United States Small Business Administration

RS Number 137

July 1993

Purpose

Environmental regulations can be painful for all businesses, but smaller ones are usually harder hit. The Regulatory Flexibility Act was designed to alleviate the disproportionally heavy burden placed on small firms by government regulation. It requires federal agencies, including the Environmental Protection Agency, to consider reasonable alternatives that will ease the burden on small firms without damaging the objectives of the regulating policy.

This project examines several atmospheric emission regulations and their effects on the industries involved, and describes some alternatives that have been proposed to reduce the cost to small businesses. It provides some useful examples to federal and state agencies looking for ways to make their regulations more small-business friendly.

Scope and Methodology

Preliminary research involved a review of EPA regulations and a series of interviews with representatives of regulated industries, states and municipalities. Four regulations were found that particularly threatened small business: (1) regulations restricting the use of perchlorethylene and 1-1-1 trichloroethane, a solvent used by 29,300 dry cleaners; (2) the National Emissions Standard for Hazardous Air Pollutants (NESHAP) for Stage I Gas Marketing, affecting more than 100,000 gasoline marketing establishments; (3) the ban on ozone-depleting substances used in nonessential products; and (4) the Irvine, California ordinance regulating the overall use of ozone-depleting chemicals with city limits.

This study also reviews Title V of the U.S Clean Air Act Amendments of 1990 (CAAA), which affects all firms releasing emissions into the atmosphere. Title V requires that the EPA specify minimum requirements for state permits to point sources of air emissions.

Highlight

The EPA and the dry cleaning industry have worked together to develop reciprocal emissions standards. The requirements of Title III of the 1990 Clean Air Act Amendments have been met with no added cost to most existing dry cleaners; 60 percent either own the required equipment or are exempt because they have annual sales of less than $100,000, and would experience financial difficulty in complying with the standard. The EPA is considering meeting the clean air standard by exempting small dry cleaners and requiring large ones to use special equipment. This could result in an added cost to many mid-sized cleaners, since they are too big to be exempt but too small to own advanced equipment.

Future EPA regulations could require that service stations collect and recycle noxious vapors that are released when gasoline is pumped into underground storage tanks-stage I of gas marketing operations. Five to 10 percent of the vapors are composed of at least one of 12 of the 189 hazardous air pollutants listed in Title III of the 1990 CAAA. The effects on small businesses vary with different revisions of the act. The National Emissions Standard for Hazardous Air Pollutants for gasoline marketers will offer a choice of systems that will effectively reduce emissions from underground tanks by 95 percent. Some exemptions may be granted, but nothing is definite yet.

Amendments to the Montreal Protocol, signed by the United States and 22 other nations in 1990, led to new regulations on ozone-depleting substances in nonessential products. Although alternative substances are available to businesses affected by the new regulations, some small manufacturers will be forced to cease operations as a result of an outright ban of some substances. Fire extinguishers containing halon-deemed non-essential by the EPA-are primarily manufactured by eight small firms. Although the EPA argues that substitutes are available, research shows that the only available substitutes are less effective and more expensive. The present value the lost revenue is estimated to be somewhere between $23 million and $393 million, depending on whether non-halon substitutes are developed and marketed.

In 1989, the city of Irvine, California, passed an ordinance regulating the use of ozone-depleting chemicals within city limits. This ordinance exemplifies the importance of flexibility. Irvine's exemption clause has substantially reduced the cost of the ban without crippling its objectives. The regulation was cost-effective because it was performance-based, allowing exemptions and extensions when warranted. Each firm is allowed its own system of compliance based on individual circumstances. Although the Irvine regulation has been praised, even by the targeted firms, there is some question as to whether these substances should be regulated at the municipal level.

The EPA's general permits program under Title V of the CAAA could engender extraneous red tape and put further strain on small businesses; it duplicates state requirements and lengthens the application process by over a year. Based on this research, the U.S. Small Business Administration presented to the EPA a "model" permit application for a general permit that would reduce cost and time.

Ordering Information

The complete report is available from:

National Technical Information Service

5285 Port Royal Road

Springfield, VA 22161

(800) 553-6847

Ordering Number: PB93-209377

Price Codes: A07 ($27), Paper; A02 ($12) Fiche

*Last Modified 6-11-01