The
GAO report is to include an assessment of the agency's compliance with the procedural steps
required by the RFA, UMRA and other relevant statutes and executive orders, including
SBREFA, the Paperwork Reduction Act and E.0.12866. The agency issuing the major rule is
directed to cooperate with the GAO by providing information relevant to preparation of the GAO
report.
3. Limited window for introduction of joint resolution of disapproval
To take advantage of SBREFA's expedited procedures for review of agency rules, a
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February 5,1997 -- 62
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member of Congress must introduce a joint resolution of disapproval within a specified time
period. Generally, this period is 60 days (not counting those days either House of Congress is
adjourned for more than 3 days) beginning on the date Congress receives the report containing a
copy of the rule. However, if the rule is submitted to Congress within 60 session days (in the
Senate) or 60 legislative days (in the House) before Congress adjourns a session, members of
Congress have until the 15th session day (in the Senate) and the 15th legislative day (in the
House) of the next session of Congress to introduce a joint resolution.
4. Form of joint resolutions of disapproval
For SBREFA purposes, a joint resolution of disapproval is defined as a resolution that
states after the resolving clause, "That Congress disapproves the rule submitted by the
relating to , and such rule shall have no force or effect" (the blank spaces being
appropriately filled in). A joint resolution of disapproval may thus only nullify a rule in full. It
may not be used to rescind part of a rule or add to or revise provisions of the rule.
5. Congressional consideration of joint resolutions
When a joint resolution of disapproval is introduced in the Senate, specified procedures
for considering the resolution apply in the Senate for 60 session days after Congress' receipt of
the agency's rule report or publication of the rule in the Federal Register, whichever is later. In
the case of a rule submitted within 60 session days of Congress adjourning for a session, the
Senate's expedited procedures apply until the expiration of the 60th session day following the
15th session day of the next session of Congress. Onca-the time period for the Senate's expedited
procedures expires, any joint resolution may be considered using the Senate's normal procedures.
SBREFA is silent with respect to what procedures apply in the House of Representatives
when a joint resolution of disapproval is introduced by a member of that House. However,
SBREFA does specify the procedures that apply when one House receives a joint resolution
passed by the other House before it has passed its own. In that instance, the receiving House is
not to refer the joint resolution passed by the other House to a committee. The receiving House
is to apply its own procedures to consideration of the joint resolution and take any vote on the
other House's resolution. SBREFA sets no deadline for Congressional action on a resolution
once introduced.
m. AGENCY IMPLEMENTATION OF CONGRESSIONAL REVIEW PROVISIONS
A. What agency actions are covered?
1. Generally applicable rules
With a few exceptions noted below, any generally applicable rule must be submitted to
Congress and the Comptroller General. A generally applicable rule is a rule that a) applies to
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entities that meet specified criteria (as opposed to entities individually named by the rule), and b)
is binding on those entities subject to it (i.e., would be the basis for an enforcement action). If a
rule applies to entities identified by criteria and is legally binding on those entities, it must be
submitted to Congress for review. For example, a rule that names and imposes a requirement on
only Acme Manufacturing need not be submitted because it is a "rule of particular applicability"
and thus not generally applicable. On the other hand, a rule that imposes a requirement on all
manufacturers of a specified type or size would have to be submitted.
Whether an Agency action is a rule or an informal adjudication is not always clear. Some
routine actions are in fact informal adjudications, so this issue should be considered in determining
whether an action is subject to congressional review.
Rules that pertain only to internal Agency management and personnel issues are not
subject to review and should not be submitted. Rules that address Agency organization, practice
or procedure are subject to review only if they substantially affect the rights or obligations of non-
agency parties.
2. Technical correction rules
There is no exemption from the submission requirement for "technical correction" rules.
A technical correction rule corrects minor errors of a clerical or technical nature (e.g., a
typographical error) in an existing rule. It is worth noting, however, that these rules are typically
eligible for the APA "good cause" exemption from notice-and-comment rulemaking requirements.
Because they are minor in nature, it is generally unnecessary to provide prior public notice and
comment on them. The rules are thus also eligible for the "good cause" exception from the
effective date delay provisions of SBREFA, since the finding required under SBREFA is the same
as that required under the APA. However, to qualify for both exceptions, the preamble of the rule
must include the "good cause" finding explaining why prior public notice and comment
procedures are impracticable, unnecessary, or contrary to the public interest.20
For technical correction rules, the following language should be included in the preamble
of the rule to address the reporting requirements of SBREFA. This language is in addition to the
findings discussed above and the language specified in the last section of this chapter.
Under Executive Order 12866, this action is not a "significant regulatory action "
and is therefore not subject to review by the Office of Management and Budget. In
20As noted elsewhere, the "good cause" finding necessary to exempt a rule from SBREFA's
delay of effective dates is not the same "good cause" finding necessary to exempt a rule from the
APA's 30-day delay of effective dates. Thus, for a technical correction rule that is subject to the
APA and that the Agency wants to make effective earlier than 30 days after publication, the
Agency must make two "good cause" findings in the preamble of the rule - one explaining why
prior notice and comment are impracticable, unnecessary or contrary to the public interest, and
the other explaining why the rule should take effect earlier than 30 days after publication.
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addition, this action does not impose annual costs of $100 million or more, will not
significantly or uniquely affect small governments, and is not a significant federal
intergovernmental mandate. The Agency thus has no obligations under sections 202,
203, 204 and 205 of the Unfunded Mandates Reform Act. Moreover, since this
action is not subject to notice-and-comment requirements under the Administrative
Procedure Act or any other statute, it is not subject to sections 603 or 604 of the
Regulatory Flexibility Act.
3. Direct final rules and withdrawals thereof
Direct final rules should be submitted for congressional review since they become final
unless the Agency withdraws them. Withdrawals of direct final rules need not be submitted, since
withdrawals are not rules.
B. How should the effective date of a rule be determined in light of SBREFA?
As explained above, SBREFA generally provides that before a rule subject to
congressional review can take effect, it must be submitted to Congress and the Comptroller
General. A major rule generally cannot take effect earlier than 60 days after it is submitted to
Congress or published in the Federal Register, whichever is later. Moreover, SBREFA's effective
date provisions override inconsistent provisions in laws that predate SBREFA. For example, even
if a preexisting statute would allow a rule meeting SBREFA's major rule definition to take effect
upon promulgation, under SBREFA the rule may not take effect earlier than 60 days following
the later of its submittal to Congress or its publication Na the Federal Register, unless one of the
exceptions from SBREFA's effective date provisions apply. Accordingly, SBREFA must be
considered in determining the effective date of any rule subject to congressional review.
EPA has instituted a process by which any rule subject to congressional review under
SBREFA is submitted to the Hill at the same time it is submitted to the Federal Register for
publication. This process ensures that rules are always submitted to Congress by the time they are
published in the Federal Register. Thus, EPA may accurately determine a rule's effective date
under SBREFA (barring enactment of a joint resolution disapproving the rule) and include that
information in the Federal Register notice of the rule.
By virtue of EPA's submission process, a rule that is not major under SBREFA may take
effect as early as the date it is published in the Federal Register consistent with SBREFA.21 A
non-major rule may take effect as early as the date it is promulgated,22 even before it is published
or submitted to Congress, if the Agency invokes the "good cause" exception from SBREFA's
21Whether the rule may take effect upon promulgation or publication consistent with the
statute authorizing the rule or the APA is a separate issue.
"Promulgation occurs when a rule is signed by the Administrator or other authorized Agency
official and broadly disseminated to the public.
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effective date provisions. As described above, to invoke that exception, the Agency must publish
along with the rule a finding that prior public notice and comment procedures for the rule are
unnecessary, impracticable or contrary to the public interest. It should be noted that even where
public notice and comment were provided for a rule, it may be possible to make a finding that
providing public notice and comment was unnecessary, depending on the particular circumstances
of the rule.
Again by virtue of EPA's submission process, a rule that is major under SBREFA may
take effect as early as 6G calendar days after the rule is published in the Federal Register
consistent with SBREFA. A major rule may take effect as early as the date it is published or
promulgated if the Agency invokes one of two exceptions from SBREFA's effective date
provisions. The first exception is the same as that described above in the context of non-major
rules — where the agency finds, and explains in the rule's preamble, that providing prior public
notice and comment on the rule is unnecessary, impracticable or contrary to the public interest.
The second exception is for major rules for which die President makes a determination by
Executive Order that the rule should take effect earlier than it otherwise could under SBREFA.
C. What materials must be submitted beside the rule itself?
As described above, SBREFA requires that a report containing a copy of the rule and
other specified information be submitted for congressional review before the rule can take effect.
It also requires that additional information pertaining to the rule be submitted to the Comptroller
General and made available to Congress at the same time the rule is submitted.
The Regulatory Management Division (RMD) of OPPE has developed a form (attached)
that covers all of the information that needs to be submitted with the rule. Once the form is filled
out and a copy of the rule and any other specified documents are attached, the rule is ready for
submission to the Hill.
D. What are the procedures for submitting the rule to the Hill?
As noted above, the Agency's practice is to submit any rule subject to congressional
review to Congress and the Comptroller General at the same time it submits the rule to the
Federal Register for publication. Accordingly, a rule subject.to congressional review must be
ready for submission by the time it is sent to the Federal Register. To make sure this occurs, the
program office developing the rule must submit to RMD along with the Federal Register package
for the rule: 1) the congressional submission form filled out for the rule, and 2) a copy of all of
the documents that the form indicates must be submitted along with the Federal Register package.
Where the documents are incorporated into the Federal Register package itself, they need not be
supplied separately. However, where the Federal Register package only summarizes the relevant
documents, a copy of the documents themselves should be provided.
RMD submits the required rule report and any accompanying information to both Houses
of Congress and the Comptroller General. All congressional submissions under SBREFA should
thus be routed through RMD. When RMD delivers the report and information to the appropriate
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Hill offices, it obtains a receipt for the submission and keeps a record of the date of receipt for
purposes of establishing when the rule was submitted.
E. What should be included in the rule's preamble with regard to congressional
review?
For any rule subject to congressional review, the preamble for the final rule should contain
the following statement (which requires tailoring in one respect as indicated):
Submission to Congress and the Comptroller General
Under 5 U.S.C. §801(a)(1)(A), as added by the Small Business Regulatory
Enforcement Fairness Act of1996, EPA submitted a report containing this rule and
other required information to the U.S. Senate, the U.S. House of Representatives,
and the Comptroller General of the United States prior to publication of the rule in
today's Federal Register. This rule is f OR is not] a "major rule " as defined by 5
U.S.C. §804(2).
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THIS PAGE INTENTIONALLY BLANK - RESERVED FOR ATTACHMENT
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Chapter 6:
lEd. Note: Guidance Forthcoming for Informal Small Entity Guidance (SBREFA 621311
TITLE II-SMALL BUSINESS REGULATORY FAIRNESS
SEC. 201. SHORT TITLE.
This title may be cited as the "Small Business Regulatory Enforcement Fairness Act of 1996".
*
*
*
SEC. 213. INFORMAL SMALL ENTITY GUIDANCE.
(a) General .-Whenever appropriate in the interest of administering statutes and regulations
within the jurisdiction of an agency which regulates small entities, it shall be the practice of the
agency to answer inquiries by small entities concerning information on, and advice about,
compliance with such statutes and regulations, interpreting and applying the law to specific sets of
facts supplied by the small entity. In any civil or administrative action against a small entity,
guidance given by an agency applying the law to facts provided by the small entity may be
considered as evidence of the reasonableness or appropriateness of any proposed fines, penalties
or damages sought against such small entity.
(b) Program.-Each agency regulating the activities of small entities shall establish a program
for responding to such inquiries no later than 1 year^fter enactment of this section, utilizing
existing functions and personnel of the agency to the extent practicable,
(c) Reporting.-Each agency regulating the activities of small business shall report to the
Committee on Small Business and Committee on Governmental Affairs of the Senate and the
Committee on Small Business and Committee on the Judiciary of the House of Representatives no
later than 2 years after the date of the enactment of this section on the scope of the agency's
program, the number of small entities using the program, and the achievements of the program to
assist small entity compliance with agency regulations.
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Chapter 7:
fEd. Note: Guidance Forthcoming for Periodic Review of Rules (RFA S61(ttl
REGULATORY FLEXIBILITY ACT
*
*
*
SEC. 610. PERIODIC REVIEW OF RULES.
(a) Within one hundred and eighty days after the effective date of this chapter, each
agency shall publish in the Federal Register a plan for the periodic review of the rules issued by
the agency which have or will have a significant economic impact upon a substantial number of
small entities. Such plan may bye amended by the agency at any time by publishing the revision in
the Federal Register. The purpose of the review shall be to determine whether such rules should
be continued without change, or should be amended or rescinded, consistent with the stated
objectives of applicable statutes, to minimize any significant economic impact of the rules upon a
substantial number of such small entities. The plan shall provide for the review of all such agency
rules existing on the effective date of this chapter within ten years of that date and for the review
of such rules adopted after the effective date of this chapter within ten years of the publication of
such rules as the final rule. If the head of the agency determines that completion of the review of
existing rules is not feasible by the established date, he shall so certify in a statement published in
the Federal Register and may extend the completion date by one year at a time for a total of not
more than five years.
(b) In reviewing rules to minimize any significant economic impact of the rule on a
substantial number of small entities in a manner consistent with the stated objectives of applicable
statutes, the agency shall consider the following factors~\
(1) the continued need for the rule;
(2) the nature of complaints or comments received concerning the rule from the
public;
(3) the complexity of the rule;
(4) the extent to which the rule overlaps, duplicates or conflicts with other Federal
rules, and, to the extent feasible, with State and local governmental rules; and
(5) the length of time since the rule has been evaluated or the degree to which
technology, economic conditions, or other factors have changed in the area affected by the
rule.
(c) Each year, each agency shall publish in the Federal Register a list of the rules which
have a significant economic impact of a substantial number of small entities, which are to be
reviewed pursuant to this section during the succeeding twelve months. The list shall include a
brief description of each rule and the need for and legal basis of such nile and shall invite public
comment upon the rule.
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Policy on Compliance Incentives For Small Businesses
http://es.incl.gov/oeca/smbusiJitml
Policy on Compliance Incentives For Small
Businesses
Issued May 20,1996; effective June 10,1996
A. INTRODUCTION
This document sets forth the U.S. Environmental Protection Agency's Policy on Compliance Incentives
for Small Businesses. This Policy is one of the 25 regulatory reform initiatives announced by President
Clinton on March 16, 1995, and implements, in part, the Executive Memorandum on Regulatory Reform,
60 FR 20621 (April 26, 1995).
The Executive Memorandum provides in pertinent part:
To the extent permitted by law, each agency shall use its discretion to modify the penalties for small
businesses in the following situations. Agencies shall exercise their enforcement discretion to waive the
imposition of all or a portion of a penalty when the violation is corrected within a time period appropriate
to the violation in question. For those violations that may take longer to correct than the period set by the
agency, the agency shall use its enforcement discretion to waive up to 100 percent of the financial
penalties if the amounts waived are used to bring the entity into compliance. The provisions [of this
paragraph] shall apply only where there has been a good faith effort to comply with applicable regulations
and the violation does not involve criminal wrongdoing or significant threat to health, safety, or the
environment.
This Policy also implements section 323 of the Small Business Regulatory Enforcement Fairness Act of
1996, signed into law by the President on March 29, 1996.
As set forth in this Policy, EPA will refrain from initiating an enforcement action seeking civil penalties, or
will mitigate civil penalties, whenever a small business makes a good faith effort to comply with
environmental requirements by receiving compliance assistance or promptly disclosing the findings of a
voluntarily conducted environmental audit, subject to certain conditions. These conditions require that the
violation: is the small business's first violation of the particular requirement; does not involve criminal
conduct; has not and is not causing a significant health, safety or environmental threat or harm; and is
remedied within the corrections period. Moreover, EPA will defer to State actions that are consistent with
the criteria set forth in this Policy.
B. BACKGROUND
The Clean Air Act (CAA) Amendments of 1990 require that States establish Small Business Assistance
Programs (SBAPs) to provide technical and environmental complianceassistance to stationary sources. On
August 12,1994, EPA issued an enforcement response policy for stationary sources which provided that
an authorized or delegated state program may, consistent with federal requirements, either:
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(1) assess no penalties against small businesses that voluntarily seek compliance assistance and
correct violations revealed as a result of compliance assistance within a limited period of time; or
(2) keep confidential information that identifies the names and locations of specific small businesses
with violations revealed through compliance assistance, where the SBAP is independent of the state
enforcement program.
In a further effort to assist small businesses to comply with environmental regulations, and to achieve
health, safety, and environmental benefits, the Agency is adopting a broader policy for all media programs,
including water, air, toxics, and hazardous waste.
C. PURPOSE
This Policy is intended to promote environmental compliance among small businesses by providing
incentives for them to participate in on-site compliance assistance programs and to conduct environmental
audits. Further, the Policy encourages small businesses to expeditiously remedy all violations discovered
through compliance assistance and environmental audits. The Policy accomplishes this in two ways: by
setting forth a settlement penalty Policy that rewards such behavior, and by providing guidance for States
and local governments to offer these incentives.
D. APPLICABILITY
This Policy applies to facilities owned by small businesses as defined here. A small business is a person,
corporation, partnership, or other entity who employs 100 or fewer individuals (across all facilities and
operations owned by the entity). This definition is a simplified version of the CAA 6507 definition of small
business. On balance, EPA determined that a single definition would make implementation of this Policy
straightforward and would allow for consistent application of the Policy in a multimedia context.
This Policy is effective June 10, 1996, and on that date supersedes the Interim version of this Policy issued
on June 13, 1995 and the September 19,1995 Qs and As guidance on the Interim version. This Policy
applies to all civil judicial and administrative enforcement actionstaken under the authority of the
environmental statutes and regulations that EPA administers, except for the Public Water System
Supervision Program under the Safe Drinking Water Act. This Policy applies to all such actions filed after
the effective date of this Policy, and to all pending cases in which the government has not reached
agreement in principle with the alleged violator on the amount of the civil penalty.
This Policy sets forth how the Agency expects to exercise its enforcement discretion in deciding on an
appropriate enforcement response and determining an appropriate civil settlement penalty for violations by
small businesses. It states the Agency's views as to the proper allocation of enforcement resources. This
Policy is not final agency action and is intended as guidance. It does not create any rights, duties,
obligations, or defenses, implied or otherwise, in any third parties. This Policy is to be used for settlement
purposes and is not intended for use in pleading, or at hearing or trial. To the extent that this Policy may
differ from the terms of applicable enforcement response policies (including penalty policies) under
media-specific programs, this document supersedes those policies. This Policy supplements, but does not
supplant the August 12, 1994 Enforcement Response Policy for Treatment of Information Obtained
Through Clean Air Act Section 507 Small Business Assistance Programs.
E. CRITERIA FOR CIVIL PENALTY MITIGATION
EPA will eliminate or mitigate its settlement penalty demands against small businesses based on the
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following criteria:
(!) The small business has made a good faith effort to comply with applicable environmental
requirements as demonstrated by satisfying either a. or b. below.
(a) Receiving on-site compliance assistance from a government or government supported
program that offers services to small businesses (such as a SBAP or state university), and the
violations are detected during the compliance assistance. If a small business wishes to obtain a
corrections period after receiving compliance assistance from a confidential program, the
business must promptly disclose the violations to the appropriate regulatory agency.
(b) conducting an environmental audit (either by itself or by using an independent contractor)
and promptly disclosing in writing to EPA or the appropriate state regulatory agency all
violations discovered as part of the environmental audit pursuant to section H of this Policy.
For both a. and b. above, the disclosure of the violation must occur before the violation was otherwise
discovered by, or reported to the regulatory agency. See section 1.1 of the Policy below. Good faith also
requires that a small business cooperate with EPA and provide such information as is necessary and
requested to determine applicability of this Policy.
(2) This is the small business's first violation of this requirement. This Policy does not apply to
businesses that have previously been subject to an information request, a warning letter, notice of
violation, field citation, citizen suit, or other enforcement action by a government agency for a
violation of that requirement within the past three years. This Policy does not apply if the small
business received penalty mitigation pursuant to this Policy for a violation of the same or a similar
requirement within the past three years. If a business has been subject to two or more enforcement
actions for violations of environmental requirements in the past five years, this Policy does not apply
even if this is the first violation of this particular requirement.
(3) The business corrects the violation within the corrections period set forth below. Small
businesses are expected to remedy the violations within the shortest practicable period of time, not
to exceed 180 days following detection of the violation. However, a small business may take an
additional period of 180 days, Le., up to a period of one year from the date the violation is detected,
only if necessary to allow a small business to correct the violation by implementing pollution
prevention measures. For any violation that cannot be corrected within 90 days of detection, the
small business should submit a written schedule, or the agency should issue a compliance order with
a schedule, as appropriate. Correcting the violation includes remediating any environmental harm
associated with the violation, as well as implementing steps to prevent a recurrence of the violation.
(4) The Policy applies if:
(a) The violation has not caused actual serious harm to public health, safety, or the
environment; and
(b) The violation is not one that may present an imminent and substantial endangerment to
public health or the environment; and
(c) The violation does not present a significant health, safety or environmental threat (e.g.,
violations involving hazardous or toxic substances may present such threats); and
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(d) The violation does not involve criminal conduct.
F. PENALTY MITIGATION GUIDELINES
EPA will exercise its enforcement discretion to eliminate or mitigate civil settlement penalties as follows.
(1) EPA will eliminate the civil settlement penalty in any enforcement action if a small business
satisfies all of the criteria in section E.
(2) If a small business meets all of the criteria, except it needs a longer corrections period than
provided by criterion 3 (i.e., more than 180 days for non-pollution prevention remedies, or 360 days
for pollution prevention remedies), EPA will waive up to 100% of the gravity component of the
penalty, but may seek the full amount of any economic benefit associated with the violations.
(3) If a small business meets all of the criteria, except it has obtained a significant economic benefit
from the violation(s) such that it may have obtained an economic advantage over its competitors,
EPA will waive up to 100% of the gravity component of the penalty, but may seek the full amount
of the significant economic benefit associated with the violations. EPA retains this discretion to
ensure that small businesses that comply with public health protections are not put at a serious
marketplace disadvantage by those who have not complied. EPA anticipates that this situation will
occur very infrequently.
If a small business does not fit within guidelines 1 2, or 3 immediately above, this Policy does not. provide
any special penalty mitigation. However, if a small business has otherwise made a good faith effort' to
comply, EPA has discretion, pursuant to its applicable enforcement response or penalty policies, to refrain
from filing an enforcement action seeking civil penalties or to mitigate its demand for penalties. Further,
these policies allow for mitigation of the penalty where there is a documented inability to pay all or a
portion of the penalty, thereby placing emphasis on enabling the small business to finance compliance. See
Guidance on Determining a Violator's Ability to Pay a Civil Penalty of December 1986. Penalties also
may be mitigated pursuant to the Interim Revised Supplemental Environmental Projects Policy of May
1995 (60 F.R. 24856, 5/10/95) and Incentives for Self-Policing: Discovery, Disclosure, Correction and
Prevention of Violations Policy of December 1995 (60 F.R. 66706, 12/22/95).
G. COMPLIANCE ASSISTANCE
1. Definitions and Limitations
Compliance assistance is information or assistance provided by EPA, a State or another government
agency or government supported entity to help the regulated community comply with legally mandated
environmental requirements. Compliance assistance does not include enforcement inspections or
enforcement actions.
In its broadest sense, the content of compliance assistance can vaiy greatly, ranging from basic
information on the legal requirements to specialized advice on what technology may be best suited to
achieve compliance at a particular facility. Compliance assistance also may be delivered in a variety of
ways, ranging from general outreach through the Federal Register or other publications, to conferences
and computer bulletin boards, to on-site assistance provided in response to a specific request for help.
The special penalty mitigation considerations provided by this Policy only apply to civil violations
which were identified as Dart of an on-site compliance assistance visit to the facility. If a small
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business wishes to obtain a corrections period after receiving compliance assistance from a confidential
program, the business must promptly disclose the violations to the appropriate regulatory agency and
comply with the other provisions of this Policy. This Policy is restricted to on-site compliance assistance
because the other forms of assistance (such as hotlines) do not expose a small business to an increased risk
of enforcement and do not provide the regulatory agency with a simple way to determine when the
violations were detected and thus when the violations must be corrected. In short, small businesses do not
need protection from penalties as an incentive to use the other types of compliance assistance.
2. Delivery of On-Site Compliance Assistance By Government Agency or Government
Supported Program
Before on-site compliance assistance is provided under this Policy or a similar State policy, businesses
should be informed of how the program works and their obligations to promptly remedy any violations
discovered. Ideally, before on-site compliance assistance is provided pursuant to this Policy or similar
State policy, the agency should provide the facility with a document (such as this Policy) explaining how
the program works and the responsibilities of each party. The document should emphasize the
responsibility of the facility to remedy all violations discovered within the corrections period and the types
ofviolations that are excluded from penalty mitigation (e.g., violations that caused serious harm). The
facility should sign a simple form acknowledging that it understands the Policy. Documentation explaining
the nature of the compliance assistance visit and the penalty mitigation guidelines is essential to ensure
that the facility understands the Policy.
At the end of the compliance assistance visit, the government agent should provide the facility with a list
of all violations observed and report within 10 days any additional violations identified resulting from the
visit, but not directly observed, e.g., results from review and analysis of data or information gathered
during the visit. Any violations that do not fit within the penalty mitigation guidelines in the Policy - e.g.,
those that caused serious harm — should be identified. If the violations cannot all be corrected within 90
days, the facility should be requested to submit a schedule for remedying the violations or a compliance
order setting forth a schedule should be issued by the agency.
3. Requests for On-Site Compliance Assistance
EPA, States and other government agencies do not have the resources to provide on-site compliance
assistance to all small businesses that request such assistance. This Policy does not create any right or
entitlement to compliance assistance. A small business that requests on-site compliance assistance will not
necessarily receive such assistance. If a small business requests on-site compliance assistance (or any other
type of assistance) and the assistance is not available, the government agency should provide a prompt
response indicating that such assistance is not available. The small business should be referred to other
public and private sources of assistance that may be available, such as clearinghouses, hotlines, and
extension services provide by some universities. In addition, the small business should be informed that it
may obtain the benefits offered by this Policy by conducting an environmental audit pursuant to the
provisions of this Policy.
H. ENVIRONMENTAL AUDITS
For purposes of this Policy, an environmental audit is defined as "a systematic, documented, periodic and
objective review by regulated entities of facility operations and practices related to meeting environmental
requirements." See EPA's new auditing policy, entitled Incentives for Self-Policing, 60 F.R. 66706,
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66711, December 22,1995.
The violation must have been discovered as a result of a voluntaiy environmental audit, and not through a
legally mandated monitoring or sampling requirement prescribed by statute, regulation, permit, judicial or
administrative order, or consent agreement. For example, the Policy does not apply to:
(1) emissions violations detected through a continuous emissions monitor (or alternative monitor
established in a permit) where any such monitoring is required;
(2) violations of National Pollutant Discharge Elimination System (NPDES) discharge limits
detected through required sampling or monitoring; or
(3) violations discovered through an audit required to be performed by the terms of a consent order
or settlement agreement.
The small business must fully disclose a violation within 10 days (or such shorter period provided by law)
after it has discovered that the violation has occurred, or may have occurred, in writing to EPA or the
appropriate state or local government agency.
ENFORCEMENT
To ensure that this Policy enhances and does not compromise public health and the environment, the
following conditions apply:
(1) Violations detected through inspections, field citations, reported to an agency by a member of
the public or a " whistleblower" employee, identified in notices of citizen suits, or previously
reported to an agency as required by applicable regulations or permits, remain fully enforceable.
(2) A business is subject to all applicable enforcement response policies (which may include
discretion whether or not to take formal enforcement action) for all violations that had been
detected through compliance assistance and were not remedied within the corrections period. The
penalty in such action may include the time period before and during the correction period.
(3) A State's or EPA's actions in providing compliance assistance is not a legal defense in any
enforcement action. This Policy does not limit EPA or a state's discretion to use information on
violations revealed through compliance assistance as evidence in subsequent enforcement actions.
(4) If a field citation is issued to a small business (e.g. under the Underground Storage Tank
program), the small business may provide information to the Agency to show that specific violations
cited in the field citation are being remedied under a corrections schedule established pursuant to
this Policy or similar State policy. In such a situation, EPA would exercise its enforcement
discretion not to seek civil penalties for those violations.
J. APPLICABILITY TO STATES
EPA recognizes that states are partners in enforcement and compliance assurance. Therefore, EPA will
defer to state actions in delegated or approved programs that are generally consistent with the criteria set
forth in this Policy. Whenever a State agency provides a correction period to a small business pursuant to
this Policy or a similar policy, the agency should notify the appropriate EPA Region. This notification will
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assure that federal and state enforcement responses are properly coordinated.
K. Public Accountability
Within three years of the effective date of this Policy, EPA will conduct a study of the effectiveness of this
Policy in promoting compliance among small businesses. EPA will make the study available to the public.
EPA will make publicly available the terms of any EPA agreements reached under this Policy, including
the nature of the violation(s), the remedy, and the schedule for returning to compliance.
Return to top of this document.
Return to EnviroSenSe Home Page
Last Updated: May 30, 1996
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Cardinal
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SMALL BUSINESS REGULATORY ENFORCEMENT
FAIRNESS ACT (SBREFA)
Effective Date
President Clinton signed SBREFA into law on March 29,
1996.
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Today's purpose:
V Brief Analysis Of The Act
V Agency Activities
V Regional Responsibility
V Contacts for Future Reference
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PURPOSE OF SERE FA
SIMPLIFIED COMPLIANCE ASSISTANCE
REGULATORY ENFORCEMENT REFORMS
REGULATION DEVELOPMENT INVOLVEMENT
AGENCY ACCOUNTABILITY
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SIMPLIFIED COMPLIANCE ASSISTANCE
§212 REQUIRES AGENCIES TO:
_ DEVELOP "HOW TO" GUIDES
EPA ACTIONS INCLUDE:
° DEVELOPED CRITERIA FOR COMPLIANCE GUIDES
° PROVIDED GUIDANCE TO A/As
REGIONS SHOULD:
V Maintain awareness of publications and distribute as
appropriate
V Apply guidance in workgroup involvement
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SIMPLIFIED COMPLIANCE ASSISTANCE
§213 REQUIRES AGENCIES TO:
- PROVIDE INFORMAL COMPLIANCE ASSISTANCE
EPA ACTIONS INCLUDE:
° Drafted strategy to id current agency opinion procedure
° Funded Compliance Assistance Centers
automotive service shops
printing processes
metal finishing operations
small fa;rms
REGIONS SHOULD:
V Comment on strategy
V Document outreach efforts
V Know that advice can be used as evidence in enforcement
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REGULA TORY ENFORCEMENT REFORM
§223 REQUIRES AGENCIES TO:
- PROVIDE COMPLIANCE INCENTIVES
EPA ACTIONS TO DATE:
° Developed policy on Compliance Incentives for Small Businesses
(applies to companies with less than 100 employees across all
facilities.), June, 1996
° Existing Audit Policy
REGIONS SHOULD:
V Apply "good faith" efforts in enforcement
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REGULATION DEVELOPMENT INVOLVEMENT
§241 REQUIRES AGENCIES TO DEFINE REG FLEX
ANALYSIS
EPA ACTIONS INCLUDE:
° Agency Guidance
defined "substantial number"
developed criteria for "economic impact"
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REGULATION DEVELOPMENT INVOLVEMENT
§244 REQUIRES AGENCIES TO IMPROVE OUTREACH
EPA ACTIONS TO DATE:
° Relocated SBO to Adminstrator's Office
° Designated Tom Kelly, Chairperson
Small Business Advocacy Review Panel
consults with small entities
coordinates with SBA
REGIONS SHOULD:
V Maintain "potentials" list
V Document outreach efforts
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A GENCY A CCOUNTABILITY
§222 SB A ENFORCEMENT OMBUDSMAN
§241 SMALL B USINESS REGULA TOR Y FAIRNESS BOARDS
§801 CONGRESSIONAL REVIEW
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EFFECTS OF SBREFA
EPA must:
V ensure small entity involvement in reg. development
V develop "simple how-to " guides with regulations
V develop criteria to determine "adverse effects on
significant" small entities
V establish procedures to reduce/waive penalties
Small Entities may:
° sue agencies for failure to do "meaningful" outreach
° use agency advice or guidance in penalty mitigation
Courts can:
review agency's compliance with RFA/SBREFA
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REGIONAL SMALL BUSINESS PROGRAM
Develop strategies to:
¦¦ Increase region's understanding of small business issues;
wm Improve state small business partnerships/relationships
wm Integrate a small business component into Agency priorities
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Cardinal
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SBREFA BRIEFING for OPM
March 18,1997
Purpose/Overview SBREFA
Annette N. Hill
Compliance/Simplification
Annette
Rights in Enforcement Actions
Angelia S-Blackwell
Regulatory Participation
Annette
Cooperative Enforcement
Angelia
Agency Accountability
Angelia
QUESTIONS/COMMENTS
If you have questions or need additional please contact:
Annette N. Hill, PAB
404/562-8287
Angelia Souder-Blackwell, EAD
404/562-9527
Fran Jonesi, OECA
202/564-7043
Nancy Ketcham-Colwill
202/260-7624
Small Business Hotline
800/368-5888
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