Money

How the Federal Regulatory Process is Out of Balance

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Recently there has been no lack of examples that emphasize how out of balance the federal regulatory process has become. The President’s spilled milk example in his State of the Union Address this year.

Stories about children needing business licenses for lemonade stands. Special paperwork requirements for diagnosing water-ski injuries.  The list seems never ending. 

Under the Energy Independence and Security Act of 2007, gas and diesel refineries are required annually to mix in to gasoline set amounts of “cellulosic biofuel,” a biofuel produced from wood, grasses, and other agricultural products. For 2012, the EPA set the bar at 8.65 million gallons. 

The catch is cellulosic biofuels don’t exist commercially. With very little to no commercial supply of cellulosic biofuels in the U.S., it’s impossible for refiners to meet this demand. Yet Washington continues to press for compliance with this impossible mandate and heap hefty fines on fuel manufacturers for not meeting them.

This unusual quandary is adding costs to production, which ultimately gets passed on to consumers at the pump, where prices are already high.

The illogicality of the rule is evident. It doesn’t hold up to a basic commonsense smell test, and it represents how out of touch regulators in Washington have become.  Sadly, it’s only the tip of the iceberg. 

In recent years the regulatory process has persistently swelled. According to the  Business Roundtable’s Taking Action for America plan, research by the George Washington University Center of Regulatory Studies found an average of 84 economically significant regulations, those costing $100 million or more, were approved in the last two years. 

Too often regulations are so complex and inconsistent that they provide little benefit but impose heavy costs. For example , only a small portion of proposed regulations are even weighed to consider whether the projected benefits outweigh the costs.  

Moreover, when evaluations are conducted, they are often based off of poor data and unsound methodology.  Take for example, the EPA assessment of palm oil under the RFS program. Other assessments of palm oil show Greenhouse Gas (GHG) emissions savings value compared with fossil fuels are significant.  

Independent research demonstrates that default values for GHG emission savings for palm oil feedstock for electricity generation account for 52%, and for transportation biodiesel range between 38.5% and 41. Unfortunately, the EPA did not take this type of palm oil into consideration even as this technology has been supported by the UN’s Clean Development Mechanism.

The aggregate effects add up quickly for the business community and consumers. 

To remedy the problem, regulators need to focus on creating more efficient regulation, not just more regulation or regulation promulgated on ideology but sound science. There should be standardized practices and benchmarks across agencies, made available to the public, to weigh the long-term benefits of regulations against their full costs including in terms of US jobs and competitiveness. 

Additionally, agencies calculations should be made public and subject to independent review to ensure only truly beneficial rules are put into place. And encouraging greater public input and requiring Congressional oversight on major regulations would help ensure all interests are reflected in new rules.

These requirements probably seem like commonsense to the average American, which emphasizes how far out of balance our policymaking process has gotten. 

Harry Alford is President & CEO of The Black Chamber of Commerce

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