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ON

ECONOM

INNOVAT OPEI Regulatory Development Series

Final Guidance for EPA Rulewriters: Regulatory Flexibility Act

as amended by the Small Business Regulatory Enforcement Fairness Act

EPA’s Action

Development Process

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 Regulatory Flexibility Act or to clarify and update text. In fact, such changes have

been made to this guidance since the November 30, 2006 signature of the SBAC and are reflected in this version

of the guidance.

November 2006

UNITED STATES ENVIRONMENT PROTECTION AGENCY

Washington D. C. 20460

Nov. 30, 2006

Office of Policy,

Economic and Innovation

MEMORANDUM

SUBJECT: Transmittal of

FROM: Alexander Cristofaro

Small BusinessAdvocacy Chair

TO: AssistantAdministrators

RegionalAdministrators

General Counsel

I am pleased to provide you with the document referenced above. This revised guidance reflects

the Agency's accumulated experience with the RFA, as amended by SBREFA, since we issued the

previous guidance on March 29, 1999. This new edition retains much of the substance of the 1999 edition,

while significantly expanding chapters on screening analysis and adding a new chapter on preparing the

initial and final regulatory flexibility analyses.

As we did earlier, we have prepared this revised guidance for EPA managers and staff to use

flexibly and with considerable judgment. We have discovered no single "magic formula" that applies

equally to all situations. Even so, we are confident EPA employees will find this document even more

helpful than its predecessor in sorting through the variety of issues we can expect to encounter

considering the unique needs of small entities subject to environmental rules.

Attachment

cc: Steering Committee Representatives

Regulatory Contacts

Send comments on the guidance to me c/o Joan Rogers

E-mail:

Telephone: 202-564-6568

U.S. mail: mail code 1803A@ 1200 PennsylvaniaAvenue, NW, Washington, DC 20460

Fax: 202-564-0965

Final Guidance EPA Rulewriters: Regulatory Flexibility Act as

Amended by the Small Business and Regulatory Enforcement Fairness Act

Regional







rogers.joanb@epa.gov


How to Use

This Guidance

A Quick Glimpse at this Guidance and the RFA Process

Assessing a Rule's Economic Impact on Small Entities.

Preparing the Initial and Final Regulatory Flexibility Analyses.

Implementing Small Entity Outreach.

The purpose of this Guidance is to help you, the rulewriter, understand how the

requirements of the Regulatory Flexibility Act (RFA) as amended by the Small Business

Regulatory Enforcement Fairness Act (SBREFA) fit into the Agency's Action Development

Process. The Agency refers to the RFA as amended by SBREFA simply as the RFA.

When EPA initiates a regulatory development action, RFA compliance should be near the

top of the list of issues you address in your project plan or Analytic Blueprint. This guidance

outlines the analytical and sequential process that will apply to most rules subject to the RFA.

illustrates the RFA process for proposed rules and illustrates the RFA process

for final rules.

nce you have determined that your

rule is subject to the RFA (i.e., you are required to publish a notice of proposed rulemaking under

the APA or any other statute), the first thing you need to do for RFA compliance is to determine

what, if any, impact your rule may have on small entities. To do this, you need to perform a

screening analysis on your proposed and final rules. Screening analyses are discussed in detail in

of this guidance.

These are analyses of

economic impacts on small entities that you must prepare if you do not certify that your rule does

not have a significant economic impact on a substantial number of small entities (SISNOSE).

These analyses are discussed in detail in .

If the screening analysis indicates that your rule may have

1

2

Figure 1 Figure 2

Chapter 2

Chapter 3

O

1

2

See June 30, 2004. EPA's

Action Development guidance can be found at EPA's Action Development Process Library site

http://intranet.epa.gov/adplibray.

See Guidelines for Preparing Analytic Blueprints, June 28, 2004, (available at http://intranet.epa.gov/adplibrary or

contact OPEI

EPA's Action Development Process: Guidance for EPA Staff on Developing Quality Actions,

i
some impact on some small entities, or you find that you need more information to make that

determination, will provide you with guidance for identifying and engaging in a

dialogue with representatives of small entities that may be subject to the rule under development.

f the screening analysis of your rule indicates that

the rule is likely to have a SISNOSE, you should plan to prepare for a Small Business Advocacy

Review Panel. In you will find detailed information about how you should go about

complying with the requirement that the Agency convene a Small Business Advocacy Review

Panel for proposed rules which are likely to have a SISNOSE.

If you must prepare a final regulatory flexibility analysis for

your (i.e., you do not certify the rule as not having a significant economic impact on a

substantial number of small entities), the RFA also requires you to prepare a small entity

compliance guide. answers questions regarding what constitutes such a guide and

gives guidance for designing a small entity compliance guide.

When planning for the post-promulgation stage of

your rule, refer to the discussion in regarding the RFA provision on giving informal

advice to small entities in response to inquiries.

RFA section 610 requires a periodic review of promulgated rules

which have or will have a significant economic impact on a substantial number of small entities.

explains the Agency's strategy for continued compliance with this requirement.

This guidance is not a binding Agency procedural rule. In determining and

mitigating impacts on small entities, we anticipate that there will be many situations in which

Agency staff and management must exercise considerable judgment. Nevertheless, we intend this

guidance to provide you with an analytic and sequential structure that should be sufficient for

most covered rulemakings. Should you come across a situation that does not appear to be

discussed in this guidance, or a situation where an approach other than that suggested by this

guidance makes sense, you need to consult with your Regulatory Steering Committee

representative, the Small Business Advocacy Chair in the Office of Policy, Economics and

Innovation (OPEI), and attorneys from the Office of General Counsel (OGC).

This guidance was developed for practical use. Occasionally, it repeats information

already introduced in order to increase its accessibility and utility to a rulewriter working under

pressure and looking to find adequate guidance on a particular point quickly. Some readers

might find the narrative occasionally redundant for this reason. Even so, we strongly urge all

users of the guidance to review it in its entirety before embarking on a rulemaking likely to

directly regulate small entities.

This document supersedes and revokes all prior Agency guidance on the Regulatory

Flexibility Act. This guidance incorporates the information on preparing initial and final

regulatory flexibility analyses that was contained in the EPA Guidelines for Implementing the

Regulatory Flexibility Act, April 1992. That information is contained in a new Chapter 3 in this

guidance. In addition, a revised Chapter 2 based on the Agency's continuing implementation of

the RFA is included. A few minor editorial changes have been made to other chapters such as

deleting outdated contact information and updating footnote references to other documents.

Please direct any questions to the Small Business Advocacy Chair's staff in the Office of

Regulatory Policy and Management of OPEI.

Chapter 4

Chapter 5

final rule

Chapter 6

Chapter 7

Chapter 8

Small Business Advocacy Review Panels.

Small Entity Compliance Guides.

Ongoing Informal Small Entity Guidance

Periodic Review of Rules

Please note

.

.

:

I

ii
Notes:

General: References to "Chapters" in the flowchart refer to the chapters in this guidance document. See Table of Contents.

Only rules subject to notice-and-comment requirements are subject to the regulatory flexibility analysis requirements of the RFA. See Chapter 1 and 2 for more

details.

It may be appropriate to start outreach to small entities before or concurrent with performing a screening analysis. See Chapter 2 for more details.

It is EPA's policy to assess impacts on small entities and minimize impacts to the extent feasible. If you do not have enough information to determine with confidence

that the Agency can certify (no SISNOSE), proceed with "NO."

Under the RFA, you must prepare an IRFA and meet other requirements for your rule proposal, unless the Administrator certifies that the rule "will not, if

promulgated, have a significant economic impact on a substantial number of small entities." See Chapter 1 for general information and Chapter 3 for more detailed

information on preparation of an IRFA. A decision to convene a Panel is not a commitment to prepare an IRFA (or a FRFA for rule promulgation), nor does it prevent

EPA from certifying your proposed or final rule if its substance so warrants.

Although the preparation of the IRFA and the term of the Panel are represented here as concurrent activities, in reality, there is no firm linkage in timing for the two

tasks. However, the two tasks may inform each other and the IRFA should not be completed until the panel report is signed.

1

2

3

4

5

iii

RFA PROCESS OVERVIEW FOR PROPOSED RULES

Figure 1

Likely

To Certify

Rule?3

PREPARE IRFA4

Prepare for

SBAR

Panel5

[Chapter 5]

Convene

SBAR Panel

[Chapter 5]

Complete

Panel

Report

[Chapter 5]

Prepare

NPRM

Package

for OMB

Review

Prepare

NPRM

Package

for Agency

Signature and

Routing to

Federal

Register

YES

NO Initiative

Action

Development1

Initial Analytic

Assessment

Perform

Screening

Analysis2

[Chapter 2]

Any

Adverse

Impact on

Any Small

Entity?

Outreach

To Small

Entities

[Chapter4]

YES

NO

Draft

Certification

Statement &

Factual

Explanation

Thereof

2] [Chapter

May Need to

Prepare NPRM

Package for

OMB Review
Draft Final

Rule:

Consider

Comments &

Select

Alternatives

Certify

Final

Rule? 1

Prepare

FRFA 2

Prepare FRM

Package for OMB

Review

And/or

Agency Signature

and Routing to

Federal Register

NO

Draft

Certification

Statement &

Factual

Explanation

Thereof

[ ] Chapter 2

YES

Prepare

Compliance

Guide

[ ] Chapter 6

Final Rule is

Publish in

Federal

Periodic Review

Rules Which

Have a

Significant

Economic

Impact on a

Substantial

Number of Small

Entities

[ ] Chapter 8

Issue

Compliance

Guide

[ ] Chapter 6

Provide

Ongoing

Informal Small

Entity

Guidance

[ ] Chapter 7

RFA Process Overview for Final Rules

Figure 2

Notes:

General: References to "Chapters" in the flowchart refer to the chapters in this guidance document. See Table of Contents.

If you have not gone through the SBAR Panel process for rule proposal, but think that you may not be able to certify your final rule, consult with your OGC attorney.

Under the RFA, you must prepare a FRFA and meet other requirements for your rule, unless the Administrator certifies that the rule will not have a significant

economic impact on a substantial number of small entities. See Chapter 1 for general information and Chapter 3 for more detailed information on preparation

of a FRFA.

1

2

iv
List of Acronyms

APA Administrative Procedure Act

CFR Code of Federal Regulations

FRFA Final Regulatory Flexibility Analysis

IRFA Initial Regulatory Flexibility Analysis

NPRM Notice of Proposed Rulemaking

OPA Office of Public Affairs (EPA)

OCIR Office of Congressional and Intergovernmental Relations (EPA)

OECA Office of Enforcement and Compliance Assurance (EPA)

OGC Office of General Counsel (EPA)

OIRA Office of Information and Regulatory Affairs (OMB)

OMB Office of Management and Budget

OPEI Office of Policy, Economics and Innovation (EPA)

ORPM Office of Regulatory Policy and Management (EPA)

RFA Regulatory Flexibility Act

RMD Regulatory Management Division (EPA)

SBA Small Business Administration

SBAC Small Business Advocacy Chair (EPA)

SBAR Small Business Advocacy Review

SBO Small Business Ombudsman (EPA)

SBREFA Small Business Regulatory Enforcement Fairness Act

SER Small Entity Representative

SISNOSE Significant economic Impact on a Substantial Number Of Small Entities

v
Table of

Contents

How to Use This Guide .............................................................................................................................................. i

........................................................................................................1

1.1 What is the RFA?.............................................................................................................................1

1.2 What is SBREFA? ............................................................................................................................1

1.3 What Do I Need to Know about the RFA and SBREFA?......................................................................1

1.4 What is EPA's Policy for Implementing the RFA? ..............................................................................2

1.5 What Rules Are Subject to the RFA? .................................................................................................3

1.6 What Part of RFA Compliance is Judicially Reviewable?....................................................................4

1.7 What is in this Guidance?................................................................................................................6

1.8 What are the RFA Procedural Requirements for Rule Proposal? .........................................................7

1.9 What are the RFA Procedural Requirements for Final Rule Promulgation?.........................................8

1.10 How Does this Guidance Differ from the 1999 Revised Interim Guidance? ........................................8

.................................................................9

2.1 RFA: The Basics ..............................................................................................................................9

2.2 What is a Screening Analysis and Why Should I Do One?................................................................10

2.3 Is a Screening Analysis Needed for My Rule? ..................................................................................11

2.4 What Basic Steps Make up a Screening Analysis? ............................................................................11

2.5 Step 1: Determining Which Small Entities are Subject to the Rule's Requirements............................12

2.6 Step 2: Determining Appropriate Measures of Economic Impacts ...................................................18

2.7 Step 3: How Should I Use the Screening Analysis to Determine If a Rule May Be Certified under the

RFA? ............................................................................................................................................22

2.8 Step 4: What Should I Do after Assigning My Rule to a Category? ....................................................29

List of Acronyms ......................................................................................................................................................v

Chapter 1

Introduction to the Regulatory Flexibility Act

Chapter 2

RFA/SBREFA Screening Analysis: Assessing Impacts on Small Entities
Chapter 3

Preparing the Initial and Final Regulatory Flexibility Analyses

Chapter 4

Implementing Small Entity Outreach: Informing, Listening, Responding

Chapter 5

The Small Business Advocacy Review Panel Process for Proposed Rules

Chapter 6

Small Entity Compliance Guides

............................................................................31

3.1 What are IRFAs and FRFAs? ..........................................................................................................31

3.2 What is the Relationship Between the IRFA/FRFA and a Rule's Broader Economic Analysis?.............33

3.3 What is the Relationship of the IRFA/FRFA to the SBAR Panel Process?............................................34

3.4 How Do I Prepare an IRFA? ...........................................................................................................35

3.5 How Do I Prepare a FRFA?.............................................................................................................39

..........................................................43

4.1 Small Entity Outreach: The Basics .................................................................................................43

4.2 What Does "Outreach" Mean? .......................................................................................................44

4.3 Is Small Entity Outreach Subject to FACA?.....................................................................................44

4.4 Should I Coordinate My Stakeholder Involvement Activities?.........................................................45

4.5 What Kind of Outreach Does the RFA Require? ..............................................................................45

4.6 Where Can I Get Assistance with My Small Entity Outreach? ..........................................................46

4.7 What Steps Can I Take to Reach Small Entities? ..............................................................................48

4.8 Where Can I Get More Information? ..............................................................................................50

..............................................................51

5.1 What is a Small Business Advocacy Review Panel? ..........................................................................51

5.2 What are the Statutory Panel Requirements? ..................................................................................51

5.3 What Help is Available to Me in Preparing for a Panel? ....................................................................53

5.4 What Circumstances Require EPA to Convene a Panel?...................................................................55

5.5 Can I Request a Waiver from the SBAR Panel Process?.....................................................................56

5.6 When Should We Convene a Panel?...............................................................................................57

5.7 What Should Be Done Before My Panel Can Be Convened? .............................................................57

5.8 What Can I Expect from Panel Review?..........................................................................................64

5.9 Consideration of the Panel Report During Development of the Proposed Rule and Initial

Regulatory Flexibility Analysis ......................................................................................................67

...........................................................................................................................69

6.1 EPA's Approach to Small Entity Compliance Guides.......................................................................69

6.2 What is the Goal in Writing a Compliance Guide?...........................................................................71

6.3 Who Participates in the Development of a Compliance Guide? .......................................................71
6.4 When Should I Develop a Compliance Guide? ...............................................................................72

6.5 What Sorts of Questions Should I Ask My Small Entity Reviewers?..................................................72

6.6 How Do I Document Development of the Guide? ...........................................................................72

6.7 Who Can Help Me with Distribution?............................................................................................73

6.8 How Do We Ensure that Compliance Guides are Kept Up to Date? ..................................................73

6.9 Template for Compliance Guides ..................................................................................................74

.............................................................................................................81

7.1 Overview of EPA's Section 213 Program.........................................................................................81

7.2 List of Compliance Assistance Resources........................................................................................83

...........................................................................85

8.1 Introduction.................................................................................................................................85

8.2 What's a Section 610 Review?........................................................................................................85

8.3 Are there Some Rules that are not Certified by EPA that will not have a Section 610 Review? .............86

8.4 How Do We Identify and Track Rules for Review?...........................................................................86

8.5 Scheduling Section 610 Reviews ...................................................................................................87

8.6 Must We Review a Rule More than Once? .......................................................................................87

8.7 What If a Rule has been Subsequently Amended? ...........................................................................87

8.8 Do We Review a Rule or a CFR Part or Section? ...............................................................................87

8.9 Conducting the Review.................................................................................................................88

8.10 Does the Line-by-line Review also Satisfy Section 610 Requirements? .............................................89

8.11 Announcing the Results of the Review ...........................................................................................89

8.12 Follow-up to the Section 610 Review.............................................................................................89

8.13 Example of "Prerule" Semi-annual Regulatory Agenda Entry ..........................................................89

8.14 Example Entry for Completed Section 610 Review.........................................................................91

8.15 Section 610 Judicial Review ..........................................................................................................92

Figure 1 RFA Process Overview For Proposed Rules ............................................................................................iii

Figure 2 Process Overview For Final Rules ..........................................................................................................iv

Figure 3 Screening Analysis Overview ...............................................................................................................14

Figure 4 Small Business Advocacy Review Panel Process for Proposed Rules .......................................................54

Figure 5 Small Entity Compliance Guides.........................................................................................................70

Table 1 Recommended Quantitative Metrics for Economic Impact Screening Analyses .......................................21

Table 2 Example SISNOSE Certification Decision Process...................................................................................24

8

Chapter 7

Ongoing Informal Small Entity Guidance

Chapter 8

Periodic Review of Final Rules as Required by RFA Section 610

Chapter 1

Introduction to the

Regulatory Flexibility Act

1.1 What is the RFA?

1.2 What is SBREFA?

1.3 What Do I Need to Know about the RFA and SBREFA?

President Carter signed the Regulatory Flexibility Act (RFA) into law on September 19,

1980. In enacting the law, the Congress found that "uniform Federal regulatory and reporting

requirements have in numerous instances imposed unnecessary and disproportionately

burdensome demands ... upon small [entities]. . . [T]he practice of treating all regulated

[entities] as equivalent may lead to inefficient use of regulatory agency resources, enforcement

problems and, in some cases, to actions inconsistent with the legislative intent of health, safety,

environmental and economic welfare legislation."

The RFA imposes both analytical and procedural requirements on EPA and other federal

agencies. The analytical requirements call for EPA to carefully consider the economic impacts

our rules will have on small entities. The procedural requirements are intended to ensure that

small entities have a voice when EPA makes policy determinations in shaping its rules. Together,

these requirements ensure that EPA carefully considers the effect our regulations may have on

small entities. However, the RFA's analytical and procedural requirements do not require EPA to

reach any particular result regarding small entities.

SBREFA is the Small Business Regulatory Enforcement Fairness Act, a regulatory reform

statute passed by the 104 Congress and signed into law by President Clinton on March 29,

1996. SBREFA (Pub Law No. 104-121) enacted a variety of provisions, including several

amendments to the Regulatory Flexibility Act, 5 U.S.C. section 601 , of particular

importance to EPA rulemakings. The Agency refers to the RFA as amended by SBREFA simply as

the RFA, but there are other SBREFA provisions as well.

In short, with respect to the Regulatory Flexibility Act (RFA), SBREFA established certain

formal procedural and analytical requirements (detailed below) for the limited number of rules

3

th

et seq

1

3 Regulatory Flexibility Act, Pub. L. No. 96-354, Sec. 2(a) (5 USC § 601 note).
developed by EPA with the potential to impose a significant economic impact on a substantial

number of small entities. More specifically, as a rulewriter, if your rule may impose a significant

economic impact on a substantial number of small entities (see Chapter 2) you most likely will

be required to prepare a formal analysis of the potential adverse economic impacts on small

entities, participate in a Small Business Advocacy Review Panel (proposed rule stage), and

prepare a Small Entity Compliance Guide (final rule stage).

SBREFA also made other changes to Agency regulatory practice as it affects small entities.

Many Agency actions under the RFA are now judicially reviewable, including decisions to certify

a rule as not having a significant economic impact on a substantial number of small entities, the

preparation of a regulatory flexibility analysis and periodic review of

final rules. SBREFA's other provisions include Subtitles A through C,

relating to enforcement of federal laws and regulations with respect to

small entities, and Subtitle E, wholly unrelated to the small entity

provisions of the rest of SBREFA, which provides for Congressional

review of virtually all final rules.

The purpose of the RFA is "to fit regulatory and informational

requirements to the scale of the businesses, organizations and

governmental jurisdictions subject to the regulation." To achieve this

principle, agencies are required to "solicit and consider flexible

regulatory proposals and to explain the rationale for their actions to

assure that such proposals are given serious consideration." The RFA

does not require an agency to 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 their ultimate choice of regulatory approach.

Since its enactment in 1980, the RFA has required every federal agency to prepare

regulatory flexibility analyses for any rule for which the agency is required to issue a notice of

proposed rulemaking under the Administrative Procedure Act or any other statute the

agency certifies that the rule "will not, if promulgated, have a significant economic impact on a

4

5

6

7

unless

1.4 What is EPA's Policy for Implementing the RFA?

4

5

6

7

The Regulatory Flexibility Act definition of small entities includes small businesses, small governments and small

organizations. The RFA references the definition on small business found in the Small Business Act, which

authorizes the Small Business Administration (SBA) to further define small business by regulation. The SBA's

small business definitions are codified at 13 CFR section 121.201. More information on the definition of “small”

can be found in Chapter 2.

For more information, see the document entitled June 1998,

available from OPEI or on EPA's Action Development Process Library intranet site:

http://intranet.epa.gov/adplibrary

Regulatory Flexibility Act, Pub. L. No. 96-354, Sec. 2(a) (5 USC § 601 note)

Id.

Congressional Review Act, Guidance for Rule Writers,

The Regulatory

Flexibility Act (RFA)

was amended by the

Small Business

Regulatory

Flexibility Act

(SBREFA) in 1996.

The Agency refers to

the RFA as amended

by SBREFA simply as

the RFA.

The Regulatory

Flexibility Act (RFA)

was amended by the

Small Business

Regulatory

Enforcement

Fairness Act

(SBREFA) in 1996.

The Agency refers to

the RFA as amended

by SBREFA simply as

the RFA.

2
substantial number of small entities." One important function of this guidance is to establish

workable guidelines for determining if a particular rule will have a "significant economic impact"

on a "substantial number" of small entities. Prior to the enactment of SBREFA, EPA exceeded the

requirements of the RFA by preparing regulatory flexibility analyses for every rule that would

have impact on number of small entities, regardless of the size of impact or the number

of small entities affected. That policy was embodied in the

guidance document dated April 1992 (1992 RFA Guidance).

When SBREFA became law in 1996, we developed additional procedures for full

compliance with SBREFA's multiple and various provisions. To ensure the Agency gave top

priority to this effort, a cross-Agency Task Force was established to develop comprehensive

procedures for our implementation of SBREFA. The efforts of the Task Force were reflected in the

guidance document dated February 5, 1997

(1997 Interim SBREFA Guidance) and the subsequent

dated March 29, 1999.

The SBREFA amendments also directed agencies to name a Small Business Advocacy

Chairperson (SBAC) to act as permanent chair of their review Panels. EPA's Small Business

Advocacy Chair is responsible for convening Small Business Advocacy Review (SBAR) Panels

and, among other things, overseeing policy decisions regarding certification that a rule will not

have a significant economic impact on a substantial number of small entities. Chapter 5 provides

detailed information on the SBAR Panel process.

As a threshold matter, the RFA requirement to prepare a regulatory flexibility analysis or a

any any

EPA Guidelines for Implementing the

Regulatory Flexibility Act

EPA Interim Guidance for Implementing the Small Business Regulatory Enforcement Fairness Act and

Related Provisions of the Regulatory Flexibility Act

"Revised Interim Guidance for EPA

Rulewriters: Regulatory Flexibility Act as Amended by the Small Business Regulatory Enforcement

Fairness Act

8

In view of

the changes made by SBREFA, however, the Agency decided to implement the RFA as written;

that is, a regulatory flexibility analysis as specified by the RFA will be required simply

because the rule has some impact on some number of small entities. Instead, such analyses will

be required only in cases where we will not certify that the rule will not have a

economic impact on a number of small entities. This approach allows us to manage

our resources such that we can consider the potential small entity impacts of all rules while

preparing full regulatory flexibility analyses for those rules warranting such analyses under the

RFA.

It remains EPA policy that program offices should assess the direct adverse impact

of every rule on small entities and minimize any adverse impact to the extent feasible,

regardless of the magnitude of the impact or number of small entities affected.

significant

substantial

not

1.5 What Rules Are Subject to the RFA?

8

This 2006 Guidance document supersedes and revokes all prior Agency guidance on the Regulatory Flexibility Act.

3
certification of no significant economic impact on a substantial number of small entities applies

only to:

under the

Administrative Procedure Act (APA) or any other statute, and

Exempt from the RFA requirement to prepare either a regulatory flexibility analysis or a

certification are:

Agency actions that are rules (e.g., orders or adjudications), and

rules that the Agency is by statute to propose before promulgating.

Most EPA rulemakings are subject to section 553 of the APA, which generally requires

that an agency issue a notice of proposed rulemaking and take comment on a rule before issuing

it. The APA, however, exempts from notice-and-comment requirements:

rules of agency organization, procedure or practice that do not substantially affect the

rights of non-agency parties;

rules for which the agency finds "for good cause" that notice and an opportunity to

comment are "impracticable, unnecessary, or contrary to the public interest;" and

rules relating to agency management or personnel or to public property, loans, grants,

benefits or contracts.

It should be noted that "direct final rules" (i.e., rules that the Agency issues without first

proposing them, that are withdrawn if anyone files an adverse comment)

and are therefore subject to the RFA requirements in this

guidance. For more information on direct final rulemaking see,

available on EPA's Action Development Process Library intranet site:

http://intranet.epa.gov/adplibrary.

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, you should consult those statutes and your

OGC attorney.















proposed rules subject to notice-and-comment rulemaking requirements

final rules promulgated under the notice-and-comment rulemaking

requirements

not

not required

of the APA.

are generally subject to

notice-and-comment requirements

Direct Final Rulemaking: Guidance

for EPA Rule Writers,

1.6 What Part of RFA Compliance is Judicially Reviewable?

Judicial review is the process whereby an adversely affected person can challenge an EPA

final regulatory action in Federal court if the statute so allows and ask the court either to vacate

4
or stay enforcement of the rule. During review of a rule, EPA must demonstrate that we complied

with not only the substantive statutory requirements of the implementing statute (e.g., the Clean

Air Act), but also with requirements contained in procedural statutes, such as the APA and RFA.

During judicial review, EPA also must demonstrate that our interpretation of the law is

reasonable in areas that we had discretion and that we had a rational basis for our regulatory

decision.

The SBREFA Amendments to the RFA added provisions that now allow a that

is by a final rule to seek review in court of an agency's compliance with the

following RFA requirements:

Section 601 - Establishing an alternative definition for small businesses, small

governmental jurisdictions, and/or small non-profit organizations;

Section 604 - Final regulatory flexibility analysis (FRFA);

Section 605(b) - Certification of the proposed or final rule and the factual basis for the

certification;

Section 608(b) - Delaying the completion of a FRFA for up to 180 days due to an

emergency; and

Section 610 - Periodic review of final rules that were not certified within ten years of

promulgation.

The RFA gives a reviewing court broad discretion in deciding what the appropriate

remedy should be if the court finds an agency has not complied with the RFA's requirements

(e.g., consulting with the Small Business Administration and providing notice and an

opportunity for comment before establishing an alternative small business definition or

preparing a meaningful FRFA). Such remedies may include vacating and/or remanding the rule

to the agency for further action or deferring enforcement of the rule against small entities.

Thus, even if you have fulfilled the requirements of your implementing statute, have

reasonably interpreted those statutory requirements in areas in which the agency has discretion

to do so, have explained on the record your rationale for selecting the option you did, but you

fail to comply with one or more RFA requirements or fail to adequately explain your

conclusions, a reviewing court decide to vacate, remand, or stay the rule on that basis.

Indeed, one agency previously had a rule vacated for basing its RFA analysis on an alternative

small entity definition it did not establish properly.

In addition, a rule may be challenged if the agency fails to adequately respond to adverse

comments challenging any aspect of the rule. This applies to an agency's failure to respond to

comments on the agency's certification, the factual basis for the certification, or the initial

regulatory flexibility analysis.

small entity

adversely affected

could











5
1.7 What is in this Guidance?

Assessing a Rule's Economic Impact on Small Entities.

Preparing the Initial and Final Regulatory Flexibility Analyses

Implementing Small Entity Outreach

Small Business Advocacy Review Panels

Small Entity Compliance Guides

.

.

.

.

The purpose of this Guidance is to help you, the rulewriter, to understand how the

requirements of the RFA fit into the Agency's Action Development Process.

When EPA initiates a regulatory development action, RFA compliance should be near the

top of the list of issues you address in your project plan or Analytic Blueprint. This guidance

outlines the analytical and sequential process that will apply to most rules subject to the RFA.

Figure 1 illustrates the RFA process for proposed rules and Figure 2 illustrates the RFA process

for final rules.

These are analyses of

economic impacts on small entities that you must prepare if you do not certify that your rule

does not have a significant economic impact on a substantial number of small entities

(SISNOSE). These analyses are discussed in detail in .

If the screening analysis indicates that your rule may

have some impact on some small entities, or you find that you need more information to make

that determination, will provide you with guidance for identifying and engaging in a

dialogue with representatives of small entities that may be subject to the rule under

development.

If the screening analysis of your rule indicates that

the rule is likely to have a SISNOSE, you should plan to prepare for a Small Business Advocacy

Review Panel. In you will find detailed information about how you should go about

complying with the requirement that the Agency convene a Small Business Advocacy Review

Panel for proposed rules which are likely to have a SISNOSE.

If you must prepare a final regulatory flexibility analysis for

your (i.e., you do not certify the rule as not having a significant economic impact on a

substantial number of small entities), the RFA also requires you to prepare a small entity

compliance guide. answers questions regarding what constitutes such a guide and

gives guidance for designing a small entity compliance guide.

9

10

Once you have determined that your

rule is subject to the RFA (i.e., you are required to publish a notice of proposed rulemaking

under the APA or any other statute), the first thing you need to do for RFA compliance is to

determine what, if any, impact your rule may have on small entities. To do this, you need to

perform a on your proposed final rules. Screening analyses are discussed in

detail in of this guidance.

screening analysis and

Chapter 2

Chapter 3

Chapter 4

Chapter 5

final rule

Chapter 6

9

EPA's Action Development Process: Guidance for EPA Staff on Developing Quality Actions,

Guidelines for Preparing Analytic Blueprints,

June 30, 2004. EPA's Action

Development guidance can be found at EPA's Action Development Process Library intranet site:

http://intranet.epa.gov/adplibrary.

See June 28, 2004, (available at http://intranet.epa.gov/adplibrary) or

contact OPEI.

10

6
Ongoing Informal Small Entity Guidance

Periodic Review of Rules

Please note:

.

.

1.8 What are the RFA Procedural Requirements for Rule Proposal?

When planning for the post-promulgation stage of

your rule, refer to the discussion in regarding the RFA provision on giving informal

advice to small entities in response to inquiries.

RFA section 610 requires a periodic review of promulgated rules

which have or will have a significant economic impact on a substantial number of small entities.

explains the Agency's strategy for continued compliance with this requirement.

This guidance is not a binding Agency procedural rule. In determining and

mitigating impacts on small entities, we anticipate that there will be many situations in which

Agency staff and management must exercise considerable judgment. Nevertheless, we intend this

guidance to provide you with an analytic and sequential structure that should be sufficient for

most covered rulemakings. Should you come across a situation that does not appear to be

discussed in this guidance, or a situation where an approach other than that suggested by this

guidance makes sense, you need to consult with your Regulatory Steering Committee

representative, the Small Business Advocacy Chair in the Office of Policy, Economics and

Innovation (OPEI) and attorneys from the Office of General Counsel (OGC).

. You must prepare a certification statement

and a statement of factual basis supporting the certification that your rule will not have a

significant economic impact on a substantial number of small entities. The RFA section 605(b)

requires you to publish in the "a statement providing the factual basis for such

certification." That certification and the factual basis for the certification are subject to judicial

review. Accordingly, it is important that you provide sufficient detail in your factual basis to

explain why the Agency is certifying the rule.

Generally, the RFA requires EPA to an Initial

Regulatory Flexibility Analysis (IRFA) for each proposal, the Administrator that

the rule, if promulgated, will not have a significant economic impact on a substantial number of

small entities (see Figure 1).

Under the RFA, EPA a Small Business

Advocacy Review Panel for a rule under development, the Agency that the rule

will not impose a significant economic impact on a substantial number of small entities. Each

Chapter 7

Chapter 8

If the RFA APPLIES to your rule and your screening analysis indicates your rule most

likely WILL NOT have a significant economic impact on a substantial number of

small entities:

OR

If the RFA APPLIES to your rule and your rule most likely WILL have a significant

economic impact on a substantial number of small entities:

prepare

unless certifies

AND

must convene

unless certifies

Certification statement and statement of factual basis

Federal Register

Initial Regulatory Flexibility Analysis.

Small Business Advocacy Review Panels.

~ ~

~ ~

7
Panel includes representatives from the Small Business Administration, the Office of

Management and Budget, and EPA. The Panels conduct outreach to individuals representative of

small entities likely to be subject to the rule and prepare a report to the EPA Administrator for

each rulemaking on the potential small entity impacts of the rule and on potential ways to

reduce those impacts (see Figure 1). More detailed information on the Small Business Advocacy

Review Panel process is contained in Chapter 5.

. You must prepare a certification statement

and a statement of factual basis to support the certification that your rule will not impose a

significant economic impact on a substantial number of small entities. The RFA section 605(b)

requires you to publish in the "a statement providing the factual basis for such

certification." Under SBREFA, that certification and the factual basis for the certification are

subject to judicial review. Accordingly, it is important that you provide sufficient detail in your

factual basis to explain why the Agency is certifying the rule.

For each rule that EPA promulgates and does not certify as

not having a significant economic impact on a substantial number of small entities, the Agency

must prepare a Final Regulatory Flexibility Analysis (FRFA; see Figure 2). Importantly, RFA

requires that each FRFA summarize the significant issues raised by public comments on the

IRFA, assess these issues, and describe any changes made in response to the public comments.

For each final rule where RFA requires preparation of a FRFA,

the Agency must also issue a small entity compliance guide providing a Plain Language

explanation of how to comply with the regulation (see Figure 2). More guidance on developing a

small entity compliance guide can be found in Chapter 6.

This guidance incorporates the information on preparing initial and final regulatory flexibility

analyses that was contained in the

April 1992. That information is contained in a new Chapter 3 in this guidance. In addition, a

revised Chapter 2 based on the Agency's continuing implementation of the RFA is included. A

few minor editorial changes have been made to other chapters such as deleting outdated contact

information and updating footnote references to other documents.

If the RFA APPLIES to your rule and your analysis along with any information or analysis

developed since the proposal indicates your rule WILL NOT have a significant economic

impact on a substantial number of small entities:

OR

If based on your analysis, you are not certifying that your rule WILL NOT have a

significant economic impact on a substantial number of small entities:

AND

Certification statement and statement of factual basis

Federal Register

Final Regulatory Flexibility Analysis.

Small Entity Compliance Guide.

~ ~

~ ~

EPA Guidelines for Implementing the Regulatory Flexibility Act,

1.9 What are the RFA Procedural Requirements for Final Rule Promulgation?

1.10 How Does this Guidance Differ from the 1999 Revised Interim Guidance?

8
Chapter 2

RFA/SBREFA Screening Analysis:

Assessing Impacts on Small

Entities

This chapter describes the screening process for determining whether a regulatory

flexibility analysis or a certification of no significant economic impact on a substantial number of

small entities (SISNOSE) should be prepared for a proposed or final rule.

The purpose of the Regulatory Flexibility Act (RFA) is to ensure that, in developing rules,

agencies identify and consider ways of tailoring regulations to the size of the regulated entities.

The RFA does not require an agency to minimize a rule's impact on small entities if there are legal,

policy, factual or other reasons for not doing so. The RFA generally requires that for certain rules,

you:

to the extent feasible, the on small entities subject to the

rule,

for reducing any significant economic

impact on a substantial number of such entities, and

your ultimate choice of regulatory approach.

This chapter, and Chapter 3, provide you with guidance on how to

comply with the analytical requirements of the RFA and EPA'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.







,determine economic impact

explore regulatory options

explain

even where the Agency

Unless the Agency certifies that a rule subject to the RFA will not have a SISNOSE,

sections 603 and 604 of the RFA require that you prepare a regulatory flexibility analysis meeting

the applicable statutory requirements. More information on preparation of regulatory flexibility

analyses can be found in Chapter 3. It bears repeating, however, that

2.1 RFA: The Basics

The Regulatory

Flexibility Act

(RFA) was

amended by

the Small

Business

Regulatory

SISNOSE

ignificant

economic

mpact on a

ubstantial

umber

f

mall

ntities

S

I

S

N

O

S

E

Impacts on Small Entities

9
certifies that a rule will not have a SISNOSE, EPA's policy is to make an assessment of the

rule's direct adverse impact on any small entities, to engage the potentially regulated

entities in a dialog regarding the rule, and to minimize the impact of the rule on small

entities to the extent feasible while remaining consistent with applicable statutory

requirements.

not

As always, program managers should determine what level of outreach is

appropriate given the expected level of impact.

Once you have determined that your rule is subject to the RFA (see Chapter 1 and

Section 2.3 of this Chapter), it is most important for you to determine if your rule may have a

SISNOSE. Generally, this determination is made by conducting a "screening analysis." For

purposes of the RFA, a screening analysis is an assessment of the potential economic impacts of a

rule on small entities and generally indicates whether you can certify the rule as not having a

SISNOSE. Under the RFA and SBREFA, you must either:

Certify that the rule will have a SISNOSE (5 U.S.C. section 605(b)); or

Undertake the following activities:

- prepare a Small Entity Compliance Guide (SBREFA section 212, PL 104-

121 as amended by Pub. L. Number 110-28), see Chapter 6.

The RFA does not analytically define the terms or with regard to

extent of economic impact and number of small entities affected. In this chapter we suggest

guidelines for determining if a particular rule may have a SISNOSE. We recognize that there can

be no one-size-fits-all methodology for making this determination. Therefore, we recommend

specific approaches but leave you the flexibility to use alternative methods or reach different

conclusions where appropriate in the context of a particular rule. However, remember that the

rationale underlying your ultimate conclusions should be included in the rulemaking record and

is judicially reviewable.

It is important to note that a screening analysis is not the same as an initial or final

regulatory flexibility analysis (IRFA/FRFA). IRFA/FRFAs analyze a rule's economic impact on

small entities, including alternative regulatory or policy options that would minimize significant

economic impacts. Chapter 3 describes the requirements related to IRFAs and FRFAs. The

Agency must prepare an IRFA/FRFA for rules that are subject to the RFA unless the Agency

certifies that the rule will not have a SISNOSE (5 U.S.C. sections 603-605). A screening analysis,

therefore, serves as a means by which EPA determines and documents its decision to either

certify that a rule will not have a SISNOSE or prepare the IRFA/FRFA, convene a Small Business

Advocacy Review Panel, and prepare a Small Entity Compliance Guide. It may also be used to





- prepare a regulatory flexibility analysis (5 U.S.C. sections 603-604), see

Chapter 3;

- convene a Small Business Advocacy Review Panel (5 U.S.C. section 609),

see Chapter 5; and

significant substantial

2.2 What is a Screening Analysis and Why Should I Do One?

2.2.1 Is a Screening Analysis the Same as a Regulatory Flexibility Analysis?

10
provide the required factual basis for a certification of no SISNOSE.

The difference between a screening analysis and the broader economic analysis described

in Executive Order (E.O.) 12866 is that a screening analysis focuses exclusively on economic

impacts to small entities, while a broader economic analysis focuses on costs and benefits to

society as a whole.

When a general economic analysis is conducted for a rule (e.g., it is a "significant

regulatory action" under E.O. 12866), the screening analysis can be conducted as part of the

larger economic analysis, provided that the information on small entity impacts is set out clearly.

Each economic analysis performed for a given rule should strive to make consistent assumptions

and interpretations of results. However, in cases where different approaches call for alternative

assumptions, those differing assumptions should be highlighted and the reasons for using them

should be clearly explained.

However, as a matter of Agency policy, even if your rule is not subject to the RFA,

In addition, even if your rule is not subject to the RFA, the

preambles to the proposed and final rules should include a "Regulatory Flexibility" section that

explains why the rule is not subject to the RFA.

If you have determined that your rule is subject to the RFA, you should conduct a

11

12

Only rules that are required to undergo notice and comment under the Administrative

Procedure Act (APA), or other applicable statutes, are subject to the requirements of the RFA (5

U.S.C. sections 603-604). Therefore, if your rule is required by statute to undergo notice and

comment, it is subject to the RFA and you do not need to prepare a regulatory flexibility

analysis or a certification of no SISNOSE. See Section 1.5 for a more complete discussion of

which rules require notice and comment.

not

not

to the

extent that you foresee that your rule will have an adverse economic impact on small

entities, you should assess those impacts and make efforts to minimize them through

consultation with the small entities likely to be regulated, while remaining consistent with

applicable statutory requirements.

2.2.2 How is a Screening Analysis Different from the Economic Analysis

Described in Executive Order 12866?

2.3 Is a Screening Analysis Needed for My Rule?

2.4 What Basic Steps Make up a Screening Analysis?

11

12

For more information on Executive Order 12866's economic analysis - see EPA's Action Development Process

Library intranet site: http://intranet.epa.gov/adplibrary/statutes.htm#ombreview

For example, the simple screening methods outlined in this Chapter assume that affected entities absorb the full cost of

the regulation, while the broader economic analysis may assume some cost pass-through. An analyst choosing to

examine cost pass-through to inform the SISNOSE determination should adopt assumptions that are consistent with

relevant assumptions made in other economic analyses conducted for the rule.

1
screening analysis to determine if you can certify the rule as not having a SISNOSE. This section

provides an overview of the four basic steps that make up a screening analysis. This approach is

also illustrated in . More details on specific components of the approach are provided in

Sections 2.5 through 2.8. Generally, this screening analysis process is applicable to both the

proposed and final versions of your rule, since the RFA requires that a regulatory flexibility

analysis or a certification be prepared for each version (5 U.S.C. sections 603-604). The four

steps in the screening analysis process are:

Determine which small entities are subject to the rule's requirements (see Section

2.5);

Select appropriate measures for determining economic impacts on these small

entities and estimate those impacts (see Section 2.6);

Determine whether the rule may be certified as not having a SISNOSE (see

Section 2.7); and

Document the screening analysis and include the appropriate RFA statements

in the preamble (see Section 2.8).

The first step in the screening analysis process is determining which, if any, small entities

are subject to the rule's requirements. This step involves three activities:

Identify the entities or types of entities (regardless of size) subject to the rule's

requirements (Section 2.5.1);

Define "small" for each type of entity (Section 2.5.2); and

Determine whether it is likely that any of the entities subject to the rule's

requirements are small (Section 2.5.3).

It is likely that the types of entities regulated by the rule were identified during the

development of the rule and preparation of the primary economic analysis. For a screening

analysis, you should re-examine these entities to identify those small entities that are subject to

Figure 3

13

Step 1

Step 2

Step 3

Step 4

·

·

·

2.5 Step 1: Determining Which Small Entities are Subject to the Rule's Requirements

2.5.1 Identify the Types of Entities Subject to the Rule's Requirements

13 If a program is not planning to certify that a proposed or final rule does not have a SISNOSE, then a screening

analysis is not required because a regulatory flexibility analysis will be prepared. Frequently, however, the

screening analysis is a necessary step in determining whether to certify a rule as not having a SISNOSE.

12
the rule's requirements.

The determinative question is "who is subject to the requirements of the rule?" If a small

entity will have obligations imposed on them directly by the rule, then the small entity is subject

to the requirements of the rule and it should be included in the RFA screening analysis. If a small

entity does not have an obligation imposed on them directly by the rule, it should not be

included in the analysis. This is true even if the entities are included in the rule's broader

economic analysis, either for purposes of complying with Executive Order 12866 or the

Unfunded Mandates Reform Act.

Further, you should analyze who is subject to the requirements of the rule even if the rule

is either not immediately enforceable or does not impose immediately applicable requirements on

those subject to the rule. You should perform this analysis as long as you know: (1) who will be

regulated; and (2) what requirements will be imposed. For example, the promulgation of effluent

limitations guidelines in the water program does not result in imposition of requirements on

direct dischargers until the limitations are included as conditions in the discharger's NPDES

permit. Either EPA or States must take some action before a specific discharger must comply with

the requirements. We can, however, generally develop this screening assessment (and a

Regulatory Flexibility Analysis if needed) because EPA must include conditions implementing

guidelines in any permits it issues and State laws generally must be at least as stringent as EPA's.

Moreover, EPA knows who will be regulated (we define that in each effluent limitation guideline).

We can perform a screening analysis premised on a reasonably clear prediction as to who will be

regulated and with what economic impact.

The RFA provides separate definitions for what constitutes "small" for three types of

entities:

small businesses

small governmental jurisdictions, and

small organizations.

Given that the SISNOSE determination is subject to judicial

review, it is important to limit the screening analysis to what is needed to make the

SISNOSE determination.14







2.5.2 Define "Small" for Each Type of Entity

14 EPA believes that only rules that will have a significant economic impact on a substantial number of

small entities that are subject to the rule require an IRFA or FRFA, since the purpose of both analyses is to identify

adverse impacts on small entities and discuss regulatory alternatives that significant economic impacts on

small entities (see 5 U.S.C. section 603-604). Thus, rules that regulatory burden, or otherwise have a positive

net economic effect on the small entities subject to the rule, do not require an IRFA or FRFA.

direct adverse

minimize

relieve

13
14

Screening Analysis Overview

Figure 3

Identify the types of

entities (regardless of

size) that are subject to

the rule

Define “small” for each

type of entity

Are any

small entities

subject to the

rule?

Select measure(s) for assessing

economic impacts and estimate

impacts

NO

YES

Step 1

(Section 2.5)

Step 2

(Section 2.6)

Should

the rule be certified as having

no SISNOSE under

RFA?

Assign rule to a

SISNOSE

certification category

Certify the rule as having no

SISNOSE and provide a

statement of factual basis for why

no small entities are subject to the

regulation

Certify the rule as having no

SISNOSE and provide a

statement of factual basis

Conduct activities required for

rules that are not certified as

having no SISNOSE (see

Chapters 3-6)

Step 3

(Section 2.7)

Step 4

(Section 2.8)

Document the Analysis

YES

NO
Under the RFA the Agency can adopt alternative definitions for small business, small

organization and small governmental jurisdiction provided that the agency follows procedures

set out in the statute (5 U.S.C. section 601). Section 2.5.5 discusses when it may be appropriate

to apply an alternative definition and the procedures to follow when establishing an alternative

definition.

The RFA defines "small governmental jurisdiction" as the government of a city, county,

town, township, village, school district, or special district with a population of less than 50,000

(5 U.S.C. section 601(5)). For the purposes of the RFA, States and tribal governments are not

considered small governments.

The RFA defines "small organization" as any "not-for-profit enterprise which is

independently owned and operated and is not dominant in its field" (5 U.S.C. section 601(4)).

In determining whether any small entities are subject to your rule's requirements, you

should first group the entities subject to the rule by type (i.e., business, government, nonprofit

entity). Next, for each type of entity, apply the definition of "small," or an appropriate alternative

definition that the Agency has adopted or intends to adopt in accordance with the procedures

established by the RFA (see Section 2.5.5).

Some rules may include special provisions to minimize economic impacts on certain

classes or categories of entities otherwise subject to the particular rule. These classes or categories

may, in some cases, include or be limited to small entities or subsets of small entities. In cases

where the universe of entities to which such provisions apply is not limited to "small entities" as

What is a "small business"?

What is a "small governmental jurisdiction"?

What is a "small organization”?

The RFA incorporates and uses the definition of "small business" found in the Small

Business Act (5 U.S.C. section 601(3)). The Small Business Act authorizes the Small Business

Administration (SBA) to define "small business" by issuing regulations. The SBA periodically

reviews and reissues these definitions. SBA has established size standards for various types of

economic activities, or industries, under the North American Industry Classification System

(NAICS). These size standards generally define small businesses based on the number of

employees or annual receipts. The current version of SBA's size standards can be found at

http://www.sba.gov/size. that the SBA definition of a small business applies to a firm's

parent company and all affiliates as a single entity.

Note

2.5.3 Determine Whether Any of the Entities Subject to the Rule are Small

2.5.4 What is the Relationship Between the Definition of "Small" Used in the

Analysis and the Definition (if any) Used in the Rule?

15
defined in the RFA, the provisions of such rules may employ a definition of small entity for those

entities subject to the special provisions that is different from the definition used for the RFA

analysis. This is acceptable since the definitions are used for different purposes. The RFA does

not require regulatory relief to be granted to small entities. For example, it may be the case that

only a subset of the small entities captured in the screening analysis' definition faces significant

economic impacts. In such a case, the rule might provide relief to only the subset of small entities

most in need of special treatment. You do not need to propose an alternative size standard under

the RFA to provide regulatory flexibility to a subgroup of the small entities most affected by the

rule.

It may also make sense to define "small" for environmental regulatory purposes in terms

other than revenue or number of employees--the common SBA size measures for characterizing

business entities. For example, the regulations for permitting concentrated animal feeding

operations (CAFOs) require only that animal feeding operations designated as "small CAFOs"

must obtain permits. EPA's regulations define "small CAFOs" in terms of, among other things,

the numbers of animals they confine, rather than revenues or employees, because the number of

animals relates to the degree of environmental impact. While such an environmentally relevant

definition may not correlate exactly with the definition used in the regulatory flexibility analysis,

it may nonetheless offer an environmentally appropriate way to provide relief to most "small

entities" as defined by the RFA. In the case of the CAFO rules, while a few small entities are

regulated as large CAFOs because they happen to confine large numbers of animals, the

regulatory definition of small CAFO nonetheless excludes from coverage hundreds of thousands

of animal feeding operations that are "small" both in terms of the degree of their environmental

impact and in terms of the SBA size standards.

Section 601 of the RFA allows you to establish an alternative definition of small for the

entities subject to your rule when the definition is "appropriate to the activities of the agency." An

alternative definition of small governmental jurisdiction must also be based on "such factors as

location in rural or sparsely populated areas or limited revenues due to population of such

jurisdiction" (5 U.S.C. section 601(5)).

In general, there are several situations in which an alternative definition may be

appropriate:

Section 601(3) of the RFA adopts the SBA size standards established under

 SBA's size standards are not most appropriate for considering impacts on small entities subject to

the rule.

2.5.5 Alternative Small Entity Definitions

2.5.5.1 In What Situations Should I Consider Establishing an Alternative Small

Entity Definition? 15

15 When developing and applying alternative definitions of small business, small government and small nonprofit

organization, you should be careful to develop alternative definitions that do not confuse small entities with entities of

any size 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. 16
section 3 of the Small Business Act (15 U.S.C. 632) which are primarily intended to

determine whether a business entity is eligible for government programs and preferences

reserved for small businesses (13 CFR 121.101), i.e., the SBA size standards are primarily

intended to "seek to ensure that a concern that meets a specific size standard is not

dominant in its field of operation" (13 CFR 121.102(b)). See also section 632(a)(l) of the

Small Business Act. You may determine that the SBA size standard for some industrial

sectors are not generally the best standards to use in assessing the potential impacts on

small businesses. For example, in some industrial sectors, businesses that are considered

large multi-national companies in other contexts (such as when regulated under the

Federal Insecticide, Fungicide and Rodenticide Act or Toxic Substances Control Act) may

qualify as small businesses when applying SBA size standards that are based on number

of employees.

You may be limited in the precision with which you can apply a size definition

because of data or methodology used for the analysis. For example, a rule may cover

businesses in many different industries encompassing many different SBA size categories.

Using the SBA size definition specific to each industry may be methodologically difficult.

In these

instances, the program may prefer to use the definition contained in the applicable

environmental statute not only in the rule itself, but also in the RFA analysis. For

example, the Safe Drinking Water Act has numerous provisions for separate requirements

for "small systems," which are defined in terms of the number of customers served, not

employees or revenue of businesses, or the population of the governmental jurisdiction.

Another example of a statutory-specific definition of "small business" is the one found in

the Pesticide Registration Improvement Act of 2003 (PRIA). Under PRIA, a small business

is defined in terms of both its number of employees and its annual global gross revenues

from pesticides.

The RFA specifies procedures for adopting an

alternative definition. For all alternative definitions you

must publish the alternative definition in the

and provide an opportunity for public comment (5

U.S.C. section 601). For alternative definitions of "small

business" you must also consult with the Chief Counsel for

Advocacy of the SBA (5 U.S.C. section 601(3)). Your

consultation may include a letter to SBA's Chief Counsel for

Advocacy. Document any consultation with SBA to establish

an alternative small business size standard (e.g., letters,

email, phone conversations) and place the documentation

in the rulemaking docket.

If you plan to adopt an alternative definition, it is





The Act's definitions are difficult to implement given methodological or data limitations of the

analysis.

The applicable environmental statute already employs a suitable alternative definition.

Federal

Register

2.5.5.2 What Procedures Should I Follow to Establish an Alternative Small Entity

Size Standard?

1

The Regulatory

Flexibility Act (RFA)

was amended by the

Small Business

Regulatory

Flexibility Act

(SBREFA) in 1996.

The Agency refers to

the RFA as amended

by SBREFA simply as

the RFA.

To Establish an

Alternative Definition of

"Small":

Provide an opportunity

for public comment;

Publish the alternative

definition in the

and

Consult with the Chief

Counsel for Advocacy of

the SBA (for alternative

definitions of "small

business").

Federal

Register,
extremely important to comply with these specific procedures. At least one federal agency has

had a rule vacated for basing its RFA analysis on an alternative small entity definition it did not

properly establish. In addition, remain cognizant of the timing of the establishment of an

alternative definition in relation to a Panel (if required), so as not to exclude any small entities

from the Panel process by prematurely employing an alternative definition. In light of these

potential pitfalls,

If you decide not to adopt a proposed alternative

definition, you should use the SBA size standards or other previously established alternative

small entity definition for your rulemaking.

You should specify clearly in the rulemaking notice in which an alternative definition is

proposed whether you are proposing to use the alternative definition for:

that particular rulemaking only,

that rulemaking and any subsequent amendments, or

that rulemaking as well as all subsequent rulemakings regulating the same small entities

under the same authority.

If you fail to clearly state the applicability of the alternative definition to later

rulemakings in your original notice or proposed rule, you may have to repeat the process of

adopting the alternative definition for subsequent rules (i.e., give notice, take comment and, for

an alternative definition of "small business," consult with SBA). Once an alternative definition is

established for a particular set of rules, be sure to use that definition for all of those rules unless

you adopt a different definition. Adopting a new alternative definition will involve the same

process described above. Re-establishing a previous definition also requires notice and

opportunity for public comment and may require consultation with SBA if re-establishing a

definition for "small business."

For purposes of the screening analysis, the question for the rulewriter is: can we properly

certify that the rule, if promulgated, will impose a SISNOSE. To answer this question, you

it is imperative that you consult with your Regulatory Steering Committee

representative and the Small Business Advocacy Chair staff before you proceed with the

adoption or use of an alternative definition

significant substantial

not

.







The analytic objective of your screening analysis is to allow you to determine whether or

not you may certify your rule as not having a SISNOSE. The RFA does not establish a formula for

estimating the economic impact of a rule on small entities. Nor does it define the terms

or as they pertain to the extent of economic impact and the number of

small entities affected. Based on past experience, we've identified several methods or quantitative

measures that may be used to assess economic impact on small entities. You have the flexibility

to select the most appropriate method for your rulemaking. 16

2.6 Step 2:Determining Appropriate Measures of Economic Impacts

16 Regardless of the analytic methods you use, you should explain your reasons for selecting the methods in the

documentation of the analysis.

18
should address two subquestions:

1) What is the best way to measure a rule's economic impacts on affected

entities?

2) What level of economic impact (i.e., threshold), on what number of small entities

is sufficient to establish that there may be a SISNOSE and the rule should thus not be

certified?

This section discusses what you should do to answer the first subquestion. Section 2.7 addresses

the second sub-question.

In addition to this guidance document, the Agency has published a comprehensive

manual on conducting economic analysis, (September

2000), which is available at http://www.epa.gov/economics . Chapters 8 and 9 of the

provide a comprehensive discussion of methods for estimating costs and economic impacts of

proposed regulations. The also discuss methods for considering equity and

distributional concerns as part of the economic analysis of the rule. The economic impacts on

small entities are discussed as a specific subset of total impacts. You should refer to the

for an in-depth discussion of these methods.

Before beginning a quantitative analysis of the economic impact of the rule on small

entities, you should qualitatively think through the actions a small entity will have to take to

comply with the rule and how those actions might differ from those taken by large companies.

For example, will small entities incur the same initial compliance costs - such as for buying and

installing equipment, establishing new procedures, and/or record keeping - as large entities, or

are initial costs likely to be proportionate to the size of the company? Will initial compliance

costs be high enough that entities will need to obtain financing and, if so, do small entities have

the same access to financing as large entities? Will small entities have to obtain access to

professional or administrative services that large entities might maintain "in-house?”

Although the broader economic analysis for a rule may identify and include some

separate cost elements for small entities, the economic analysis may not identify every

meaningful aspect of costs to small entities (see Section 2.2.2 for more information on the

relationship between the broader economic analysis and the screening analysis). A

comprehensive qualitative assessment provides a good foundation for quantitative analysis of the

regulation. A thorough understanding of the compliance procedures will help you develop

meaningful quantitative analyses of the rule, such as selecting appropriate methods for

estimating economic impacts, collecting relevant data, and using professional judgement to

compensate for missing data. A thorough, qualitative analysis of small entities' compliance

actions, and associated costs, provides the foundation for the SISNOSE determination.

If a qualitative assessment indicates that you may not be able to certify your rule, you

may choose to prepare an IRFA (and, later, FRFA) on that basis and avoid the need for a detailed,

Guidelines for Preparing Economic Analyses

Guidelines

Guidelines

Guidelines

2.6.1 The Role of Qualitative Analysis

19
quantitative screening analysis, although the IRFA (or FRFA) itself will require some quantitative

information. IRFAs and FRFAs are discussed in Chapter 3. Where a qualitative assessment indicates

that a rule will have a SISNOSE, you may be able to certify the rule on that basis or you 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.

Because the decision to certify a rule may be judicially reviewable, you should prepare a

quantitative analysis whenever possible to support a decision to certify.

Assessment of economic impacts on small entities can include many different factors, such

as the cost of compliance relative to the entities' income or assets, the ability of the entities to pass

compliance costs through to customers or suppliers, and the relative economic impacts on small

entities compared to those on large entities. The most appropriate method for a particular

screening analysis will usually depend on the data available and on the methodology used for the

economic analysis of the rule. In general, more detailed analysis requires more data and resources.

Therefore, it is preferable to start with a relatively simple methodology and add more complexity as

needed to reach an acceptable level of confidence in the determination of whether the rule may

have a SISNOSE.

The simplest method of screening for economic impacts on small entities is the direct

compliance cost method. This method may be used as an initial screening analysis. More

sophisticated analyses can be conducted later to refine the estimate if a determination about

SISNOSE is not clear from the initial analysis (see Section 2.7.4 for more information on additional

analysis).

Under the direct compliance cost method, the compliance costs faced by small entities

(estimated as the capital, operating, maintenance, administrative, and other direct compliance costs

associated with the rule) are compared to one or more financial statistics (e.g., sales, profits,

operating expenditures) of the regulated small entities. Annualizing the compliance costs is

appropriate when a stream of cash flows or a large capital expenditure is involved with compliance.

There are several variations of this method that differ by the financial statistic used as the basis of

comparison. Selection of the appropriate financial statistics depends on the type of small entity

being regulated and the availability of financial data on those small entities.

Conceptually, we believe that a profits test represents the most accurate screening analysis

not

You should consult your

Regulatory Steering Committee representative and the Small Business Advocacy Chair when

you anticipate relying solely on a qualitative analysis to certify a rule.

17

18

2.6.2 Quantitative Analysis

17

18

Note that an analysis of relative impacts should not be used as the sole basis for certifying a rule as not having a

SISNOSE. The phrase "significant economic impact on a substantial number of small entities" describes an

absolute measure of economic impacts on small entities, not one that is relative to economic impact on large

entities. Nevertheless, an analysis of relative economic impacts can be useful to characterize the distribution of

effects.

Chapter 9 of EPA's provides more information on estimating compliance

costs.

Guidelines for Preparing Economic Analyses

20
for determining whether a regulation will pose a significant economic burden on small

businesses. However, because of procedural and operational issues associated with the

implementation of a profits test, a sales test remains our preferred quantitative guideline at this

time. Because data on profits are limited, especially for small businesses, routine use of a profits

test would require us to estimate profits for small businesses where there are currently

insufficient data. A summary of preferred and alternative metrics for estimating the economic

impacts on each type of small entity (businesses, governments, nonprofit organizations) is

presented in

While you may choose to apply any of the suggested measures based on the type of

information available, the table indicates a preferred guideline for each type of small entity:

- annualized compliance cost as a percentage of sales;

- annualized compliance cost as a percentage of annual

government revenues; and

- annualized compliance cost as a percentage of annual

operating expenditures.

Table 1.

For small businesses

For small governments

For small nonprofit organizations

19

TABLE 1: Recommended Quantitative Metrics for Economic Impact Screening Analysesa

( indicates preferred measures)

SMALL BUSINESSES

Sales Test Annualized compliance costs as a percentage of sales

Cash Flow Test Debt-financed capital compliance costs relative to current cash flow

Profit Test Annualized compliance costs as a percentage of profits

SMALL GOVERNMENTAL JURISDICTION

Revenue Test Annualized compliance costs as a percentage of annual government

revenues

Income Test Annualized compliance costs to household (per capita) as a

percentage of median household (per capita) income

SMALL NONPROFIT ORGANIZATIONS

Expenditure Test Annualized compliance costs as a percentage of annual

operating expenditures

Asset Test Annualized compliance costs as a percentage of total assets

a The selection of threshold values for determining whether a given level of economic impact constitutes

a "significant economic impact" is discussed in Section 2.7.1.

When sales data are unavailable, revenue or receipts (though technically different than sales) can usually serve as

a reasonable proxy for sales.

19

2
2.7 Step 3: How Should I Use the Screening Analysis to Determine If a Rule May Be

Certified under the RFA?

Each of the measures shown in Table 1 will yield quantitative estimates of the economic

impact on the small entities subject to the rule. The question addressed in this section is how to

interpret those values in the context of determining whether your rule may be certified as "no

SISNOSE". Since there can be no single formula to produce a consistently appropriate answer,

the Agency encourages program offices to consider the unique factors associated with a

particular rulemaking in order to reach a conclusion appropriate to the case at hand. To assist

you with this process, EPA has developed general guidelines for determining when a rule can be

certified as not having a SISNOSE.

Under the Agency's general guidelines, rules are assigned to one of three SISNOSE

certification categories based on a comparison of the economic impacts (e.g., one or more

measures such as those listed in Table 1) to specific thresholds established based on the

circumstances of your rule and the number of entities with impacts above the threshold(s). The

thresholds you define for the circumstances of your rule define what level of impact is

considered and the number of small entities that is considered Sections

2.7.1 and 2.7.2 discuss how you may define the significant impact and substantial number

thresholds. Comparing the magnitude of the impacts, and the number of small entities facing the

impacts, to the thresholds will determine which SISNOSE certification category you assign to

your rule. The SISNOSE certification categories are as follows:

The rule is

However, your Assistant

Administrator may exercise discretion to prepare an analysis of the

economic impacts of the rule on small entities.

The rule is Unless you can

demonstrate, through further analysis, that the rule nonetheless should be

certified as not having a SISNOSE, you should contact the SBAC through

your Regulatory Steering Committee representative, prepare a regulatory

flexibility analysis, and participate in a Small Business Advocacy Review

Panel.

significant substantial.

presumed not to have a significant economic impact on a

substantial number of small entities.

No presumption applies.

not

presumed to be ineligible for certification

Table 2 example

20

You may consult with the Small Business

Advocacy Chair (SBAC) if you believe that your rule should be certified as

having a SINOSE.

represents an of a decision process you may use to determine whether

your rule may have a SISNOSE (i.e., which category to assign to your rule). The thresholds

displayed in Table 2 are 1% and 3% for determining the of the economic impact on

.

significance

20 The terms IRFA and FRFA are used only for rules that are not certified. If a rule is certified as not having a SISNOSE and

you perform an analysis that contains some or all of the required elements of and IRFA or FRFA, the documentation of

your analysis should be titled "Small Entity Flexibility Analysis" and not IRFA or FRFA.

Presumed No

SISNOSE:

Uncertain - No

Presumption:

Presumed

Ineligible for

Certification:

22
small entities, and 100 and 1000 and/or 20% for determining if the number of small entities

impacted is No bright line exists for

determining whether a given set of economic impacts constitutes a SISNOSE. The RFA does not

define the terms or as they pertain to the extent of economic impact and the

number of small entities affected. EPA has not established fixed definitions for the terms,

reflecting the practical difficulty of stipulating what would uniformly represent a significant

economic impact or a substantial number in every regulatory circumstance. Even when EPA

issues a rule adhering to the full procedural and analytic requirements of the RFA (i.e., without

certification), the Agency does not state the rule positively will impose a SISNOSE, since it may

or it may not. In such cases, we simply refrain from certifying it.

substantial.

significant substantial

These thresholds are only examples.

As in the example decision process in Table 2, you determine the numerical thresholds

that are appropriate to the circumstances of your rule. The thresholds represent three factors that

may be considered in making your SISNOSE determination. The three factors are:

(1) magnitude of economic impact that may be experienced by regulated small entities;

(2) total number of regulated small entities that may experience the economic impact; and

(3) percentage of regulated small entities that may experience the economic impact.

The first factor relates to defining a numerical threshold for the significance of the

economic impact and is discussed in Section 2.7.1. The second and third factors relate to the

numerical thresholds for substantial number of small entities and are discussed in Section 2.7.2.

23
TABLE 2: Example SISNOSE Certification Decision Processa

Economic Impact Number of Small

Entities Subject to

the Rule and

Experiencing Given

Economic Impact

Percent of All Small

Entities Subject to

the Rule That are

Experiencing Given

Economic Impact

Certification

Categoryb

Less than 1% for all

affected small entities

Any number Any percent Presumed No SISNOSE

Fewer than 100 Less than 20% Presumed No SISNOSE

Fewer than 100 20% or more Uncertain - No

Presumption

100-999d Less than 20% Presumed No SISNOSE

100-999 20% or more Uncertain - No

Presumption

1% or greater for one

or more affected small

entitiesc

1000 or more Any percent Uncertain - No

Presumption

Fewer than 100 Less than 20% Presumed No SISNOSE

Fewer than 100 20% or more Uncertain - No

Presumption

100-999d Less than 20% Uncertain - No

Presumption

100-999 20% or more Presumed Ineligible for

Certification

3% or greater for one

or more affected small

entities

1000 or more Any percent Presumed Ineligible for

Certification a This table and the numbers in it are given only as examples of the decision process and thresholds that may be

chosen for a particular rule. The certification decision should not be solely based upon the application of this table

nor should this table be referenced in your preamble. Additional information and other factors may be relevant in

deciding whether to prepare a regulatory flexibility analysis or certify under the RFA.

b There may be cases in which the extent of the impact on small entities (measured in quantitative or qualitative

terms) is particularly severe, even though the total number of small entities experiencing that impact is small (i.e.,

fewer than 100 or 20%). In such cases, the lead office should consider placing the rule in a category more applicable

to the situation.

c For purposes of applying this portion of the table, the number of small entities that will experience an impact of 1%

to 3% should 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 should 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.

d As the number of small entities that will be affected by a rule by more than 1% or 3% of sales or revenues

approaches 1000 in number, the substantial number guidelines of 20% of affected small entities may become less

relevant in determining whether a regulatory flexibility analysis or a certification should be prepared.

24
2.7.1 Is the Level of Economic Impact on Small Entities Significant?

2.7.2 Are a Substantial Number of Entities Facing a Significant Economic Impact?

In the suggested decision process in Table 2, the first step in assigning a rule to a

category, is defining a lower and upper threshold for each of the economic impact measures that

have been estimated. The thresholds you define should establish whether the level of economic

impacts faced by the small entities can be presumed as not significant. The variations of

economic impact measures, regulatory requirements, and characteristics of potentially affected

small entities is too great to allow EPA to establish threshold values for each measure that could

be employed in Table 1. This section, therefore, discusses factors you should consider when

establishing threshold values for your screening analysis.

The lower economic impact threshold is particularly important because it is used to

screen out rules that generally will have a significant economic impact and, therefore, can be

presumed not to require an IRFA/FRFA (i.e., if all small entities subject to a rule face economic

impacts less than the lower threshold, then the rule may be assigned to the Presumed No

SISNOSE Category). For this reason the lower economic impact threshold should be set

conservatively, at a level that precludes any reasonable possibility that a rule placed in the

Presumed No SISNOSE Category might later be found to impose a "significant economic impact

on a substantial number of small entities." The upper threshold defines a level of economic

impact that would be unquestionably significant for a small entity.

In analyzing previous rules, EPA has often defined the lower threshold as compliance

costs of 1% of sales and the higher threshold as compliance costs of 3% of sales as shown in the

example in Table 2.

There are several types of information that can help you identify the appropriate

threshold values. For example, profits can be a better indicator of ability to pay than sales.

Moreover, variation in profit-to-revenue ratios exists across industries. Therefore, the magnitude

of impacts defined as the lower and upper threshold for a particular rulemaking may take into

consideration the average profit margins of the affected small entities and the ability of the

entities to pass compliance costs to either customers or suppliers. To the extent that these types

of information are available, you may wish to use them to inform your selection of appropriate

thresholds.

Consideration of the number of small entities facing regulatory costs is dependent on the

characteristics of the affected industry or group of small entities being regulated. One hundred

small businesses may represent a small fraction of the total number of small businesses in some

sectors, such as gasoline service stations, while the total number of small businesses in some

niche markets may be less than a dozen. For this reason, analysts should examine both the total

not

The example thresholds provided in Table 2 are for illustrative

purposes only and are not meant to imply a uniform standard. It is the responsibility of

each program to identify appropriate thresholds for a particular rule and set of regulated

small entities.

25
number and percentage of regulated small entities experiencing significant economic impacts

when determining whether a "substantial number" of small entities may be significantly

impacted.

While the number thresholds provided in Table 2 are typical of those used in many past

screening analyses, circumstances of a particular rule may cause an analyst to define thresholds

differently. For example, there may be cases where the extent of economic impact (measured in

quantitative or qualitative terms) is particularly severe, even though the number of affected small

entities totals considerably fewer than 100 - or 20% - of all regulated small entities. In such

cases, the lead office should consider not certifying the rule, but rather placing it in the

Uncertain - No Presumption or Presumed Ineligible for Certification categories. Indeed, in the

past the Agency has employed such discretion by choosing not to certify a proposed rule that

directly regulated only a small number of small businesses, but with compliance costs

considerably greater than 3% of sales. Likewise, the relative importance of the two measures of

the number of small entities impacted can vary with the situation. For example, as the total

number of small entities bearing "significant" costs approaches a number like 1000, the

relevance of the 20% threshold becomes far less significant.

While a decision on whether to certify the rule is made based on consideration of the

impacts on all small entities subject to the rule, your analysis should consider economic impacts

on each of the of small entities that may be affected: small businesses, small

governmental jurisdictions, and small nonprofit organizations. While many rules affect only a

single type of small entity (e.g., small businesses), they might affect a variety of entities within

the type (e.g., businesses in different industries). Other rules may affect more than one type of

small entity (e.g., small businesses and small nonprofit organizations). This section describes

how your analysis should account for situations in which a variety of different entities are

affected. Section 2.7.3.1 addresses situations for which the variety is contained within a single

type of small entity (e.g., only small businesses). Section 2.7.3.2 addresses situations in which

affected small entities are of different types (e.g., small businesses and small governmental

jurisdictions).

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 dry cleaners and auto

body shops. In assessing the economic 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.

It is important to remember that

They suggest

categories that support presumptions. Agency management should exercise its own judgment in

deciding whether to certify a particular rule.

these numbers and the process outlined in Table 2

are only guidelines for assessing whether a rule may have a SISNOSE.

three types

2.7.3 What If My Rule Affects a Variety of Different Entities?

2.7.3.1 Economic Impacts on Entities Within a Type Should Be Aggregated

26
However, for the purposes of deciding whether to prepare a regulatory flexibility analysis or to

certify no SISNOSE, the impacts of the rule on the two types of business should be aggregated

and the decision based on the aggregated impact.

When both a decrease and increase in burden will occur to exactly the same entities, it is

appropriate to consider the net impact on those small entities. However, when a rule will reduce

burdens on some small entities and create or increase burden on others, these should not be

netted (even if all the affected entities fall within the same industry). In this case, only the

adverse impacts are relevant to the SISNOSE determination.

Where the rule will apply to more than one type of small entity (i.e., small businesses,

small governments, and small nonprofit organizations), you should analyze the economic impact

separately for each type of 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, you

should analyze the rule's impact on small businesses using an economic measure appropriate to

small businesses, and analyze the impact on small governments using an economic measure

appropriate to small governments. You should then determine categories separately for each type

of entity. The rule will thus be categorized twice - once for its impact on small businesses and a

second time for its impact on small governments.

Where a rule applies to more than one type of small entity, and impacts have been

analyzed for each type of small entity separately, one further analytic step is required to

categorize the rule. This involves applying the total number and percentage thresholds to the

aggregate number of small entities affected by the rule. These steps are necessary because the

screening process uses total numbers as well as percentages to assess whether the rule is eligible

for certification. The total numbers provide a suggested floor and ceiling for considering

numbers of small entities that may be impacted above or below the suggested thresholds. For

example, a rule imposing "significant" economic impacts on over 1000 small entities is presumed

to meet the substantial number threshold, even if that number represents less than 20% of

affected small entities.

The total number threshold should be chosen as indicative of a substantial number not

only with respect to any one type of small entity, but with respect to small entities taken

together. Thus, for the example thresholds displayed in Table 2, a rule with an impact of 2% of

sales, revenues or assets with respect to 334 small businesses, 334 small governments and 334

small organizations, where 334 is less than 20% of each type of small entity, would be

categorized as Presumed No SISNOSE if each type of entity were examined separately. However,

the rule would actually fall into the Uncertain - No Presumption category since more than 1000

small entities may be significantly affected by the rule.

all

you should apply the matrix separately to different kinds of small

For some rules, the issue of applying the matrix to each type of small entity may be a two

step process - that is,

2.7.3.2 Economic Impacts on Entities of Should Be Assessed

Separately and Aggregated

Different Types Both

2
businesses, small governments, or small nonprofits.

It is not appropriate to prepare

separate certifications for small businesses, small governments, and small non-profit

organizations.

A rule may, for example, apply the same

requirements to dry cleaners and auto-body shops, but the rule's economic impact may be much

greater on one than on the other kind of business. As indicated above, it would be appropriate in

such a case to analyze the impact of the rule separately for the two kinds 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 kinds of business, should be

aggregated and the aggregate fed into the matrix. Please note that if your rule is certified, the

Agency is assuring the public that the rule will not impose a significant economic impact on a

substantial number of small entities of all types taken together.

When the simple direct compliance cost screening method produces an uncertain answer

to the question of whether your rule can be certified as not having a SISNOSE, you may wish to

consider doing additional analysis in order to provide a better picture of whether the economic

impact on small entities is significant or substantial. The decision to conduct more analysis, and

what type and level of analysis, will depend on many factors including: qualitative information

that points to the rule being certified or not, data availability, and resource or time constraints.

Some analyses that may be helpful in refining an "Uncertain - No Presumption" SISNOSE

category are an analysis of cost pass-through, use of or examination of profits or profit margins,

measurement of the financial health of entities, or comparing the relative impacts on small

entities versus large entities. While the simple initial screen for economic impacts typically

assumes that entities are not able to shift some of the burden of higher costs onto consumers, an

estimate of cost pass-through can reveal if entities are facing the full burden of the direct

compliance costs. When data on profits is available, that information may be used directly, by

applying a profit test (see Table 1), or indirectly, by using information on profit margins to

inform your selection of appropriate thresholds (see Section 2.6.1) for use with other measures

(e.g., cost as a percentage of sales). The financial literature contains many methods of predicting

firm (or other entity) health and or closures. Finally, a comparison of a rule's impact on small

entities versus large entities may reveal whether the impacts are disproportionately burdensome

to the small entities. More information on these analyses and others can be found in Chapter 9

of the

21

Guidelines for Preparing Economic Analyses.

If you are unable to obtain adequate information regarding the entities affected by your

2.7.4 What Additional Information Can I Provide to Decision-makers When the

Rule Falls into the "Uncertain - No Presumption" SISNOSE Category?

2.7.5 What Other Issues Should I Consider?

2.7.5.1 Data Issues

21 Note that this type of analysis should not be used as the sole basis for certifying a rule as not having a SISNOSE. The

phrase "significant economic impact on a substantial number of small entities" describes an absolute measure of

economic impacts on small entities, not one that is relative to economic impact on large entities. Nevertheless, an

analysis of relative economic impacts can be useful to characterize the distribution of effects. 28
rule, one option is to model such information based on other available data or on reasonable

proxies. For example, you may choose to use quantitative information on another type of small

entity 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 and adjusting quantitative information available for larger entities in the

same industrial or governmental sector. In general, where quantitative information is sought, the

goal is to obtain the type of data that allow for the most reliable form of quantitative analysis to

be used. But where data limitations persist, you should identify and consider other reliable

alternatives.

In calculating the costs the rule will impose on small entities, you should presume full

compliance with all existing applicable statutory or regulatory requirements. For example, if the

new rule is designed to address widespread non-compliance with an existing rule, you should

not assume full compliance with the existing rule, as this could undermine the basis for the new

rule. Generally, in the case of a rule revising an existing rule, you should assess only the

incremental cost of the rule revision. In such cases, you should consult with your Regulatory

Steering Committee representative, the SBAC, and the OGC attorney for your rule before

conducting the analysis. This issue is discussed more fully in Chapter 5 of the

When you plan to propose multiple regulatory alternatives (i.e., two or more approaches

from among which one will be selected for promulgation in the final rule), you preferably

should conduct a screening analysis on each of the proposed alternatives, but, at a minimum,

you should analyze the alternative that most likely would have the greatest economic impact on

small entities.

Similarly, if you plan to propose a single regulatory approach but seek comment on

variations of that approach or on different approaches altogether, you should analyze not only

the proposed approach but also the most potentially burdensome variation or approach that has

a significant chance of being promulgated. You should contact your Regulatory Steering

Committee representative and your OGC attorney if you are uncertain about the appropriate

scope of the alternatives or approaches to include in the screening analysis for your proposed

rule.

For many rules, full documentation of the screening analysis will be contained within the

larger economic analysis prepared for the rule. If this is not the case, the screening analysis

should be documented in the same manner as any good economic analysis by fully describing

the data and methods used, assumptions made, uncertainties and limitations involved, and

Guidelines for

Preparing Economic Analysis.

2.7.5.2 Baseline Compliance with Existing Regulations

2.7.5.3 Evaluating Multiple Regulatory Approaches or Options

2.8 Step 4: What Should I Do after Assigning My Rule to a Category?

2.8.1 Document the Screening Analysis

29
conclusions reached. If you are certifying a rule as not having a SISNOSE, you must describe the

factual basis for the certification within the preamble for the rule. (See 5 U.S.C. section 605(b))

The text included in the preamble does not have to contain the complete documentation of the

screening analysis (see 5 U.S.C. section 605(a)), but should at least present a summary of the

findings and cite the document where the full documentation can be found. The certification

and statement of factual basis you include in the preamble to a final rule are subject to judicial

review.

For rules that can be certified as not having a SISNOSE, a certification statement and

justification must be prepared (see 5 U.S.C. section 605(b)) and included in the preamble for the

rule (see Section 2.7.1 above). When a rule will not be certified, you should consult with both

your SB AC staff and Regulatory Steering Committee representative (see

for contact information). These representatives will help guide

you and your rule through the RFA process, including:

preparing the screening analysis (this Chapter);

preparing an IRFA or FRFA (see Chapter 3);

conducting outreach (see Chapter 4);

convening a Panel (see Chapter 5); and

preparing a small entity compliance guide (see Chapter 6).

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http://intranet.epa.gov/adplibrary/











2.8.2 What Other Steps are a Part of the RFA Process?

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Please see the (Office of Policy, Economics

and Innovation, Regulatory Management Division, December 2004) for more guidance on writing the RFA section of a

preamble.

The terms "IRFA" and "FRFA" are included only in rules that are not certified. If a rule is certified as not having a

SISNOSE and you perform an analysis that contains some or all of the required elements of an IRFA or FRFA , the

documentation of your analysis should be titled "Small Entity Flexibility Analysis" and not IRFA or FRFA.

Rulewriter's Guide: Preamble Templates for the Regulatory Flexibility Act (RFA),
Chapter 3

Preparing the Initial and

Final Regulatory Flexibility

Analyses

3.1 What are IRFAs and FRFAs?

An Initial Regulatory Flexibility Analysis (IRFA) and a Final Regulatory Flexibility

Analysis (FRFA) are the analyses of economic impacts on small entities that you must prepare

unless your rule is certified as not having a significant economic impact on a substantial number

of small entities (SISNOSE). See 5 U.S.C. sections 603 and 604. This chapter explains these

analyses, how they are performed and information that the RFA requires each to contain.

Section 603 of the Regulatory Flexibility Act (RFA) requires agencies to prepare an initial

regulatory flexibility analysis (IRFA) for proposed rules that are subject to the RFA unless the

agency certifies that the rule will not have a SISNOSE. As noted in Section 1.5, only proposed

rules subject to notice-and-comment rulemaking requirements under the Administrative

Procedure Act (APA) or any other statute are subject to the requirements of the RFA. An IRFA

describes the economic impact of the proposed rule on small entities and any significant

alternatives to the proposed rule that would accomplish the objectives of the rule while

minimizing significant economic impacts on small entities.

An IRFA ensures that the agency has explicitly considered small entities the

requirements of the rule are finalized. It is not simply a stand-alone paperwork exercise. In most

cases, IRFAs must be made available for public comment along with the proposed rule.

Although an IRFA is not subject to judicial review, it is important that you carefully prepare each

required component of the analysis.

What is an IRFA?

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before

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Chapter 2 describes the process for determining if a rule can be certified as not having a SISNOSE.

Section 608(a) of the RFA authorizes agencies to waive or delay the completion of an IRFA if the agency publishes a

finding that the rule is being promulgated in response to an emergency that makes compliance or timely compliance with

the IRFA requirement impracticable. The finding must be supported by reasons and published in the Federal Register by

the time the final rule is published.

Final Regulatory Flexibility Analyses

3
What is a FRFA?

Section 604 of the RFA requires agencies to prepare a final regulatory flexibility analysis

(FRFA) for final rules that are promulgated under the notice-and-comment rulemaking

requirements of the Administrative Procedure Act (APA) after a notice of proposed rulemaking

required by the APA or any other law, unless the agency certifies that the rule will not have a

SISNOSE. A FRFA is similar, but not identical, to an IRFA. While both types of analysis contain

some similar elements, there are several requirements specific to a FRFA. One such requirement

is that the FRFA must summarize and respond to comments received on the IRFA.

A FRFA documents the Agency's consideration of alternatives to minimize economic

impacts on small entities. In most cases, the FRFA must be prepared in time for it to be available

to the public when the final rule is published (see 5 U.S.C. section 604) The FRFA is subject to

judicial review so it is crucial that you carefully complete each required component of the

analysis.

No. The IRFA and FRFA contain both quantitative and qualitative information and

describe several factors in addition to the potential economic impacts of a proposed or final rule

on small entities. The central focus of the IRFA is to present the opportunities for, and outcomes

of, alternative regulatory or policy options that could minimize the rule's potentially significant

economic impacts on small entities subject to the rule. The purpose of the IRFA is to provide the

decision maker with an analytic framework to inform the ultimate decision on the final rule and

provide the public with information on the alternatives considered by the agency. The central

focus of the FRFA is to describe the considerations particularly those related to small entity

impacts underlying the ultimate decision on the final rule. The IRFA and FRFA include

discussions of program design and scope issues, as well as quantitative economic analysis (see

Sections 3.4.1 and 3.5.1 for the specific required elements of an IRFA and FRFA).

Both the IRFA and FRFA usually contain quantitative information about the potential

economic impacts of the rule on small entities. Section 607 of the RFA indicates that as an

agency complies with the requirement to prepare an IRFA or FRFA, it "may provide either a

quantifiable or numerical description of the effects of a proposed rule or alternatives to the

proposed rule, or more general descriptive statements if quantification is not practicable or

reliable." The Agency's approach should be based on factors such as the quality and quantity of

available information and the anticipated economic impact on small entities that are subject to

the rule. The quantitative information estimated by the screening analysis may be included as

part of the IRFA or FRFA (see Chapter 2 for information on screening analyses).

26

Are the IRFA and FRFA Solely Quantitative Analyses?

26 Section 608(b) of the RFA allows the agency head to delay completion of the FRFA for up to 180 days after publication

of the final rule in the Federal Register if the agency publishes a finding that the final rule is being promulgated in

response to an emergency that makes compliance or timely compliance with the FRFA requirement impracticable. The

finding must be supported by reasons and published in the Federal Register by the time the final rule is published. If the

FRFA has not been prepared within 180 days, the rule lapses and cannot be repromulgated until the FRFA has been

completed. 32
3.2 What is the Relationship Between the IRFA/FRFA and a Rule's Broader Economic

Analysis?

While the RFA may require an IRFA or FRFA for a rule, Executive Order (E.O.) 12866

may call for a broader economic analysis of a rule. The focus of the IRFA and FRFA is the

impact of the rule's requirements on the small entities that are subject to the rule, while the

focus of an E.O. 12866 economic analysis, on the other hand, is social costs and benefits

aggregated across all entities and individuals, not just those directly subject to the rule. This

broader focus provides a picture of the rule's impact on society as a whole. This difference in

focus derives from the different objectives of the mandates for the two types of analyses. Please

note, however, that an E.O. 12866 economic analysis may contain a small entity impact section

that may be written to satisfy the IRFA/FRFA requirements of the RFA.

Another difference in the analyses is that the RFA requires EPA to identify and consider

(but not necessarily adopt) alternatives that minimize a rule's significant economic impacts on

small entities subject to the rule. The RFA, however, does not require the agency to adopt the

alternative that has the least impact on small entities. E.O. 12866, on the other hand, encourages

agencies, when legally permissible, to adopt the regulatory alternative that maximizes the net

benefit to society. An E.O. 12866 analysis can encompass all economic impacts attributable to

the rule, whether experienced by large or small entities, whether imposed directly or

experienced indirectly downstream from the compliance activity, or whether borne by parties

subject to the rule or other parties not bound by enforceable requirements. Although these

requirements differ, they are generally consistent. Indeed, the alternative that achieves statutory

and regulatory objectives while minimizing economic impacts under the RFA may be identical to

the alternative that imposes the least burden on society. In some cases, however, the lead office

may find that the E.O. 12866 broader economic analysis and the IRFA/FRFA analysis point to

different options. Such issues should be resolved on a case-by-case basis, in consultation with

the Office of General Counsel (OGC) and the Small Business Advocacy Chair (SBAC).

Another difference between IRF A/FRFAs and E.O. 12866 economic analyses is the rules

to which they apply. E.O. 12866 requires agencies to prepare economic analyses for all rules

deemed to be "significant regulatory actions," which are defined as any regulatory action likely

to result in a rule that may:

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Other statutes also may require the analysis of economic impacts. For example, the Safe Drinking Water Act and Clean

Water Act both require EPA to consider the economic achievability or affordability of regulatory options when

developing limitations and standards.

Note that section 605(a) of RFA allows agencies to prepare IRFA/FRFAs "in conjunction with or as a part of any other

agenda or analysis required by any other law if such other analysis satisfies the IRFA/FRFA provisions."

See EPA's (September 2000) for methods of estimating a rule's benefits

and costs. The Guidelines can be accessed on the internet at

.

Section 603(c) requires an IRFA to describe the alternatives while section 604(a)(5) requires a FRFA to state why

any significant alternatives which affect the impact on small entities were rejected.

Note that E.O. 12866 also requires consideration of "any adverse effects on the efficient functioning of the

economy, private markets (including productivity, employment, and competitiveness)..." This may also entail impact

analysis.

Guidelines for Preparing Economic Analysis

http://yosemite.epa.gov/ee/epa/eed.nsf/webpages/Guidelines.html

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(1) Have an annual effect on the economy of $100 million or more or adversely

affect in a material way the economy, a sector of the economy, productivity,

competition, jobs, the environment, public health or safety, or State, local, or

tribal governments or communities;

(2) Create a serious inconsistency or otherwise interfere with an action taken or

planned by another agency;

(3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan

programs or the rights and obligations of recipients thereof; or

(4) Raise novel legal or policy issues arising out of legal mandates, the President's

priorities, or the principles set forth in this E.O.

The RFA, on the other hand, requires preparation of IRFAs and FRFAs only for noticeand-comment rules that are subject to the RFA and are not certified as having no SISNOSE. It is

possible, therefore, that a rule may be subject to the RFA's analytic requirements while not being

a "significant regulatory action" or vice versa.

A Small Business Advocacy Review Panel (SBAR Panel or Panel) is required for all

proposed rules for which EPA is required to prepare an IRFA (5 U.S.C. section 609(b)). The

IRFA and the Panel share a common objective: to consider opportunities for minimizing a rule's

significant economic impacts on small entities. The Panel provides an additional means for small

entities to provide input into certain EPA rulemakings and to ensure that the unique concerns of

small entities are carefully considered during the rulemaking process. The FRFA documents how

the input received through the Panel and IRFA processes were used to arrive at a final rule.

The RFA requires the Agency to consider the Panel Report and, where appropriate, to

modify the proposed rule, the IRFA, or the decision on whether an IRFA is required (5 U.S.C.

section 609(b)). While you are not required to provide the Panel with a copy of the draft IRFA -

indeed, the Panel typically convenes before the IRFA has yet been assembled in draft - the Panel

process can be enhanced through the review of preliminary estimates or qualitative descriptions,

where available, of the universe of small entities to which the proposed rule will be applicable;

requirements of the proposed rule; Federal rules which may duplicate, overlap or conflict with

the proposed rule; and information on significant alternatives that still accomplish the statutory

objective of the proposed rule.

The IRFA should document the results of the Panel process and its role in the Agency's

deliberations. You should also summarize the substantive Panel recommendations, and the

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3.3 What is the Relationship of the IRFA/FRFA to the SBAR Panel Process?

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The terms "IRFA" and "FRFA" are used only in rules that are not certified as having no SISNOSE. If a rule is

certified as not having a SISNOSE, the documentation of your analysis should be titled "Small Entity Flexibility

Analysis" and not IRFA or FRFA even if the documentation contains all the elements required of an IRFA or FRFA.

Guidance on the Small Business Advocacy Review Panel is provided in Chapter 5.

34
Agency's actions in response to them, in the RFA section of the preamble of your proposed rule.

This section discusses the components of an IRFA and considerations in preparing an

IRFA. Section 3.4.1 outlines the elements of an IRFA required by section 603 of the RFA. Section

3.4.2 discusses different types of analyses that program offices may consider doing in order to

enhance the information provided in an IRFA. Guidance on how to assemble the IRFA and

proposed rule preamble appear in Section 3.4.3.

The RFA states that an IRFA "shall describe the impact of the proposed rule on small

entities" (5 U.S.C. section 603(a)) and lists several elements that each IRFA shall contain. The

statutory language for each required element of an IRFA, as codified by 5 U.S.C. section 603, is

presented below. Remember that if the information is contained in the preamble to the proposed

rule or another rulemaking document, you do not need to repeat it in the IRFA, rather you can

reference the discussion in the other document (see 5 U.S.C. section 605).

The IRFA should at a minimum identify, by North American Industry Classification

System (NAICS) code, the small entities subject to the rule and the size standard for each type of

small entity. See Section 3.4.2 for a discussion of supplemental analysis that may enhance your

description of small entities subject to the rule.

Most of the information required for Element 3 may be available from the RFA screening

analysis (see Chapter 2), if one was conducted. Other sources of information may include the

E.O. 12866 economic analysis, impact analyses prepared pursuant to other statutes, technical

background documents, and risk analysis, if any of these were prepared for the rule. Whatever

the source of information used, it should be well documented within the IRFA. If you are not

able to provide an estimate of the number of small entities, you should provide an explanation of

the reasons for this omission.

Element 1: Description of the reasons why action by the agency is being considered (5

U.S.C. section 603(b)(l))

Element 2: Succinct statement of the objectives of, and legal basis for, the proposed rule

(5 U.S.C. section 603(b)(2))

Element 3: Description of and, where feasible, an estimate of the number of small

entities to which the proposed rule will apply (5 U.S.C. section 603(b)(3))

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Element 4: Description of the projected reporting, record keeping and other compliance

requirements of the proposed rule, including an estimate of the classes of

small entities which will be subject to the requirement and the type of

3.4 How Do I Prepare an IRFA?

3.4.1 Required Elements of an IRFA

34 See Section 2.5.2 on defining "small" for each type of small entity. If applicable, a description of the steps taken to

develop an alternative definition of small for the small entities should be included in the IRFA (see Section 2.5.5).

35
professional skills necessary for preparation of the report or record (5 U.S.C.

section 603(b)(4))

This element of your IRFA, a description of the proposed rule's requirements, should

provide details of the impacts on the small entities that will be subject to the proposed rule, as set

forth in section 603(a) of the RFA. Analysts have generally provided estimates of the proposed

rule's costs on the small entities subject to the rule to describe the small entity impacts of the

proposed rule. To address this element, you may refer to the costs estimated for your rule's RFA

screening analysis (see Chapter 2), or other analyses prepared for the proposed rule (see 5 U.S.C.

section 605(a)). For example, if an Information Collection Request is prepared for a rule, estimates

of the costs and administrative burdens associated with reporting and record keeping and the

professional skills needed to prepare required reports or records may be obtained from the

paperwork burden analysis prepared under the Paperwork Reduction Act. Section 3.4.2 discusses

supplemental analyses you may choose to consider for enhancing your description of the proposed

rule's impacts on small entities.

If you plan to propose multiple regulatory alternatives (i.e., two or more approaches, one of

which will be selected for promulgation in the final rule), you should describe the impacts to small

entities of each of the proposed alternatives or, at a minimum, of the alternative that would likely

have the greatest economic impact on small entities. Similarly, if you plan to propose a single

regulatory approach, but also seek comment on variations of that approach or on different

approaches altogether, you should ordinarily describe not only the proposed approach, but also the

potentially most burdensome variation.

Many EPA rules complement requirements imposed by other EPA rules or rules

promulgated by other Federal Agencies. EPA's authority and responsibility intersect with those of

many other Federal Agencies and Departments (e.g., OSHA, Transportation, Energy, Interior). In

principle, these controls should all work together to create a comprehensive system of

environmental management. Each agency should, therefore, coordinate its regulatory requirements

with those already in place. The lead OGC attorney for your rulemaking can assist in identifying

duplicate, overlapping, or conflicting rules. These may also be identified through the Panel process

(see Section 5.2).

Consistent with the stated objectives of applicable statutes, the analysis shall discuss

significant alternatives such as:

the establishment of differing compliance or reporting requirements or timetables

that take into account the resources available to small entities;

the clarification, consolidation, or simplification of compliance and reporting

requirements under the rule for such small entities;

Element 5: Identification, to the extent practicable, of all relevant federal rules which

may duplicate, overlap or conflict with the proposed rule (5 U.S.C. section

603(b)(5))

Element 6: 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.



 36




the use of performance rather than design standards; and

an exemption from coverage of the rule, or any part thereof, for such small entities. (5

U.S.C. section 603(c)).

Element 6 requires the IRFA to describe significant alternatives to the rule which

accomplish the stated objectives of applicable statutes and which minimize significant impacts of

the proposed rule on small entities. Discussion of regulatory options included in the rule (see

Element 4 above) may already include one or more "significant alternatives."

By law, an IRFA need only explore significant regulatory alternatives "which accomplish the

stated objectives of applicable statutes and which minimize of

the proposed rule on small entities" (section 603(c) (emphasis added)). At a minimum the IRFA

should describe any significant alternatives that meet this criteria. The internal rulemaking process

or the RFA Panel process may identify other regulatory mechanisms that could minimize the

significant economic impact on small entities.

The lead office, working with OGC, should determine whether the objectives of the statute

may be achieved in more than one manner. In many cases even when a statute appears to be

prescriptive, there still may be ways to minimize economic impacts on small entities.

If it is determined that the statute does not allow the Agency to consider regulatory

alternatives at all, the RFA still requires the Agency to prepare an IRFA. In such cases, the lead

office should prepare an explanation as to why the Agency is precluded from considering

regulatory options. This IRFA, although shorter and simpler than an analysis designed to consider

alternatives, would contain all of the sections required by the RFA.

If the statute does not preclude the agency from pursuing regulatory options designed to

minimize adverse economic impacts, the lead office should prepare an IRFA as described in this

section.

The primary purpose of the analysis is to provide the decision maker with information that

will facilitate the choice of a sound regulatory option. As with the rest of the required elements of

an IRFA, qualitative descriptions will suffice when quantitative information is not practically

available (5 U.S.C. section 607). A qualitative analysis might include: a description of the

alternative requirements, the small entities to which they would apply and a qualitative discussion

of the change in the number of small entities that would experience significant economic impacts.

As data, time, and resources allow, programs may wish to pursue some of the quantitative analysis

described in the next section (3.4.2).

In some instances, a supplemental analysis may provide a more detailed picture of the

How Many Significant Alternatives Do I Need to Consider?

What if the Statute Is Very Prescriptive in the Type of Regulatory Option to Be Used for Achieving

its Environmental Goal?

How Much Analysis Do I Need to Conduct on Each Regulatory Option?

any significant economic impact

3.4.2 Supplemental Analysis

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economic impacts on small entities than is required by the RFA. Preparing such supplemental

analyses may take significant additional time and resources. However, in some instances the

information obtained through supplemental analysis may be useful. The decision to undertake

such analyses depends on the quality and quantity of available data, the severity of a rule's

anticipated economic impact on small entities subject to the rule, and the potential consequences

of additional delay in the regulatory schedule. This section summarizes some different types of

small entity impact analyses that go beyond what is required by the RFA, and may provide

information helpful to understanding the impacts on small entities in a broader context.

In addition to the description required by Element 3, the lead office may wish to consider

segmenting the affected entities along lines that are useful for distinguishing among those that are

more and less susceptible to the economic impacts of the proposed regulation. For example, if an

industrial category consists of a collection of firms having disparate financial characteristics (e.g.,

annual sales) or operating characteristics (e.g., processes used or pollution generated), it would be

preferable to examine the economic impacts in a framework that accounts for this variability. The

goal is to provide as detailed a picture as possible of the small entities that will be affected by the

proposed regulation. Failure to distinguish properly among small entities may lead to an

overstatement or understatement of the anticipated economic impacts of the regulation or to

missed opportunities to minimize the economic impacts on small entities.

An evaluation of the pollution contributed by small entities relative to other entities being

regulated is another example of a supplemental analysis. This information may highlight how

reducing the burden on small entities is compatible with the environmental goals of the rule (e.g.,

when small entities make a relatively small contribution to the environmental problem being

addressed) or why regulatory accommodations for small entities should not be granted in a

particular instance (e.g., when an environmental problem is arising from the actions of an

industry or sector that is made up primarily of small entities).

A supplemental analysis related to Element 4 may include a comparison of the costs of

compliance for small and large entities to determine if small entities are affected

disproportionately. Other estimated impacts that may be presented are the ability of small entities

to pass on these costs in the form of price increases or user fees; the effects on profitability or the

ability to provide services; or effects (if any) on closures, production, and employment in each

class. While the RFA does not require an IRFA to discuss these impacts, providing this

information may provide a more detailed picture of how small entities are affected by the

proposed rule.

The descriptions of significant alternatives described under Element 6 may be expanded by

providing estimates for each alternative of the change in costs of the requirements on small

entities; the change in pollution contribution of the small entities subject to the rule relative to

other entities being regulated; and the changes in other measures of economic impact such as

closures, production levels, employment or profit. As previously mentioned, the provision of this

type of detailed analysis for alternatives will depend on data, time and resource constraints as well

as on the anticipated impact on small entities of the proposed rule and alternatives described.

What Should Be the Format of the IRFA?

3.4.3 Assembling the IRFA and Preamble

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The IRFA may be prepared as a stand-alone document or a chapter in the E.O. 12866

economic analysis, if one has been prepared. In either case, it should include distinct sections for

each of the requirements specified in the RFA, as discussed above. If you do not include text for

one or more sections in the IRFA because it is included in another document supporting the rule

(such as the preamble or a broader economic analysis), you should explicitly reference and

summarize the other text.

No. The statute allows agencies to avoid duplicating effort by performing the required

analyses in conjunction with, or as part of, any other analyses, if the other analyses satisfy the

requirements of the RFA (5 U.S.C. section 605(a)). Several of the IRFA requirements will

generally be met by other analyses or documents prepared for the proposed rulemaking, such as

the RFA screening analysis, the E.O. 12866 economic analysis, or the preamble. In lieu of

repeating text from these documents, you may cross-reference the relevant portions of the

documents and summarize their conclusions in the relevant sections of the IRFA.

Yes. The IRFA should be summarized in the Statutory and Executive Order Reviews

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 when a rule is not certified as not having a SISNOSE, the

Statutory and Executive Order Reviews 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 (see Chapter 4) and convening of a SBAR Panel

(see Chapter 5).

This section discusses the components of a FRFA and considerations in preparing a FRFA.

As FRFAs are judicially reviewable, each section must be completed carefully. Section 3.5.1

outlines the elements of an FRFA required by section 604 of the RFA. Guidance on how to

assemble the FRFA and final rule preamble appear in Section 3.5.2.

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 analysis of the rule, the FRFA can

repeat or cross-reference applicable sections of the IRFA.

The statutory language for each required element of a FRFA, as codified by 5 U.S.C.

section 604, is presented below. Remember that if the information is contained in the preamble

to the proposed rule or another rulemaking document, you do not need to repeat it in the FRFA,

rather you can reference the discussion in the other document (see 5 U.S.C. section 605(a)).

Do I Have to Repeat Text Included in Other Regulatory Support Documents?

Should the IRFA Be Discussed in the Preamble to the Proposed Rule?

What Else Should Be in the Preamble with Respect to Small Entities?

3.5 How Do I Prepare a FRFA?

3.5.1 Required Elements of a FRFA

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Element 1: Succinct statement of the need for, and objectives of, the rule (5 U.S.C.

section 604(a)(l))

Element 2: 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 such comments (5 U.S.C. section 604(a)(2))

Element 3: 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 (5 U.S.C. section 604(a)(3))

Element 4: Description of the projected reporting, record keeping 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 (5 U.S.C. section 604(a)(4))

Element 5: 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 alternatives to the rule considered by the agency

which affect the impact on small entities was rejected (5 U.S.C. section

604(a)(2))

The RFA requires that a FRFA summarize the significant issues raised by public

comments on the IRFA, 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 a single response-to-comments document for the whole rule that accomplishes

these objectives, the FRFA may rely on and cross-reference that document.

This description is likely to be an updated version of the corresponding section of the

IRFA. If you are not able to provide an estimate of the number of small entities, you must

provide an explanation of the reasons why not.

This section of the FRFA should discuss the option selected for the final rule. Other

options considered may be discussed in the last section (see Element 5 below). Completion of

this section should involve only updating the description in the IRFA to incorporate any changes

to the requirements of the final rule relative to those of the proposed rule.

The most critical component of the FRFA is the requirement that an agency explain the

"factual, policy and legal reasons" for selecting the regulatory approach promulgated in the final

rule and for rejecting "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." It is, therefore, important to thoroughly document all considerations of

alternatives to reduce significant economic impacts on small entities, as well as any small entity 40
outreach conducted (see Chapter 4) and the SBAR Panel process (see Chapter 5). To the extent

this requirement is met by the main body of the preamble of the final rule, the FRFA may crossreference that text.

The FRFA may be prepared as a stand-alone document or as a chapter in the E.O. 12866

economic analysis, if one has been prepared. If you do not include text for one or more sections

in the FRFA because it is included in another rule support document (such as the preamble or

broader economic analysis), you should explicitly reference and summarize the other text. In

either case, it should include distinct sections for each of the requirements specified in the RFA, as

discussed above.

No. The statute allows agencies to avoid duplicating effort by performing the required

analyses in conjunction with or as part of any other analyses, if the other analyses satisfy the

requirements of the RFA. Several of the FRFA requirements will generally be met by other

analyses or documents prepared for the proposed rulemaking, such as the RFA screening analysis,

broader economic analysis, or the preamble. In lieu of repeating text from these documents, you

may cross-reference the relevant portions of the documents and summarize the conclusions of the

analysis in the FRFA (5 U.S.C. section 605(a)).

Yes. The FRFA should be summarized in the Statutory and Executive Order Reviews

section of the final rule's preamble. The summary of the FRFA should note, in particular, the ways

in which the Agency reduced the economic impact of the final rule on small entities. The full

FRFA must be placed in the rulemaking docket and the preamble summary should indicate where

the FRFA can be found (5 U.S.C. section 604(b)).

Besides summarizing the FRFA, the Statutory and Executive Order Reviews 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 sections

of the proposed rule's preamble describing the SBAR Panel convened for the rule, if applicable

(see Chapter 5). This information regarding the Agency's outreach efforts helps the Agency

prepare the report used when it submits the rule to Congress and the Government Accountability

Office under the congressional review provisions of the Congressional Review Act (CRA) 5 U.S.C.

sections 8O1-8O8.

What Should Be the Format of the FRFA?

Do I Have to Repeat Text Included in Other Regulatory Support Documents?

Should the FRFA Be Discussed in the Preamble?

What Else Should Be in the Preamble with Respect to Small Entities?

35

3.5.2 Assembling the FRFA and Preamble

4

35 The CRA was enacted by Subtitle E of the Small Business Regulatory Enforcement Fairness Act (5 U.S.C.

sections 801-808). All final rules must be assessed to determine if the Congressional review requirements apply

whether or not the final rule has any effect on small entities. EPA guidance on the CRA, "Congressional Review

Act: Guidance for Rulewriters" (July 1998) can be accessed at EPA's intranet website, "Action Development

Process Library," http://intranet.epa.gov/adplibrary.

Chapter 4

Implementing Small Entity

Outreach: Informing,

Listening, Responding

4.1 Small Entity Outreach: The Basics

The Small Business Regulatory Enforcement Fairness Act (SBREFA) amended the

Regulatory Flexibility Act (RFA) to bolster the RFA's requirements that agencies provide small

entities with a meaningful opportunity to participate in the development of rules that may

significantly affect them. EPA's success in carrying out our obligations under the RFA requires

early and continuing interaction with small entities throughout the regulatory development

process. The RFA process, and your interactions with small entities in general, should be a

genuine dialogue with meaningful engagement and exchange of ideas and information. The goal

of small entity outreach is to ensure promulgation of a rule that is tailored to achieve a specific

environmental goal while taking into account the particular concerns of small entities.

It is important that outreach to small entities occur as early as possible in regulation

Indeed, it will often be appropriate to start outreach before or concurrently with

performance of a preliminary screening analysis (see Figure 1). Early outreach and

accommodation of small entity issues has proven to have a substantial positive impact on the

quality of our regulations. First, small entities can often fill gaps in our knowledge and

experience to provide alternate, less burdensome regulatory options

that can accomplish a stated environmental goal. Second, you can

gain support for the regulatory option ultimately selected by bringing

small entities into the process early on, listening and responding to

their concerns, and having that input influence the direction of your

rule. When you believe that is unlikely that you will be able to certify

that your rule, if promulgated, will not have a significant economic

impact on a substantial number of small entities (SISNOSE), this

early involvement should also include OGC and staff to the Agency's

Small Business Advocacy Chair (SBAC). At a later point it will be

36

development.

36 As a practical matter, most of the outreach we describe in this chapter will take place in the pre-proposal phase

of the rule development process. While further outreach may be appropriate in the post-proposal stage, any

contact with small entities at that time is subject to the same restrictions that govern all external contacts

once the public comment period closes.

ex-parte

The Regulatory

Flexibility Act

(RFA) was

amended by the

Small Business

Regulatory

Flexibility Act

Early outreach and

accommodation of

small entity issues

has proven to have

a substantial

positive impact on

the quality of

regulations.

Outreach: Informing, Listening, Responding

43
appropriate to involve the Small Business Administration's (SBA) Office of Advocacy and the

Office of Management and Budget's (OMB) Office of Information and Regulatory Affairs.

Detailed below is a strategy outlining how you can identify and engage in dialogue with

representatives of small entities that may be subject to your rule.

According to the

Outreach is a means by which the Agency keeps its constituencies - those who are

interested in or affected by its action - informed about what it is doing, what it is

planning, and what its needs are. Outreach is basic communication. In addition to

informing those affected of the Agency's activities, outreach also encourages and

provides the means by which members of the public can communicate their needs and

desires to the Agency so they may be taken into account when making decisions.

In sum, outreach includes potentially regulated parties about EPA's regulatory

plans, to their concerns and suggestions about how the rule may affect them, and

through appropriate action to meet environmental objectives while minimizing

unnecessary burden.

There are many forms and styles available for providing information to small entities

potentially subject to a rule, including:

While each of these methods of communication can be used to transmit necessary

information to members of the public, simply providing notice of EPA's intent is not enough.

Adequate outreach also requires that we seek opportunities for genuine engagement that places the

Agency in a position to hear from and respond to small entities.

Some forms of outreach are regulated by statute. Specifically, the Federal Advisory

Committee Act (FACA) establishes requirements for the convening and operating of an official

advisory committee. However, many groups are exempt from FACA coverage including: factfinding and information exchange groups, meetings with persons providing individual advice or

recommendations (as opposed to collective advice or recommendations); and meetings with

groups of people to interactively discuss and debate individual opinions or recommendations.

EPA Manual on Consultative Processes,37

informing

listening

responding

38

4.2 What Does "Outreach" Mean?

4.3 Is Small Entity Outreach Subject to FACA?

37 EPA Manual on Consultative Processes: Better Decisions Through Consultation and Collaboration, Draft - October 1998.

44

















public announcements

interviews

informal and formal meetings

web sites and list serves

magazine and journal articles

speeches

dockets, and

· press releases.

38 For more information on FACA and other public involvement, see http://www.epa.gov/publicinvolvement.
Outreach in compliance with the RFA has commonly occurred in the form of information

exchanges. According to the , information exchanges

primarily seek to enhance the parties' understanding of the situation. During information

exchanges, at least one side will be providing information or advice to the other and oftentimes

there will be an exchange of views or concerns. Importantly, the participants involved in

information exchanges are not expected to reach agreement. Sections 4.4 and 4.6 (below)

provide more specific information on where to get assistance with your outreach efforts and steps

to take to reach small entities

You are strongly encouraged to coordinate your

stakeholder activities and allow these distinct processes -- e.g.,

internal workgroup, peer review, FACA committee, SBAR Panel

-- to inform each other. Although each group has its own policies

and procedures, they do not take place in isolation; indeed, they

may have overlapping membership. Moreover, every stakeholder

activity is based on relationships, and the relationships you

develop rely on trust. Consequently, you are likely to have

greater success if you demonstrate a willingness to share

information not only with your stakeholders but also between

your stakeholder groups to nurture that trust. Beyond the

importance of these considerations, you should make the most

of your time and resources. As you invest time at the outset of your

rulemaking to develop an Analytic Blueprint or other planning document for your rule, you

should be able to recognize some efficiencies in coordinating some of your stakeholder activities.

For example, if you engage a contractor to assist you in identifying participants for a FACA

committee, as part of the same effort, the contractor may be able to identify a group of potential

small entities for a SBAR Panel. Similarly, outreach documents prepared for one group may be

appropriate for your other stakeholders.

The RFA requires an agency to "assure that small entities have been given an opportunity

to participate in the rulemaking" process for any rule that "will have a significant economic

impact on a substantial number of small entities." 5 U.S.C. section 609(a). The RFA also directs

us to ensure small entity participation through the reasonable use of techniques such as those

listed in section 609(a), as follows:

use of computer networks to solicit and receive comments;

publication of general notice of proposed rulemaking in publications likely to be

obtained by small entities;

direct notification of interested small entities;

EPA Manual on Consultative Processes

.







4.4 Should I Coordinate My Stakeholder Involvement Activities?

4.5 What Kind of Outreach Does the RFA Require?

The Regulatory

Flexibility Act (RFA)

was amended by the

Small Business

Regulatory Flexibility

Act (SBREFA) in 1996.

The Agency refers to

the RFA as amended

A stakeholder

involvement process is

not an end in itself; it

is a means to a better,

more widely accepted

decision.

EPA Manual on

Consultative Processes

-

45












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 a Small Business Advocacy Review Panel (SBAR Panel or Panel)

prior to proposing a rule for which we are required to prepare an IRFA (i.e., those rules for

which EPA does not certify that the rule will not, if promulgated, have a SISNOSE). As described

in detail in Chapter 5, 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 adversely affected

by the final rule to sue agencies in court for failure to comply with specified RFA provisions,

including section 609(a), which requires agencies to that small entities have an

opportunity to participate in rulemakings that will have a SISNOSE.

You should first consult your Regulatory Steering Committee representative to determine

what resources are available to you within your program office. EPA also has several offices that

may be able to assist you with outreach throughout different stages of rule development. EPA's

Small Business Ombudsman (SBO) can provide support and assistance in your outreach

activities to small entities. The SBO maintains an updated list of key small entity contacts, which

will be made available to you upon request. These small entity contacts include:

national small entity trade association executives and contact persons;

contacts for the CAA State section 507 Program, including the Small Business

Ombudsman, Small Business Assistance Program, and the Compliance Advisory

Panels; and

EPA Regional Small Business Liaisons.

Additional support and assistance with outreach and development of small entity contacts

is available from the Office of Public Affairs (OPA) and the Office of Congressional and

Intergovernmental Relations (OCIR). Also, OCIR supports a small town FACA group, the Small

Community Advisory Subcommittee of the Local Government Advisory Committee. OCIR

assistance may include: 1) help creating an outreach strategy to support the rulemaking; 2)

supporting the distribution of information; and 3) help developing and maintaining a

comprehensive list of small entity contacts for use by individual program offices.

The RFA defines "small governmental jurisdiction" as the government of a city, county,

town, township, village, school district, or special district with a population of less than 50,000

assure

4.6 Where Can I Get Assistance with My Small Entity Outreach?

46
(5 U.S.C. section 601(5)). There are about 40,000 such small governmental jurisdictions in the

United States, with 33,000 of those having populations of less than 10,000. Broken down

further, roughly 26,000 governmental jurisdictions have populations under 2,500. All told, over

90% of U.S. governmental jurisdictions have populations under 50,000.

In addition to experiencing many of the problems and concerns that affect large cities,

small governmental jurisdictions in the U.S. often face other hardships due to their individual

characteristics and situations. Small governmental jurisdictions often experience disproportionate

impacts from Federal regulations, particularly with regard to the cumulative impact of

environmental regulations. In many small jurisdictions, while the pressure for services and

infrastructure maintenance and repair continues to grow, the capacity to provide all necessary

services remains quite limited. Over one-third of small governmental jurisdictions in the U.S.

have no employees, while others operate on part-time assistance from dedicated citizens. These

communities most often have no engineering or environmental management capacity of their

own. Their limited financial resources due to small tax bases and often declining economic

activity only serve to further exacerbate the problem.

These are but a few of the reasons why RFA-mandated consultation with small

governmental jurisdictions is so important. With the Small Community Advisory Subcommittee's

finding that EPA should increase direct involvement of small jurisdictions in the regulatory

process, the Agency is prepared to ensure that RFA-mandated consultation is carried out with

optimal effectiveness. While timely, substantive involvement of small governmental jurisdictions

in the regulatory process will involve additional preparation and early outreach, such efforts will

invariably reduce costs later in the process and produce rules that small jurisdictions can more

reliably implement. With this in mind, the Office of Congressional and Intergovernmental

Relations' guide entitled can serve as a

valuable resource in your consultation efforts. To obtain the guidance and consult about small

governmental jurisdictions and outreach to them, contact OCIR's Intergovernmental Relations

Team.

In addition to these general resources, each program office is encouraged to develop and

maintain a comprehensive contact list of small entity representatives, keyed to their program area

of responsibility. These could include:

small business trade associations; and

organizations representing townships, counties and municipalities, and decisionmaking individuals within these organizations (public and private non-profit).

You could use this contact list to help identify knowledgeable individuals who may serve

as small entity representatives for your rulemaking.

EPA's Small Business Advocacy Chair (SBAC) is responsible for overseeing policy

decisions regarding certifying that a rule will not have a SISNOSE, as well as decisions to convene

39

Planning for Intergovernmental Outreach and Consultation





39 Results of the 1994 EPA Survey of Small Local Governments, September 1997.

4
a Small Business Advocacy Review Panel. The SBAC and SBAC staff are responsible for

coordination of SBAR Panels, including communication with SBA and OMB and Panel logistics.

The following sections outline some suggested steps you can take in developing a

proposed rule, particularly if it appears that it may not be possible to certify that your rule will

not have a SISNOSE. As noted above, you should also check with your Regulatory Steering

Committee representative to explore what resources are available to you within your own

program office.

If you believe that it may not be possible to certify your rule as not having a SISNOSE

(according to the screening analysis in Chapter 2), you should contact the SBAC staff through

your Regulatory Steering Committee representative. The SBAC staff will work to provide you

with the support and service needed to make each SBAR Panel process as efficient and productive

as possible. SBAC staff can advise you on how the Panel process can fit into your rulemaking

schedule, potential inclusion of SBA and OMB in outreach efforts, and the implications of the

results of your screening analysis, among other things.

Stakeholders are those who have an interest -- direct or indirect -- in the action the

Agency is planning to take. Small entities --those that meet the statutory definition of small

business, small government or small non-profit enterprise--are a subset of your broader

stakeholder group. As part of your outreach efforts, you should make informal contact with

potential small entities to confirm their small entity status.

There is an important distinction to note at this time between small entities which should

be included as stakeholders through your broader outreach efforts and official Small Entity

Representatives for a Small Business Advocacy Review Panel process. Official Small Entity

Representatives are chosen through a process of consultation with the EPA Small Business

Advocacy Chair and the Small Business Administration. This process is described in more detail

in Chapter 5. While small entities with whom the Agency has consulted from the beginning are

the chief candidates to serve later as official advisors to a Panel,

The formal selection of Small Entity

Representatives is made SBA's response to formal notification from the SBAC, which is

typically very close to the time a Panel convenes.

During the outreach process, if you believe that your rule may not be able to be certified

40

small entities do not become

official Small Entity Representatives (known as SERs) until they are officially designated as

such by the Small Business Advocacy Chair.

after

4.7 What Steps Can I Take to Reach Small Entities?

4.7.1 Contact SBAC Staff

4.7.2 Identify and Contact Small Entities

4.7.3 Consider Drafting Informal Notification to SBA

40 See Chapter 2 for more information on the definition of 'small entity.’ 48
as not having a SISNOSE (according to the screening analysis in Chapter 2), you should consider

drafting an informal notification to the Small Business Administration. You should route both

informal and formal notifications, as well as any communications regarding potential RFA issues,

through your Regulatory Steering Committee representative to the SBAC. Section 5.7.2 provides

more information on drafting an informal notification. Outreach to small entities or informal

notification to SBA do not represent an EPA finding that your rule will have a significant

economic impact on a substantial number of small entities, nor does it commit you to preparing

a regulatory flexibility analysis or convening a Small Business Advocacy Review Panel. Small

entities can provide input to help the Agency ultimately determine if either of these activities are

required. Further, they can offer ideas to help the agency formulate alternatives that achieve your

environmental objective and do not impose a SISNOSE.

It is clear from the specific requirements set forth by the RFA that Congress intended

agencies to provide small entities with a meaningful opportunity to participate in the

development of rules that may significantly affect them. One of the keys to fostering productive

participation is effective outreach and exchange of information. In conducting small entity

outreach, you should distribute sufficient information to your small entity representatives about

your regulation so that they can provide you with informed feedback on the elements of an Initial

Regulatory Flexibility Analysis under section 603 of the RFA which Congress identified in

SBREFA as key issues. Those 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 will be subject to the requirements 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 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.

For small entities, it is advisable to request comments in writing since these will be used

later as part of your SBAR Panel convening document or as documentation of your factual basis

for a certification of no SISNOSE (see also Keep Records section, below). You may want to

include the SBAC and staff, OMB, and SBA in your outreach efforts. Much of the success of

previous SBAR Panel processes can be attributed to the level of familiarity that the Small Entity

Representatives and the Panel members (described in Chapter 5) have gained with provisions

under consideration for the regulation, as well as with the program staff developing the

regulation, prior to convening the Panel.









So long as you ensure genuine engagement with small entities, you can include this

4.7.4 Conduct Outreach to Small Entities (i.e., substantive engagement)

49
responsibility as part of your overall outreach efforts. EPA's guidance on stakeholder

involvement, (http://www.epa.gov/publicinvolvement/policy2003/

index.htm) offers guidance as to what process to use for public involvement in your rulemaking

and what steps to take to maximize your outreach efforts. Sections 4.2 and 4.5 (above) list some

suggested venues for small entity outreach. In conducting outreach to small entities, however, it

is important to ensure these parties have an opportunity to address their concerns separately and

specifically to the Agency. While small entities may participate in public meetings designed for a

broader group of participants, such a forum should provide an opportunity for EPA to hear

separately and particularly from smaller interests. A particular reason that the Congress passed,

and the President signed SBREFA was to "level the playing field" by affording smaller interests a

chance to be heard independently from competing interests, including large entities likely to be

regulated.

EPA's Public Involvement Policy

For any rule for which the Agency is required to prepare a Regulatory Flexibility Analysis

(see Chapter 3), you are responsible for keeping a record of your outreach efforts and including

that record in the rulemaking docket for purposes of judicial review. It is crucial for you to

demonstrate and document a pattern of dialogue with and outreach to all interested stakeholders

with particular attention to the interests of small entities that may be subject to your regulation.

For each meeting, formal or informal, with your stakeholders you should take notes regarding

the major topics of discussion and create meeting summaries. You should append any materials

you distribute or present, including agendas, outreach packages, fact sheets, and overheads to

your meeting summaries.

It is also a good practice to maintain a file documenting outreach even for rules not

requiring an IRFA. This will allow the program to demonstrate its adherence to the Agency's

standing policy of outreach and, when feasible, accommodation of small entities in any rule to

which they will be subject. In addition, since the Agency can be judicially challenged on the

factual basis it presents supporting its certification that a rule does not impose a SISNOSE, such

documentation may prove necessary to demonstrate how the Agency considered small entities'

concerns in reaching its decision to certify.

For more information, you can contact your office's Regulatory Steering Committee

representatives, EPA's Small Business Advocacy Chair (OPEI), staff to the Small Business

Advocacy Chair (OPEI), and EPA's Small Business Ombudsman Program.

4.7.5 Keep Records

4.8 Where Can I Get More Information?

50
Chapter 5

The Small Business Advocacy

Review Panel Process for

Proposed Rules

5.1 What is a Small Business Advocacy Review Panel?

5.2 What are the Statutory Panel Requirements?

A Small Business Advocacy Review Panel (SBAR Panel or Panel) is an additional means

for small entities to provide input into certain EPA rulemakings to ensure that the unique

concerns of small entities are carefully considered during the rulemaking process. The Small

Business Regulatory Enforcement Fairness Act (SBREFA) amended the Regulatory Flexibility

Act (RFA) to require EPA to convene a SBAR Panel for any proposed rule for which EPA is

required to prepare an initial regulatory flexibility analysis (IRFA).

The RFA requires that we prepare an IRFA for all rules for which EPA is required by

statute to publish a NPRM the agency certifies that the rule "will not, if promulgated,

have a significant economic impact on a substantial number of small entities (SISNOSE)." If

an IRFA is required for a proposed rule under the RFA, we must also convene a SBAR Panel.

Each Panel consists of representatives from EPA, the Small Business Administration, and the

Office of Management and Budget. Although the statutory name for the Panel refers only to

small businesses,

Since the RFA was enacted in 1980, RFA section 609 has required all agencies to facilitate

small entities' participation in rulemakings that will have a significant economic impact on a

substantial number of small entities (see Chapter 4 for further discussion of general outreach

provisions). SBREFA expanded RFA section 609 to require EPA to convene SBAR Panels to

ensure that small entity representatives are involved in the development of certain rules.

unless

each Panel must solicit and consider the concerns of all small entities

directly regulated by the rule, including small governmental jurisdictions and small

nonprofit organizations, in addition to small businesses.

41

42

41

42

Because the term 'significant economic impact on a substantial number of small entities' is cumbersome, it is

commonly called a "SISNOSE". When we determine that there will be a significant adverse economic impact

on a substantial number of small entities, we call that a "No SISNOSE" finding or "making the RFA certification.”

The Occupational Health and Safety Administration is also subject to the Panel requirement.

not

Review Panel Process for Proposed Rules

5
Under RFA section 609(b), we must convene a Small Business Advocacy Review Panel for

any rule for which the Agency is required to prepare an IRFA. If we exercise our discretion to

make the RFA certification (i.e., certify that a proposed rule will have No SISNOSE), we do not

need to convene a Panel.

Also, RFA section 609(c) authorizes us to

convene a Panel for a rule that we intend to certify, but that we believe may have "a greater than

de minimis impact on substantial number of small entities." Section 609(b) requires that the

Panel process occur publication of the IRFA, which must be made publicly available at

the same time the proposed rule is published, except in cases of emergency. Accordingly, we

generally must convene a Panel a rule is proposed.

Section 609(b) establishes the following statutory framework for the Panel process:

For any rule subject to the Panel requirement, EPA is to notify the Chief Counsel for

Advocacy of the Small Business Administration (SBA) and provide the SBA Chief Counsel

with information on the potential impact of the proposed rule on small entities and the

type of small entities that might be affected.

The SBA Chief Counsel has 15 days from receiving notification of a proposed rule to

identify individuals representative of the small entities likely to be regulated by the rule.

EPA is to convene a review Panel consisting of full-time federal employees, including

representatives of the Agency office responsible for developing the rule, the Office of

Management and Budget's Office of Information and Regulatory Affairs (OIRA), and the

SBA Chief Counsel.

The Panel is to review any material EPA has prepared in connection with the rulemaking,

including any draft proposed rule, and collect the advice and recommendations of each

individual small entity representative selected by EPA, after consultation with the SBA

Chief Counsel for Advocacy, on issues related to specific elements of an IRFA for the

proposed rule under development. The specific elements of an IRFA 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 will 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.

Even if we convene a Panel, EPA may defer the decision to certify a

rule until after a Panel has concluded its work.

before

before

only









52
 Not later than 60 days after EPA convenes the Panel, the Panel must report on the

comments of the small entity representatives and the Panel's findings with regard to the

issues related to the IRFA elements listed above. The Panel Report must be included in the

rulemaking record.

In light of the Panel Report, the Agency is to modify, where appropriate, the proposed

rule, the IRFA or the decision on whether an IRFA is required.

First, you should check with your Regulatory Steering Committee representative to see

what resources are available to you within your own program office. EPA's Office of Policy,

Economics and Innovation has created this guidance document and a variety of other supporting

documents (e.g. checklists, worksheet and SBAR Panel manual) which should answer most of

your procedural and substantive questions about the SBAR Panel process. OPEI also has a team

of RFA experts who serve as staff to the SBAC to help you manage your Panel and answer

questions before, throughout and after the Panel process. The team contact information can be

found at: http://epa.gov/sbrefa/staff.htm.

This chapter provides you with a step-by-step approach to implementing the SBAR Panel

requirement. Our suggested approach is further illustrated in Figure 4. While the SBREFA

amendments to the RFA establish the basic outline of the Panel process (described below), it also

leaves us with discretion to determine many details of that process, including when to convene a

Panel prior to proposing a rule. EPA has, therefore, developed a suggested process that will

typically involve small entity representatives early in the rulemaking process.

This Guidance reflects agency policy and practice in implementation of the RFA. At the

same time, we recognize the need for flexibility in implementing the RFA. Some rules subject to

the Panel requirement may have developed in such a way that the Panel process must take place

later in the rulemaking process than this guidance suggests. Nevertheless, this suggested

process should work in most situations.

Our suggested Panel process is divided into several parts. You may not need to complete

each part of the process if, during the course of rule development, you (or, more accurately, your

Assistant Administrator, who is responsible to the Administrator for the certification decision)

determine that your rule will not have a SISNOSE. However, even if your rule will have a

SISNOSE (i.e., you are making the RFA certification), but may have impact on one or more

small entities, it is important for you to engage in consultation with the relevant small entity

stakeholders (see Chapter 4 on small entity outreach).



Early involvement

helps ensure that small entity comments and insights inform EPA's thinking about

fundamental issues of rule design and scope, as well as more specific issues posed by the

particular regulatory program at issue.

not

some

5.3 What Help is Available to Me in Preparing for a Panel?

5.3.1 How Can this Guidance Help Me with My Panel?

53
Notes:

General: References to “Sections” in the flowchart refer to the sections in Chapter 5 in this guidance document [see Table of Contents). In addition, references

to “Chapters” in the flowchart refer to the chapters in this guidance document.

It is EPA's policy to assess impacts on small entities and minimize impacts to the extent feasible. If you do not have enough information to determine with

confidence that the Agency can certify (no SISNOSE), proceed with “NO.” The decision to certify can be made at any time before proposal.

1

54

Small Business Advocacy Review Panel Process for Proposed Rules

Contact SBAC

Staff via Your

SC Rep.

[Section 5.7]

Informal

Notification to

SBA

[Section 5.7.2]

Continue Small

Entity Outreach

[Section 5.7.1 &

Chapter 4]

Consider SBA’s

Input & Finalize

List of SERs

[Section 5.7.4]

Conduct Outreach to

SERs

[Section 5.7.5]

YES

Draft Certification Statement &

Factual Explanation Thereof

[Chapter 2]

NO Likely to

Certify

Rule?1

Formal

Notification to

SBA

[Section 5.7.3]

Convene

SBAR Panel

[Section 5.8.1]

Complete Panel

Report

[Section 5.8.4]

Prepare for SBAR

Panel

[Sections 5.7.6 &

5.7.7]

Figure 4
5.3.2 Who Will Help Me with My Panel?

5.4 What Circumstances Require EPA to Convene a Panel?

Under SBREFA section 244(b), SBAR Panels are chaired by a Small Business Advocacy

Chair designated by EPA's Administrator. The Chair is responsible for implementing the Panel

review process. The Small Business Advocacy Chair heads a small staff (SBAC staff) who mainly

work on RFA issues.

The SBAC staff can help you in several ways. Two of the most important are:

the SBAC staff serve as EPA's experts in the Panel process, providing support to

program offices in resolving both complex and day to day issues; and

the SBAC staff provide support for many of the mechanics of convening and

operating the Panel.

A Small Business Advocacy Chair staff member will be assigned to work with you on your

Panel. We encourage you to make contact with the SBAC staff as early as possible in the rule

development process. This staff-level informal contact should also include your Regulatory

Steering Committee representative. You should also check with your Regulatory Steering

Committee representative to explore what resources are available to you within your own

program office.

The first step you must take to determine whether we must convene a Panel is to conduct

the screening analysis detailed in Chapter 2. As noted above, unless you can certify that your

proposed rule will not have a SISNOSE, you must prepare an Initial Regulatory Flexibility

Analysis, and EPA must convene a Panel prior to proposal. Because the determination to convene

a Panel can have a significant impact on your rulemaking schedule, you should identify the

rule's potential impact on small entities as soon as possible. After the screening analysis is

completed, you should consult with your Regulatory Steering Committee representative and the

SBAC and SBAC staff. At this early stage, you should consider ways of structuring the rule to

avoid any undue burden on small entities while still meeting the environmental objective of the

statute. In doing so, you may find that it may be possible to certify the rule as not having a

SISNOSE.

43





As stated in Chapter 2, we believe that only rules which may have a significant

economic impact on a substantial number of small entities require an IRFA, since the

primary purpose of the IRFA is to identify and address regulatory alternatives "which

any significant economic impact of the proposed rule on small entities." (RFA section 603,

emphasis added). Thus, if your rule will exclusively relieve regulatory burden, or otherwise have

direct

adverse

minimize

43 Pub. L. No. 104-121, Sec. 244(b). SBREFA has several provisions that are not codified into the RFA but that still

have an impact upon RFA implementation. SBREFA section 244(b) is one such provision.

55
a positive economic effect on the small entities subject to the rule,

your rule may be certified and, therefore, you are not required to

prepare an IRFA or convene a Panel.

In any case, our decision to convene a Panel is not a

commitment to prepare an IRFA (for rule proposal) or a FRFA (for

rule promulgation), nor does it prevent EPA from certifying your

proposed or final rule if its substance so warrants. In fact, each step

in the RFA process, from informal notification through completion

of the Panel Report, leaves open the prospect that your rule can be

certified as not having a SISNOSE, should the provisions of your

rule change or new information be discovered. For example, you

may adopt Panel recommendations that would result in a proposed rule no longer having a

SISNOSE. In that case, EPA could properly certify the rule and you would not be required to

complete an IRFA.

Under RFA section 609(e), EPA may request that the SBA Chief Counsel for Advocacy

waive the Panel requirement for a rule. The SBA Chief Counsel may grant a waiver if he or she

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 you from preparing an IRFA or notifying the SBA Chief Counsel of the

rule nor does it relieve the SBA Chief Counsel from identifying small entity representatives.)

The SBA Chief Counsel will consider the extent to which you have already consulted 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 SBA Chief Counsel must consult with OMB and the small

entity representatives identified by the SBA Chief Counsel after receiving formal notification of

the rule. The SBA Chief Counsel must also provide you with a written explanation of the waiver

decision for the rulemaking record.

Your waiver request must be submitted through your Regulatory Steering Committee

representative to the Agency SBAC. EPA will only request the waiver of a Panel requirement in

exceptional circumstances (e.g., when a rule is subject to a near-term legal deadline) or when you

have already engaged in extensive outreach to representatives of potentially regulated small

entities such that a Panel would be demonstrably redundant.

Even if the Agency decides to request a waiver, you, in cooperation with your Regulatory

Steering Committee representative and SBAC staff contact, 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 SBA

Chief Counsel grants the waiver, you are not required to complete the remaining steps of the

Panel process, but you should conduct as much outreach as time permits or as appropriate under

the circumstances.

5.5 Can I Request a Waiver from the SBAR Panel Process?

The Regulatory

Flexibility Act (RFA)

was amended by the

Small Business

Regulatory

Flexibility Act

(SBREFA) in 1996.

EPA'S decision to

convene a Panel is not a

commitment to prepare

an IRFA (for rule

proposal) or a FRFA (for

rule promulgation ) nor

does it prevent you

from certifying your

proposed or final rule.

56
5.6 When Should We Convene a Panel?

5.7 What Should Be Done Before My Panel Can Be Convened?

It is EPA's policy to convene Panels relatively early in the proposed rule development

process to give the Panel the best opportunity to inform decision makers during the initial stages

of rule development (i.e., prior to option selection). This is balanced with the need for sufficient

shape and development such that the small entity representatives and the Panel members will

have adequate information to critically appraise EPA's intention. Generally, the Agency SBAC will

consult the other standing Panel members with respect to an appropriate time to convene a

Panel. However, no matter when in the regulatory development process a Panel is convened, the

Panel's final report must be completed within 60 days of convening the Panel. EPA expects that

the Panel process will normally be concluded well in advance of Final Agency Review (or

equivalent stage for Tier 3 rules), in order to be most useful to the development of the proposed

rule.

Prior to convening a Panel, the typical steps include:

identifying and making contact with small entity representatives (SERs) among your

stakeholders;

providing informal notification of the Panel to SBA and OMB;

creating a dialogue with your SERs;

providing formal notification of the Panel to SBA and OMB;

hosting a final pre-Panel outreach meeting with the SERs to which SBA and OMB are

invited;

participating in one or more pre-Panel meeting(s) with SBA and OMB staff to discuss

Once you determine that we must convene a Panel for your rule, you should make

contact with the SBAC staff through your Regulatory Steering Committee representative to find

out who you will be working with on your Panel. You should share information about your

expectations for the Panel process and the rulemaking schedule. Bear in mind that

The

amount of time is dependent on the complexity of the rule and the amount of outreach done

prior to the initiation of the Panel process. This time line may result in a change your rulemaking

schedule or resource commitments. When negotiating court schedules, program staff and

management should take into consideration the time and resources that may be needed to

comply with the RFA Panel requirement. The Agency does not recommend asking for an

extension of any court-ordered deadlines solely to comply with the RFA Panel requirements, so it

is vital that the program fully consider these responsibilities in setting its initial rulemaking

schedule.

the Panel

itself should take no more than the 60 days provided by the statute to conduct its review;

however, the entire Panel process-- once begun in earnest with focused small entity

outreach, through SBA notifications, preparation for and convening of the Panel and

completion of the Panel Report -- will usually take between four and ten months.













5
available data, materials for the SERs and other related issues; and

creating a convening document for the Panel.

You, as the program office representative or rulewriter, are responsible for each of these

steps (discussed further below). Your SBAC staff contact and your Regulatory Steering Committee

representative are available to give you support, review drafts and provide you with examples of

documents from previous Panels.

It is very important for you to keep records of all your small entity outreach efforts. An

important part of convening your Panel will be demonstrating that your office has worked with

small entities throughout development of the rule. When you begin to involve SBA and OMB in

your small entity outreach efforts, it is important to ensure that your SBAC staff contact is also

provided with any outreach material, notices, or announcements. Your SBAC staff contact keeps

the Agency's official record of the Panel process including all communication between Panel

members regarding Panel issues.

After it is determined that you will need to convene a Panel and you make contact with

the SBAC staff through your Regulatory Steering Committee

representative, your next step in the Panel process is to identify

potential small entity representatives that may be formally

appointed later in the process. Small entity representatives

(SERs) are typically a subset of your broader stakeholder group

-- those representative of entities likely to be

subject to your regulation. Specifically, EPA prefers that SERs

be owner-operators of small businesses, small organizations or

small government officials potentially subject to the rule.

Other representatives, such as trade associations that

exclusively or at least represent potentially regulated small entities may serve as small

entity representatives. Persons other than owner-operators who wish to act as SERs are evaluated

on a case by case basis. To avoid the appearance of conflict of interest, you should apply a

general “reasonable person" rule, that is, ask yourself if a “reasonable person” would conclude

that this potential representative is capable of truly representing only the interests of small

entities.

For each rule, or group of related rules, you should identify as early as possible what

types of small entities are likely to be directly and adversely affected by the rule, and what those



small directly

primarily

44

45

5.7.1 Identify and Contact Small Entity Representatives

44

45

Small businesses are defined by the Small Business Administration through the Small Business Act (codified at 13

CFR 121.201). See Chapter 2 for more information on the definition of 'small entity' for RFA purposes.

RFA section 605(c) permits, but does not require, EPA to "consider a series of closely related rules as one rule for

the purposes of preparing an IRFA. In certain circumstances, it may also be appropriate to convene one Panel to

consider a series of closely related rules as well.

The Regulatory Flexibility

Act (RFA) was amended by

the Small Business

Regulatory Flexibility Act

(SBREFA) in 1996. The

Small entity representatives

(SERs) are typically a subset of

your broader stakeholder

group - those representative

of entities likely to be

subject to your

regulation.

small

directly

58
adverse impacts are apt to be (to the extent feasible at this early stage). An important resource for

the Panel process will be the list of small entities that you developed under Chapter 4 to support

your rulemaking activities generally. Once you identify candidate SERs, you must contact them to

confirm their small entity status and ask if they would agree to serve as a small entity

representative for your Panel, if so requested. Unless the program is in a position to sponsor

necessary travel, each SER is responsible for his or her own expenses. It is advisable to let any

potential SERs know what to expect from the Panel process. The SBAC staff have developed

information sheets that will answer questions such as:

Who Is Eligible to be a Small Entity Representative?

Who Chooses Small Entity Representatives?

At What Stage in the Rulemaking Does the Panel Process Occur?

What Will Being a Small Entity Representative Entail?

What Will Be Done with Small Entity Input?

How Can I Get More Information?

Fact sheets and other supporting documents are available on the RFA/SBREFA website

( ). You may distribute these fact sheets as part of your outreach

materials. More information and ideas regarding small entity outreach are detailed in Chapter 4.

Although this stage of the process will most likely take place before your rule is drafted, you

should provide each potential SER with an outline describing the important components of your

rule and any significant alternative approaches under consideration. Indeed, these early

discussions with your potential SERs may bring to light other ways of structuring the rule to

avoid any significant economic impact on a substantial number of small entities, in which case a

Panel need not be convened.

To the extent that comments from potential SERs (or any other information) confirm the

rule is likely to have impacts warranting preparation of an IRFA, you must continue to prepare

for the Panel process. If comments received or changes made to the rule so warrant, it may still

be possible to certify your rule. You should always consult with the SBAC staff and your

Regulatory Steering Committee representative if you stop preparations for a Panel.

Once you complete your screening analysis and it has been determined that your rule

may have a significant economic impact on a substantial number of small entities, through your

Regulatory Steering Committee representative, you must request that the Agency SBAC give the

SBA Chief Counsel notification that EPA is developing a rule that may be subject to the

Panel requirement, and that EPA may shortly ask SBA to nominate small entity representatives

Why Does EPA Need Small Entity Representatives?

What Is an EPA Small Entity Representative?

http://www.epa.gov/sbrefa

informal

5.7.2 Prepare Informal Notification to SBA

59
according to the statutory procedure. This preliminary notification is a courtesy to the Chief

Counsel for Advocacy in order to provide SBA time to inform itself about the rule and review its

own list of small entity contacts. At this time, the SBAC will provide the SBA Chief Counsel with

a program office staff contact (normally this will be the workgroup chair), and will also ask for an

SBA staff contact. Typically, the SBAC sends the informal notification via e-mail, with a courtesy

copy also directed to OMB. Keep in mind that SBAC staff are always available to facilitate

communication with SBA staff. Again, because the office of the SBAC is responsible for keeping

the Agency's record for each Panel, you should copy them on any written exchanges with SBA

and OMB regarding the Panel process. Also note your informal notification should be approved

by your management and OGC attorney before you send it forward for SBAC staff review.

You will need to draft the informal notification for the SBAC to transmit to SBA. The

informal notification could include:

the title of the rule,

requested Panel convening date and projected NPRM date,

the statutory authority for this action and the environmental objective,

an explanation of any alternatives that are or have been under serious

consideration,

the potential impacts of the rule on small entities, and

a list of any potential SERs already identified.

SBAC staff are available to help you with this task and a model informal notification is

available from the SBAC staff.

Beyond the basic rule identifying information, you should provide the SBAC with the

following information for the formal notification:

a description of the problem the rule is trying to solve;















To the extent that it continues to appear that your rule may have significant economic

impacts on a substantial number of small entities, you should work through your Regulatory

Steering Committee representative to request that the Agency SBAC provide notification

to the SBA Chief Counsel that a rule is being developed that may be subject to the Panel

requirement. EPA transmits the formal notification in hard copy under the SBAC's signature with

a courtesy copy directed to OMB. Formal notification triggers the SBA Chief Counsel's statutory

obligation to nominate small entity representatives within 15 days of receiving the notification.

Formal notification does 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 SBA Chief

Counsel's Office, or further analysis, that the rule will not have a SISNOSE, and thus neither an

IRFA nor a Panel would be required.

formal

not

5.7.3 Prepare Formal Notification to SBA

60








a list of the types of small entities likely to be affected;

a list of potential small entity representatives you've already identified, if any;

any material you have already shared with small entity representatives; and

preliminary rulemaking schedule (e.g., preferred convening Panel date, proposed

publication date, any court deadlines, etc.,)

The notice, prepared by you for the SBAC, will emphasize that the request to identify small

entity representatives does not represent an EPA finding that the rule will necessarily have a

SISNOSE, nor does it commit EPA to preparing a formal regulatory flexibility analysis or

convening a formal Small Business Advocacy Review Panel. The formal notification should be

reviewed and approved by your management and OGC attorney before it is forwarded to SBAC

staff. A sample of a formal notification to the SBA Chief Counsel is available from the SBAC staff.

In response to your formal notification to SBA, you will receive a list of suggested SERs

from SBA's Chief Counsel for Advocacy through the Agency SBAC. If EPA's outreach has been

strong, the Chief Counsel may identify individuals with whom the Agency has already been

consulting, and possibly add new names from SBA's own experience. After consultation with your

SBAC staff contact and SBA staff on the names under consideration, you should recommend an

official list of SERs for appointment by the SBAC. You should take great care to ensure that SERs

are truly representing small entities likely to be directly regulated by the rule under consideration.

It is better to take time to confirm a small entity's status than to be forced to exclude someone

later if he or she is not eligible. As stated earlier, EPA prefers that SERs be owner-operators or

officials of small entities potentially subject to the rule. Other representatives such as trade

associations that exclusively or primarily represent potentially regulated small entities may serve as

SERs, and SBA's Chief Counsel for Advocacy has sometimes nominated such representatives (see

Section 5.7.1 for more discussion of SER selection).

While the RFA authorizes the SBAC to select the SERs for the Panel process, you should

ordinarily include the SERs identified by the SBA Chief Counsel among those you recommend for

appointment unless you discover any reason that one or more should be considered ineligible. You

should consult with your SBAC staff contact before deciding whether or not to recommend any

SBA-suggested representative for the official list. You can include among your recommendations

additional small entities not suggested by SBA, but ultimately it is desirable that EPA reach

consensus with the SBA Chief Counsel on the roster of small entity representatives. The SBAC will

rely heavily on the Program's recommendations in appointing SERs for the Panel.

In preparation for a Panel, you may need to conduct outreach to potentially regulated small

entities. This outreach meeting should be conducted well in advance of the convening Panel date.

Panel members (SBA, OMB, and SBAC) should be invited to the meeting. Your SBAC contact can

assist you in this coordination.

5.7.4 Respond to SBA Input; Complete Recommendations for Small Entity

Representatives

5.7.5 Conduct Outreach to Small Entity Representatives

6
There is additional information regarding small entity outreach in Chapter 4.

You should provide the SERs 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 include any draft of the rule or preamble text, if such materials

are available.

You should solicit information, advice and recommendations on issues relating to

the specific elements of an initial regulatory flexibility analysis (listed in Section

5.2) from each SER.

You should encourage SERs to put their comments and suggestions in writing for

inclusion in the convening document and your rulemaking record.

You should keep detailed records of the SERs' participation for later use in

developing the rule and any regulatory flexibility analysis or certification for the

rule. The outreach process may lead to, and help substantiate, a determination

that the rule will have a significant economic impact on a substantial number

of small entities. Also, document your outreach efforts.

If the outreach process indicates that there will be no significant adverse economic impact

on a substantial number of small entities, it may be possible to certify your rule. In that case, the

remaining steps of the Panel process would no longer apply to your rule.

The convening document is critical to the operation of a Panel. It provides the context

and analytical framework for the Panel's deliberations and much of the Panel's report will be

based upon the convening document you prepare. By following the outline suggested below, you

will reduce the amount of work you must do to complete the Panel Report. The organization

outlined below has been used for most of the previous Panel Reports, so it offers the benefit of

being familiar to the standing Panel members (i.e., the Chair, OMB and SBA). The convening

document should include the following information in approximately the following order:

1. Introduction;

2. Background and Regulatory History;

3. Overview of Proposal Under Consideration;

4. Applicable Small Entity Definitions;

5. Small Entities that May Be Subject to the Proposed Regulation;









46

not

5.7.6 Prepare a Convening Document for the Panel

46 Small entity representatives can be consulted individually, particularly since the RFA requires that the Panel

collect the advice and recommendations of "each" representative. If, however, you choose to consult with small

entity representatives as a group, be careful not to solicit a group recommendation because issues under the

Federal Advisory Committee Act (FACA) may be raised. 62
6. Summary of Small Entity Outreach;

7. List of Small Entity Representatives; and

8. Summary of Input from Small Entity Representatives.

Typically, there are two opportunities for written SER comments, once during the

outreach process, and once during the Panel process. The Agency typically provides outreach

materials to the potential SERs in advance of the outreach meeting, and sets a deadline of about

two weeks subsequent to the meeting for the written comments. Written comments are normally

scheduled to arrive at least two weeks before the Panel convening, allowing the Agency to

develop materials for the Panel, after being informed by the written comments.

You should attach copies of any materials previously shared with the SERs and the

written comments submitted by the small entity representatives to EPA as an appendix to the

convening document. The convening document should contain a discussion of the

regulatory option or options actually selected by the Agency, since this document generally

should be prepared before such decisions are made. The convening document should be

forwarded to the SBAC staff assigned to your Panel at least one week prior to the convening date

for the Panel. The SBAC staff are also available to review drafts of your convening document. A

sample of a convening document and template are available from the SBAC staff.

Several program offices have consented to pre-Panel meetings with SBA and OMB to

discuss information needs, and we have found this to be an increasingly valuable planning step.

SBA and OMB tend to request a great deal of background information that they consider

potentially relevant to developing significant alternatives to minimize burdens on small entities.

SBREFA charges the Panel to review "any material the Agency has prepared in connection with

this chapter." At a minimum, SBA and OMB typically expect to review any materials that

describe the regulatory alternatives under consideration (to which small entities would be

subject), their environmental rationale and/or benefits, and the costs they would impose on

small parties, as well as the analysis and methods supporting these descriptions and estimates.

OMB and SBA normally expect to review such information if reasonably available and accurate,

to enable the Panel members to make informed decisions. Such materials could also include

narrative discussions of the advantages and disadvantages of these approaches. These materials,

or a subset of these materials, may also be provided to the SERs as part of the outreach package.

Since the full range of data and analysis needed to construct a publishable IRFA may not

become available until relatively late in the rulemaking, the "materials the agency has prepared,"

as well as their stage of completion and level of supporting detail at the time of convening, will

vary from rule to rule. In effect, the Panel encounters the rulemaking as a work in progress, with

the opportunity to affect its future development to avoid unnecessary burden on small entities.

not

47

5.7.7 Consider a Pre-Panel Meeting with SBA and OMB

47 “This chapter" refers to the RFA itself and suggests the elements of an IRFA, which include "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.” 63
EPA supports the Panel's thorough, meaningful consideration of such impacts and the design of

justifiable accommodations for small entities. We seek to provide the Panel with whatever

information may be available to promote those objectives, and it has been our practice to

respond generously to SBA's and OMB's requests for existing data, reports, and surveys.

Nevertheless, because each rule presents its own special circumstances bearing on what

information is both available and relevant for the Panel's review, a preliminary meeting to

consider what materials the Panel will receive, as well as what may be suitably provided to our

non-Federal advisors, may be useful in clarifying the expectations of all members. See further

discussion of data needs under 5.8.2 below.

Each Small Business Advocacy Review Panel is chaired by the Agency Small Business

Advocacy Chair (SBAC). The three other statutory Panel members are:

1. an EPA senior manager from the program office developing the rule;

2. the SBA Chief Counsel for Advocacy; and

3. the Administrator of OMB's Office of Information and Regulatory Affairs.

Each of these officials signs the final Panel Report, though, as a practical matter, one or

more may be represented by a designee during a portion of the Panel's deliberations. The Panel

member representing the EPA program should be a senior manager familiar with your rule who

has the authority to negotiate the program's position on potential regulatory alternatives for small

entities. --

they provide input to the Panel, but by statute the Panel comprises only Federal employees, as

identified above.

The SBAC convenes the Panel at the first formal meeting of the Panel members. The SBAC

sets the convening date in coordination with all the Panel members through consultation

facilitated by the SBAC staff. The convening document and a program office presentation on the

regulation are generally used as the main vehicles for initiating review. Once the Panel convenes,

it is critical that all Panel members review the same set of information. Accordingly, during a

Panel, all communication to the Panel members should be channeled through the SBAC's staff.

The program office Panel member should be prepared to negotiate with SBA and OMB on

the type and amount of data and supporting information that is needed to support the Panel's

discussions. We have found that a pre-convening meeting(s) can provide a useful forum for

arriving at workable understandings on this matter, but unexpected issues can arise during the

60-day Panel term as well. SBA and OMB sometimes request information and analyses that have

not yet been performed. As detailed below, according to the statute, the Panel is to review any

Remember, small entity representatives (SERs) are not members of the Panel

Materials not for public release can be marked deliberative and circulated to Panel

members as Federal employees. Such materials are intended to be kept confidential and are

not be released to the public nor included as part of the Panel Report.

5.8 What Can I Expect from Panel Review?

5.8.1 When is the Panel Officially Convened?

5.8.2 What Information Am I Required to Provide to the Panel?

64
existing RFA-related materials and any draft proposed rule, if those materials have been prepared

by the time the Panel convenes.

The following describes the information the RFA requires you to provide to the Panel:

- Section 609(b)(4) states that "the Panel shall review any

material the agency has prepared in connection with this chapter, including any

draft proposed rule." While this language does not require EPA to prepare a draft

proposed rule prior to convening a Panel, if you convene the Panel after you have

prepared a draft NPRM, you must provide it to the Panel members;

- Section 609(b)(l) requires EPA to provide SBA

"information on the potential impacts of the proposed rule on small entities and

the type of small entities that might be affected." Section 609(b)(l) does not

specify the requisite level of analysis of the potential impacts. EPA does not

believe the RFA requires you to prepare a full economic analysis of potential

impacts for the Panel process, nonetheless, EPA clearly must provide some

information - either quantitative or qualitative - on the potential impacts;

- Section 603(c) requires the IRFA to include "a

description of any regulatory 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." [Emphasis

added] The RFA does not require you to prepare for comment by the Panel what

essentially would be a draft IRFA for all regulatory alternatives you have

identified. You do, however, need to describe in sufficient detail, including some

analysis of the impact on small entities and environmental benefits, each

significant regulatory alternative you have identified that accomplishes the

statutory mandate. It is important to note that the Panel process precedes and is

intended to contribute to the development of the IRFA, not the reverse; and

- Pursuant to subsection 603(b)(2), an

IRFA must address the legal basis for a proposed rule. However, section 603(b)(2)

is not one of the expressly enumerated subsections on which the Panel is to

collect advice and recommendations. Since the RFA places the legal basis for the

proposed rule outside the purview of the Panel, the RFA does not require EPA to

provide such information to the Panel.

Although the above list describes what the RFA does and does not require you to provide

to the Panel, as a matter of policy, EPA typically provides information beyond the statutory

minimum. When doing so, you should consult with staff to the SBAC and establish clearly that

the provision of such information is not statutorily mandated. In previous Panel processes,

several EPA program offices have made it a practice to provide requested information to the

Panel as long as the information has been cleared by OGC for public release or otherwise would

have been provided to any requestor. We have also honored requests for materials not already

prepared if fulfilling the request would not consume excessive resources or delay the

rulemaking/Panel schedule.

The RFA does not require EPA to develop materials or

perform analyses specifically for the Panel process.









Draft regulatory text

Economic impact data

Regulatory Alternatives

significant

Technical and legal supporting materials

65
It is vital that program regulatory staff remain in close consultation with its own

management to ensure that its provision of non-statutory information is neither

inappropriately restrictive nor unacceptably intrusive on the program organization's

internal priorities and schedules.

The program office is responsible for

creating a summary of this meeting for inclusion in the Panel Report.

The program office has the primary

responsibility for drafting the Panel Report

SBAC staff can be helpful to you in establishing how the

Agency has viewed and treated similar requests for information in other Panel settings. (See

5.7.7 for further discussion of how we typically anticipate such requests and determine whether

and when the Agency can fulfill them.)

The RFA also tasks the Panel with performing its own outreach to the Small Entity

Representatives. Typically, this consists of a meeting with the SERs, either in person or via

teleconference. Prior to this meeting, the Panel generally sends a letter from the SBAC inviting

SERs to the outreach meeting and a package of information that provides them with additional

information about the rule for them to be able to judge the likely impacts of the rulemaking on

themselves and other small entities. The Panel agrees on the content, but development of this

outreach package is the responsibility of the EPA program office responsible for the rule. The

outreach letter will request written comments from each small entity representative on the four

elements of an IRFA (see Section 5.2) as well as other issues identified by the Panel. The program

office should try to anticipate what information the Panel would like to provide to the SERs and

develop the SER outreach package prior to convening the Panel. We encourage you to circulate

the draft outreach package to the Panel members within one week of convening. The outreach

materials are circulated and agreed upon by all Panel members before they are sent out under the

signature of the SBAC. An example of an outreach package is available from SBAC staff.

At the outreach meeting, chaired by the SBAC, the program office is generally responsible

for a brief presentation on the proposal under consideration and the remainder of the time is

devoted to feedback from and dialogue with the SERs.

The SER outreach

meeting should generally take place within the first 30 days of the Panel process.

The Panel generally meets very soon after the SER outreach meeting to discuss the SER

comments. It is useful at this point, for each Panel member to be able to bring to the table

proposals for regulatory options that may minimize economic impacts on small entities. Panel

deliberations can occur through a series of face-to-face meetings of the Panel members (or their

designees), conference calls, e-mail exchanges or facsimile transmissions. Deliberations generally

center around the language that will be contained in the Panel Report. You should be prepared

to devote a significant amount of time and effort to drafting materials for your SBREFA Panel,

especially toward the end of the 60-day process.

The first complete draft of the Panel Report is

based primarily on SBA and OMB's input (based on the SER comments) to the convening

document. Each of the Panel members will sign the completed Panel Report, therefore, each

Panel member has a vested interest in the specifics of the Panel Report language. The program

office Panel member should be prepared to negotiate with OMB and SBA on Panel

recommendations; this could require a substantial amount of time as well as direct, immediate

feedback from management.

.

5.8.3 Panel Outreach to Small Entity Representatives

5.8.4 Panel Deliberations and Generating the Panel Report

66
By statute, the Panel only 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. 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. When possible, the report should state matters of Panel agreement, but

no Panel member is under compulsion to agree to any position. Indeed, any member may demur

and even insert into the Panel Report a contrary position, with the knowledge that the Report

will be part of the public record offered for comment when the proposed rule is published. Since

an EPA program office representative signs the Panel Report,

The program office Panel member should not agree to any

Panel recommendation if it appears that the Agency cannot implement it. The final Panel Report

will 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.

The RFA requires the Agency to consider the Panel Report in selecting proposed

regulatory options to address small entity concerns, and where appropriate, to modify the

proposed rule, the initial regulatory flexibility analysis or the decision on whether an initial

regulatory flexibility analysis is required. As stated earlier, it is generally recognized that any

recommendations agreed upon by the entire Panel will be addressed in the proposed rule unless

unforseen circumstances intervene between completion of the Panel Report and the time of

proposal. You should document the results of the outreach and Panel process, and their role in

the Agency's deliberations in the initial regulatory flexibility analysis prepared for the rule. You

should integrate the substantive Panel recommendations into your preamble text in the

appropriate sections and also summarize these results in the Regulatory Flexibility section of the

preamble of your proposed rule. The Regulatory Management Division of EPA's Office of Policy,

Economics and Innovation, which is responsible for the review of regulations prior to OMB

review and signature by the Administrator, will, in conjunction with OGC, ensure that your

preamble language is sufficient.

it is generally recognized that any

recommendations agreed upon by the entire Panel are acceptable to the Agency, whether as

modifications to the regulatory proposal, or as issues to be discussed in the preamble. Even

if there are subsequent data findings or circumstances that warrant a change in EPA's

position after the Panel closes, it is important to discuss the Panel's recommendations and

the Agency's response in the NPRM

EPA's policy is to keep the Panel Report confidential until the rule is proposed, since

we consider its recommendations to be protected under the Federal deliberative process.

Upon proposal, the Panel Report must be placed in the docket for the rulemaking so that it

will be accessible to all parties interested in the rulemaking.

.

not

5.9 Consideration of the Panel Report During Development of the Proposed Rule and

Initial Regulatory Flexibility Analysis

6

CHAPTER 6

Small Entity

Compliance Guides

6.1 EPA's Approach to Small Entity Compliance Guides

When the Agency is required to prepare a regulatory flexibility analysis for a final rule,

SBREFA section 212 also requires the Agency to:

prepare and publish one or more documents regarding such a rule or group of

rules as small entity compliance guides and specifically "entitle such publications

as small entity compliance guides;"

explain in the compliance guide actions that a small entity must take to comply

with a rule or group of rules;

distribute the guides to small entities through "comprehensive sources of

information;”

post the guide in an easily identified location on the website of the agency and

publish each guide - “on the same date as the date of publication of the final rule

(or as soon as possible after that date);” and “not later than the date on which the

requirements of that rule become effective;” and

report annually on the agency’s compliance.

While compliance guides are not 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 implementing these requirements particularly in regard to designation, development

and distribution of the guides. Although guides are required only for final rules for which a

regulatory flexibility analysis was prepared, rulewriters should start their planning for the guide

48











48 Pub. L. No. 104-121, Sec. 212. SBREFA has several provisions that are not codified into the RFA but that still have

an impact upon RFA implementation. SBREFA section 212 is one such provision. SBREFA section 212 has also been

amended by Pub. L. Number 110-28.

69
Notes:

General: References to “Sections” in the flowchart refer to the sections in Chapter 6 in this guidance document (see Table of Contents).

If you are doing an Analytic Blueprint you should include plans for developing the Guide, including a timeline, and the resources needed. If there is no Blueprint,

you should integrate Compliance Guide development into your action or work plan.

1

70

Finalize Guide & Get

Concurrence from Both

OGC & OECA

[Section 6.3]

Issue Compliance Guide

ASAP; Preferably within 2

Months of Promulgation

[Section 6.4]

Distribute & Keep

Up-To-Date

[Sections 6.7 & 6.8]

Prepare Final Rule &

Plan for Guide

Development &

Distribution

[Sections 6.4 & 6.6]

Lead Rule- Writing Office

Prepare Draft

Compliance Guide1

[Section 6.9]

Get Input from

Agency Workgroup,

in particular from

OECA & OGC

[Section 6.3]

Small Entity

Review

Small Entity Complianc

[Section 6.3]

e Guides

Figure 5
during the proposed rule phase. Timing is discussed further in Section 6.4

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 continue to gain

experience, we may issue additional guidance. Figure 5 illustrates our approach to developing a

small entity compliance guide.

As mentioned above, SBREFA section 212 requires the Agency to prepare and publish one

or more documents as small entity compliance guides for a rule or group of rules for which

we've prepared a final regulatory flexibility analysis and specifically "entitle such publications as

small entity compliance guides." Beyond meeting the statutory obligation, the primary goal of the

guide is to help small entities--whether they are small businesses, small governments or small

non-profit organizations--to comply with the regulation. You should therefore write your guide

using language suitable for a non-technical audience. President Clinton's memorandum of June

1, 1998 entitled "Plain Language in Government Writing," directs agencies to use plain language

in all documents that explain how to obtain a benefit or service or comply with a regulation. You

should focus your guide on what a small entity will need to know to comply with your

regulation and minimize the inclusion of any other information (see the template in section 6.10,

below). 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.

The lead rule-writing office is responsible for developing the rule-specific compliance

guide as part of the rulemaking process. You should have your draft guide reviewed by both the

Office of General Counsel attorney assigned to your rule and by a representative from OECA.

Your regulatory development workgroup, as well as representatives from SBO, OPPT's Pollution

Prevention Division, regional offices and the SBAC's staff can also provide assistance/support, or

develop sections of the guide, as appropriate. If your regulatory development workgroup does

not include representatives of the appropriate offices, you should work through your Regulatory

Steering Committee representative to identify such individuals.

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. Generally, draft compliance guides should not

be released to outside parties prior to the rule's promulgation. In those unusual circumstances

where the outline of the compliance guide is clear to you at pre-proposal, then you may seek

review and feedback from small entity stakeholders at that stage. You should share the draft

compliance guide and solicit comment from small entity stakeholders after promulgation, but

will need to balance such review with equal concern for timely issuance of the guide.

Before issuing a compliance guide, obtain concurrence from both OGC and OECA.

Normally, you can ask members of your workgroup from these offices to ensure that appropriate

levels of management in their offices approve the draft. (OGC and OECA will determine the level

of concurrence from their offices.)

6.2 What is the Goal in Writing a Compliance Guide?

6.3 Who Participates in the Development of a Compliance Guide?

7
6.4 When Should I Develop a Compliance Guide?

6.5 What Sorts of Questions Should I Ask My Small Entity Reviewers?

6.6 How Do I Document Development of the Guide?

You should integrate development of the guide into the rulemaking process. Generally, you

should 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,

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.

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. If your rule has a distant

compliance date (e.g., two years or more), closer to the compliance date you may want to ensure

the information in your compliance guide is still current and re-issue the guide, if appropriate.

Some suggestions include:

Is the format appropriate?

Is the guide clear and easy to read and understand? (use Plain Language-refer to

http://intranet.epa.gov/plainlanguage)

Does the guide accurately describe the rule as published?

Is the guide useful in planning for compliance?

If you are doing an Analytic Blueprint, it should include plans for developing a small entity

compliance guide, including a time line, and the resources needed. If there is no Blueprint, you

you should plan

to devote time during the rulemaking process for development of a guide. However, the

Agency will not ask for an extension of any court-ordered deadlines in order to complete

compliance guides.

It is required that the guide be published “not later

than the date on which the requirements of that rule become effective.”

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 compliance

options before the compliance deadline.

In any case, you

should make every effort to issue the guide within two months of the promulgation of the final

rule.

Identify your small entity reviewers early in the process. You may want to consider

using those small entity representatives who participated in the Panel process during the

development of the proposed rule.

Tip:









72
should integrate development of a compliance guide into your action or work plan. Submit a

schedule for development and completion of a compliance guide when you submit your final

rule to the Administrator for signature. Include your distribution strategy for the guide in your

Communications Plan. Information related to the development of the guide will be tracked in

OPEI's Rule and Policy Information and Development System (RAPIDS). Lead offices are also

encouraged to develop internal methods for tracking the development of the guides.

In addition to internal office distribution mechanisms, you should provide copies of your

completed guides to the staff of the Small Business Advocacy Chair, the Office of the Small

Business Ombudsman, the Office of Regional and State/Local Relations, and the Office of Public

Affairs. These offices will distribute the guide to their small entity contacts. (You should ensure,

to the extent it is feasible, that these offices do not have duplicate distribution lists.) Other small

business assistance providers include:

State Technical Assistance Programs for Pollution Prevention;

State Small Business Assistance Programs;

Small Business Development Centers;

Trade Associations;

Professional Organizations; and

the Small Business Administration, USDA and OSHA.

In addition, your small entity compliance guide must be made available to the public and

must be made available to Congress through the Courtesy Copy Policy (CCP). Please refer to

, June 30,

2004. EPA's Action Development guidance can be found at EPA's Action Development Process

Library intranet site: http://intranet.epa.gov/adplibrary.

As a statutory matter, compliance guides may have evidentiary uses in litigation so it is

important that guides are reviewed and revised as needed. The guide should be revised when

the rule for which it was developed is revised. It is the responsibility of the lead office to ensure

compliance guides are kept current.

Other circumstances that may cause you to revise the compliance guide include:

Changes in the rule which affect compliance.

Comments from the public suggesting revisions, or from OECA based on their

















EPA's Action Development Process: Guidance for EPA Staff on Developing Quality Actions

6.7 Who Can Help Me with Distribution?

6.8 How Do We Ensure that Compliance Guides are Kept Up to Date?

73
experience in enforcing the regulation.

Litigation citing a guide as a reason to challenge the appropriateness of proposed

penalties.



You should include in every compliance guide the following disclaimer on the cover

page of your guide.

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 Regulatory Steering Committee.

You also should send a copy of your compliance guide to EPA’s Small Business

Ombudsman’s office and place the most current guide in the appropriate docket, on a special

secion in EPA’s internet page or other electronic bulletin boards.

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 use this

template 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.

Non-italicized text indicates sections which should normally be included in the

compliance guide.

Italicized text indicates standard language which you may choose to use if it is

The template is organized as follows:





6.9 Template for Compliance Guides

The Regulatory Flexibility Act (RFA) was amended by the Small

Business Regulatory Flexibility Act (SBREFA) in 1996. The Agency

refers to the RFA as amended by SBREFA simply as the RFA.

NOTICE

This guide was prepared pursuant to section 212 of the Small Business Regulatory

Enforcement Fairness Act of 1996 ("SBREFA"), Pub. L. 104-121 as amended by

Pub. L. Number 110-28. 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. The statements in this document are

intended solely as guidance to aid you in complying with

EPA may decide to revise this guide without public

notice to reflect changes in EPA's approach to implementing

or to clarify and update text. To determine whether EPA has revised this

guide and/or to obtain copies, contact EPA's

The full

text of the rule is available online at:

[insert name of your

rule and its CFR citation].

[insert the name of

your rule]

[insert Small Business

Ombudsman Office and phone number and name of program office that

issued the rule and its main phone number and/or website address].

[insert name of your website].

74
appropriate to your rule. You should adapt this standard language to the specifics of

your rule as necessary.

Program offices have lead responsibility unless otherwise designated in

Please make your best effort to write your guide in plain language (see EPA's intranet site

http://intranet.epa.gov/plainlanguage)

[Insert standard publication header, including the date and appropriate publication number]

 bold.

SMALL ENTITY COMPLIANCE GUIDE

[insert title of rule or program...]

NOTICE

[insert name of your rule and its CFR citation]

[insert the name of your

rule]

[insert Small Business Ombudsman Office and phone number

and name of program office that issued the rule and its main phone number and/or website

address] [insert name of your website].

This guide was prepared pursuant to section 212 of the Small Business Regulatory Enforcement

Fairness Act of 1996 ("SBREFA"), Pub. L. 104-121 as amended by Pub. L. Number 110-28.

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. The

statements in this document are intended solely as guidance to aid you in complying with

. EPA may decide to revise this guide without

public notice to reflect changes in EPA's approach to implementing

or to clarify and update text. To determine whether EPA has revised this guide and/or to

obtain copies, contact EPA's

. The full text of the rule is available online at:

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

affected but may not be required to comply. This section needs to make this distinction clear

to the reader.

Use the compliance table from the "Summary" 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

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 of 1996. 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].

indirectly

Tip:

Who Should Use this Guide?

75
to point out any similarities or differences at this stage but you should not go into great detail

on this subject.

List an 800 number, citation or the Government Information

Locator Service.

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.

Identify in easy-to-read format (e.g., flowchart, time line, timetable) compliance dates for

notifications and other requirements.

1. Each Program should develop specific template language concerning program delegations

and relationships to other requirements 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

2. Meanwhile, this suggested template language which may be appropriate in many cases:

What does the Guide Cover?

How do I use the Guide?

How do I Obtain a Complete Copy of the Rule?

WHAT DOES THE REGULATION REQUIRE?

What environmental/human health issue(s) does this rule address and why it is

important?

Summary of the New Regulation

Compliance Timetable

How Does this Regulation Relate to Other Federal, State, and Local Requirements?

generally,

specifically.

Federal Register

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].

76
STEP-BY-STEP PROCEDURES FOR COMPLIANCE WITH THIS RULE

How can I tell if I am subject to this rule?

What requirements am I subject to?

When do I need to comply ?

hat do I need to do to comply

What, when and how must I monitor or test?

What records do I need to keep and for how long?

How do I minimize harm if I think I am out of compliance? (Program lead/OECA

support)

Where do I go for help?

What is pollution prevention and how can it affect my operations? (OPPT

lead)

Are there opportunities for flexibility or waivers?

This is where you break down the rule into discrete subject areas using a step-by-step,

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.

(elaborate on flowchart, as appropriate)

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?

Include sample forms and calculations.

Include sample forms.

Give information on federal, State and local contacts, Agency hotlines, or State Small

Business Assistance Program contacts.

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.

W ?

What, when and to whom must I report?





7
If this is applicable

OPTIONAL QUESTIONS AND ANSWERS ABOUT FACILITY/ OPERATIONS/

PROCESSES

How do I conduct a self-audit of my facility/firm/operation to help me evaluate

whether I am in compliance with this rule?

What are the implications of this rule for my existing permits?

How Does this Rule Change How I Handle/ Store Wastes?

THE COMPLIANCE ASSURANCE PROCESS (OECA LEAD)

How Is My Operation's Compliance With Environmental Requirements

Determined?

If I Discover a Violation, How Can I Work With The Agency to Correct It?

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.

Here you want to anticipate questions of potential concern to the regulated community,

including how the rule fits into the overall regulatory program. Questions will depend on the

rule; the questions below are only EXAMPLES. [ : 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.]

Provide Self-Audit Checklist

Adapt this to your particular rule or program.

(if

guide was written for RCRA rule)

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.

Discuss compliance assistance, inspections, self-monitoring and the role of citizens.

Discuss compliance incentives policies: Small Communities Policy, Policy on

Compliance Incentives for Small Businesses, Self-Disclosure Policy.

Tip

(Program/OECA)







78
If the Agency Discovers a Violation, What Might Be Its Response?

What is the legal status of this guide?

APPENDIX

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.

information and technical advice helps small businesses to understand and meet

their environmental obligations. , 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 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) may file an enforcement action seeking penalties of up to $[INSERT

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

policies 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 [INSERT POINT OF CONTACT].

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 '11 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.

Compliance

assistance

Compliance incentives

enforcement program f

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," "process."

79
Where to Obtain More Information

How Useful Was This Guide?

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.

Each guide should solicit feedback from users as to the usefulness, readability, and

improvements needed for the guide.

80
Chapter 7

Ongoing Informal

Small Entity Guidance

This chapter provides a brief overview of our informal small entity compliance program

and list of compliance assistance tools.

Section 213 of the Small Business Regulatory Enforcement and Fairness Act (SBREFA)

requires us to: 1) provide guidance to small entities "whenever appropriate in the interest of

administering statutes and regulations", 2) establish a program for providing the guidance, and 3)

issue a report to Congress regarding the program. Under section 213(a), we are required to answer

inquiries from small entities regarding compliance with all Agency statutes and final regulations. In

particular, we are required to provide advice based on the application of the law to specific sets of

facts supplied by small entities.

EPA's Informal Guidance Program consists of four main components:

· the EPA Small Business Ombudsman (SBO), located at EPA Headquarters;

· regional small business liaisons, who serve as local resources to assist small entities who

contact the EPA regional offices;

· various hotlines and clearinghouses that serve entities of any size, including large

percentages of small entities; and

· technical and program staff located throughout Headquarters and the regions who are

available to answer questions in their subject area or who refer small entities to the

appropriate State and local resources.

In designing this program, EPA's guiding principles were to: 1) ensure the accessibility of the

This information is provided here to help you

understand what resources are available to assist you in your small entity compliance

assistance efforts.

This advice and guidance can be considered as evidence of the

reasonableness or appropriateness of penalties sought against a small entity.

7.1 Overview of EPA's Section 213 Program

Small Entity Guidance

8
informal guidance program to the small entity community, and 2) avoid duplication with existing

activities. As provided in section 213(b), we have applied existing functions and personnel in

creating the program. By incorporating our Small Business Ombudsman (SBO) and other existing

services into the core of the Agency's Informal Guidance

Program, we have been able to achieve both goals.

The SBO is already well-known in the small entity

community, serving as a "first-stop shop" for multi-media

compliance information. The SBO administers a free hotline

handling approximately 1,100 to 1,500 calls per month,

answering fact-specific compliance questions, distributing

supporting documentation, and providing information on

additional sources of assistance. Callers may remain anonymous at their own discretion. In addition

to these calls to the hotline, SBO staffers respond to another 1,000 or more calls annually that are

made directly to their desks.

In addition to the SBO, EPA has numerous other resources to answer compliance questions

from small entities, such as the small business liaisons, program-specific hotlines and

clearinghouses, and technical and program media staff, some of which are listed below. For example,

we sponsor approximately 89 hotlines and clearinghouses throughout Headquarters and the

regions, which are available to customers of any size, including small entities.

We have a long history of developing authoritative materials to aid the regulatory community

in its compliance efforts. These documents include such items as Sector Notebooks, Plain English

Guides, and Fact Sheets. Through the issuance of such documents, you can often preclude the need

for a small entity to contact us with a related inquiry. In addition to these written materials, you can

make numerous resources easily accessible through the main EPA home page (www.epa.gov) or

through your program office web site.

If you provide informal guidance to small entities, whether as a technical or program expert

answering questions in your field of expertise or via a hotline or clearinghouse, you should be aware

that the Office of General Counsel has provided guidance that applies to all EPA personnel providing

informal guidance regarding the kinds of assurances EPA can make about the confidentiality of

information provided by callers to EPA hotlines. As a matter of law, the Agency generally is unable to

guarantee that any information received by EPA personnel or hotline staff will remain "confidential."

As stated in EPA's SBREFA section 213 Report to Congress, it is EPA's position that callers to an

Agency hotline who request compliance assistance may choose to remain anonymous. Callers

speaking with program or technical experts may similarly choose to remain anonymous. This means

that the caller is not required to provide specific information such as her/her name, phone number,

or address, that could be used to identify the caller. The caller may simply choose to provide

whatever information is necessary to describe his/her situation and to seek EPA's assistance in

answering their questions. however, is not the same as For instance, EPA

staff may not suggest or guarantee that (1) the information provided would not be viewed by other

parts of EPA; or (2) the information would not be released by EPA to a third party if it were the subject

of a Freedom of Information Act request.

Anonymity, confidentiality.

The Regulatory Flexibility

Act (RFA) was amended

by the Small Business

Regulatory Flexibility Act

(SBREFA) in 1996. The

Informal small entity advice

and guidance can be

considered as evidence of the

reasonableness or

appropriateness of penalties

sought against a small entity.

82
7.2 List of Compliance Assistance Resources

EPA offers small businesses a wide variety of compliance assistance resources and tools designed

to assist small businesses in complying with federal and state environmental laws. These resources can

help businesses understand their obligations, improve compliance and find cost-effective ways to

comply through the use of pollution prevention and other innovative technologies. You and your

management should assess which of these venues would be the most effective means to provide small

entity compliance assistance regarding your rule.

EPA offers a great deal of compliance assistance information and materials for small

businesses on the following Websites:

www.epa.gov

www.epa.gov/compliance

www.epa.gov/compliance

http://www.epa.gov/smallbusiness

www.epa.gov/Compliance/resources/

policies/incentives/smallbusiness/sbcp2000.pdf

www.epa.gov/sbo

www.smallbiz-enviroweb.org

EPA sponsors approximately 89 hotlines and clearinghouses that provide free and

convenient avenues to obtain assistance with environmental requirements. The Small Business

Ombudsman Hotline can provide you with a list of all the hot lines and assist you with determining

which hotline will best meet your needs. Key hotlines that may be of interest to you include:

(919) 541 -0800

(800) 424-9346

(800) 426-4791

(800) 368-5888

(800) 296-1996

(202) 554-1404

(800) 832-7828

Websites.

Hotlines.

Compliance Assistance Center

EPA's Home Page

EPA's Enforcement Policy and Guidance

EPA's Office of Enforcement and Compliance

Home Page

EPA's Small Business Assistance Programs

EPA' Small Business Compliance Policy

EPA's Small Business Ombudsman

Small Business Home Page

Clean Air Technical Center

RCRA/UST/CERCLA Hotline

Safe Drinking Water

Small Business Ombudsman

Stratospheric Ozone/CFC Information

Toxic Substances and Asbestos Information

Wetlands Hotline

EPA has established national compliance assistance centers,

in partnership with industry, academic institutions, and other federal and state agencies, that

provide on-line and fax back assistance services in several industry sectors heavily populated with

small businesses. You can access each center directly at:

s.

83
http://www.epa.gov/compliance/assistance/centers/index.html.

Agriculture

Automotive

Local Governments

Metal Finishing

Paints and Coatings

Printing

Transportation

1-888-633-2155 or

http://www.epa.gov/compliance/assistance/

sectors/agriculture.html

1-888-GRN-LINK

www. ccar-greenlink. org

1-877-TO-LGEAN

www.lgean.org

www.nmfrc.org

www.paintcenter.org

1-888-USPNEAC

www.pneac.org

1-888-459-0656

mall Business Policy and Small Communities

Policy are intended to promote environmental compliance among small businesses by providing

incentives such as penalty waivers and reductions for participation in compliance assistance

programs, and encouraging voluntary disclosure and prompt correction of violations. These

policies can not be applied to enforcement actions that have already been initiated.

www.transource. org

Many state agencies have established compliance assistance programs that

provide on-site as well as other types of assistance. Please contact your local state environmental

agency for more information. EPA's Small Business Ombudsman can provide you with state agency

contacts by calling (800) 368-5888.

EPA's S

State Agencies.

Compliance Policies Incentive.

84
Chapter 8

Periodic Review of Final

Rules as Required by RFA

Section 610

8.1 Introduction

8.2 What's a Section 610 Review?

The Regulatory Flexibility Act (RFA) generally requires agencies to examine the impact of

their proposed and final regulations on small entities. Under section 610, the RFA also requires

that agencies review rules which have or will have a significant economic impact on a substantial

number of small entities (SISNOSE) within ten years of promulgation. The Small Business

Regulatory Enforcement Fairness Act (SBREFA), enacted in 1996, added a judicial review

provision to the RFA, which means the Agency can be challenged in court as to its compliance

with the provisions of this section on a rule-by-rule basis.

This chapter provides information on:

identifying rules subject to review,

performing a section 610 review,

ensuring your review meets section 610 requirements, and

publishing your results.

In general, a section 610 review involves:

identifying a promulgated rule that was not certified, (i.e. did not contain a finding that

there was no SISNOSE);

determining if the rule should be amended, rescinded, or left unchanged, based on five

statutorily prescribed factors; and

49

50













49

50

Small entities are defined as small businesses, small governments, and non-profits that are not dominant in their

field, see Chapter 2 for more information

“Certification" means that the Agency determined that the rule had no SISNOSE, and stated this to be the case

in the published rule, see Chapter 1 for more information.

.

Rules as Required by RFA Section 610

85
 documenting the review and conclusions within 10 years of the date the rule was

promulgated.

Yes. For EPA rules issued in 1992-1997, EPA went beyond the requirements of the RFA by

preparing regulatory flexibility analyses for rules that would have any adverse impact on any

number of small entities, regardless of the size of impact or number of small entities. In effect,

many rules that we would otherwise have certified as not having a SISNOSE were not formally

certified during this time period. After the RFA was amended in 1996 by the Small Business

Regulatory Enforcement Fairness Act (SBREFA), EPA returned to its earlier practice of formally

certifying rules with no SISNOSE under the RFA while continuing to offer outreach and

accommodation to regulated small entities for those rules. EPA has identified eight rules issued

before SBREFA was passed that were not formally certified yet do not and will not have a

SISNOSE. EPA has determined that these eight rules are not subject to section 610 review, and,

even if a section 610 review were conducted, revision of the rules would not be warranted. The

rules were published in EPA's Regulatory Plan and semi-annual Regulatory Agenda, Spring 2003

(Published May 19, 2003).

Final rules that have or will have a significant economic impact on a substantial number

of small entities (SISNOSE) are subject to section 610 review. Following promulgation of the final

rule that EPA does not certify as not having a SISNOSE, we identify the rule in our Agency's

database, the Rule and Policy Information and Development System (RAPIDS), as a rule that will

require a Section 610 review.

EPA tracks rules that may be subject to section 610 reviews through the use of an

electronic section 610 Tracking Report in EPA's Rule and Policy Information and Development

System (RAPIDS). The Report consists of three categories, as follows:

Rules for which EPA has announced section 610 reviews, either completed or under way.

Rules are listed in this category once an entry has been published in the semi-annual

Regulatory Agenda announcing the section 610 review. This category tracks the rule title,

date of final publication, initiation and completion dates of the section 610 review and

the review decision,

Rules that do not require section 610 reviews, and

III. Rules that will need a section 610 review within ten years of promulgation. Rules are

listed in this category if the rule is subject to notice-and-comment and promulgated

without being certified. This category tracks the rule title, date of final publication, and

review due date.

EPA's Office of Policy, Economics and Innovation (OPEI) monitors the rules tracked in

I.

II.

8.3 Are there Some Rules that are not Certified by EPA that will not have a Section 610

Review?

8.4 How Do We Identify and Track Rules for Review?

86
this database.

The RFA requires that we the review by the tenth year anniversary date of final

publication. You may undertake a review any time within ten years of publication of the original

final rule. Conducting the review close to the ten-year anniversary, however, allows a more

focused perspective on any changed impacts on small entities.

We will use the semi-annual Regulatory Agenda (published in the to

provide public notice of the review. You must complete the review within one year of that public

notice. The RFA does not require that you initiate or complete any regulatory action to amend or

rescind the rule within that year, if it is determined that such action is necessary.

There is no requirement to review a rule more than once. After you complete a review,

and decide to rescind the rule, amend the rule or leave the rule unchanged, that completes the

obligation under section 610.

The original, final rule as published in the is the basis for section 610

review. In some cases, a subsequent amendment may eliminate impacts on small entities so that

there is no longer a SISNOSE. Under these circumstances, when the original rule comes up for

its section 610 review, you must be able to adequately document the elimination of the

SISNOSE, and publish this finding in the "Completed Actions" section of the semi-annual

Regulatory Agenda.

If an amendment reduces, but does not eliminate, a SISNOSE, then you should evaluate

the need for a section 610 review based on current guidelines for SISNOSE thresholds (see

Chapter 2).

If a subsequent amendment has created, rather than eliminated, a SISNOSE

then the rule must be reviewed within ten years

of the date of the published amendment.

The RFA explicitly stipulates a review by rule, rather than by sections or parts in the

(CFR). While we recognize that rules subsequently become

amalgamated into the CFR and may lose their individual identity, the final rule as published in

the remains the basis for section 610 reviews. You will need to decide on a caseby-case basis if the rule can be sufficiently separated from its context in the CFR to do an

adequate review. You may decide to include additional regulatory material to conduct a coherent

and meaningful review.

complete

based on

current guidelines for SISNOSE thresholds

Federal Register)

Federal Register

Code of Federal Regulations

Federal Register

,

8.5 Scheduling Section 610 Reviews

8.6 Must We Review a Rule More than Once?

8.7 What If a Rule has been Subsequently Amended?

8.8 Do We Review a Rule or a CFR Part or Section?

8
8.9 Conducting the Review

Once you have determined that your rule:

(1) is subject to the RFA, and

(2) was not certified, either at the time of promulgation or when amended, you are ready to

conduct the section 610 review. Bear in mind that section 610 does not require that you

initiate a regulatory action to rescind or amend a rule within the one-year review period.

It only requires that you complete the review in that time frame, publish your

determination, and explain the basis for your decision.

To conduct a section 610 review follow the three steps described below:

Before you begin your review, develop an entry for each rule for the "Prerule" section of

the Unified Agenda (also known as the semi-annual Regulatory Agenda), indicating that

you will be conducting this review over the next year, and requesting public comment.

You should also indicate in the abstract the length of the public comment period.

Normally, this is 60 to 90 days. Contact your Regulatory Steering Committee

representative for specific information about the semi-annual Regulatory Agenda exercise.

The "Prerule" entry must:

state your intent to review the rule under section 610;

give a brief description of the rule;

explain the need for and legal basis of the rule; and

invite public comment on the factors listed below.

2. You must specifically address and ask the public for comment on the following factors

when performing a review under section 610:

the continued need for the rule;

the nature of complaints or comments received concerning the rule from the

public since promulgation;

the complexity of the rule (i.e., can you make the rule less complex so that small

entities can comply more easily?);

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

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. (Evaluate these factors to the extent that they affect small

51

1.



















51 Over time, EPA's definition of SISNOSE has evolved to meet new statutory and administrative requirements,

and therefore the threshold for performing a regulatory flexibility analysis has changed as well. If your section

610 rule does not meet guidelines for SISNOSE, you should take this into account when conducting

the section 610 review, e.g., if a final regulatory flexibility analysis was performed under a more expansive

reading of SISNOSE, you should note this in a justification for letting a rule stand. For guidance on SISNOSE,

see Chapter 2.

current

88
entities, not the entire regulated universe.)

See Section 8.13 for an example of a "Prerule" section 610 entry in the semi-annual

Regulatory Agenda.

3. You must explicitly consider of these factors in your review, and document the results,

either positive or negative. The results of the review - either to rescind, amend or leave the

rule unchanged - are published in the "Completed Actions"section of the semi-annual

Regulatory Agenda and are placed in your program office docket.

A line-by-line reinvention review qualifies as a section 610 review if you address the

required factors stated above, request public comments, and adequately document the review.

Contact your Regulatory Steering Committee representative or OGC if you are not sure that the

review meets the section 610 requirements. In most cases you will need to develop a separate

"Prerule" entry for the section 610 portion of the line-by-line review, and proceed with an

independent analysis.

The results of this review -- either to rescind, amend or leave the rule unchanged -- will

be published in the "Completed Actions" section of the semi-annual Regulatory Agenda one year

from the time it was identified in the "Prerule" section of the semi-annual Regulatory Agenda.

You should use the "long form", i.e., the one that allows an abstract, so that you can explain your

determinations. Supporting documents should be placed in the public docket. (See Section 8.14

for an example of a "Completed Action" entry in the semi-annual Regulatory Agenda.)

You should follow any decision to amend or rescind the rule with an entry in the

"Prerule" or "Proposed Rules" section of a subsequent semi-annual Regulatory Agenda

The following example is intended to be used as a guide, not a template.

To initiate a 610 Review, you should prepare a semi-annual Regulatory Agenda entry by

completing an Action Initiation Form (AIF). Each office has different procedures for preparing

and submitting their AIF's. Your Regulatory Steering Committee representative can tell you what

the procedure is for your office. Regulatory Steering Committee members are listed in the

"Contacts" section of the Action Development Process Library. The address is:

http://intranet.epa.gov/adplibrary.

ACCIDENTAL RELEASE PREVENTION REQUIREMENTS: RISK MANAGEMENT

PROGRAMS UNDER THE CLEAN AIR ACT, SECTION 112(R)(7) (SECTION 610 REVIEW)

Substantive, Nonsignificant

all

Title:

Priority:

8.10 Does the Line-by-line Review also Satisfy Section 610 Requirements?

8.11 Announcing the Results of the Review

8.12 Follow-up to the Section 610 Review

8.13 Example of "Prerule" Semi-annual Regulatory Agenda Entry

89
Legal Authority:

CFR Citation:

Legal Deadline:

Abstract:

Timetable:

Begin Review

Comment Period End

End Review

Regulatory Flexibility Analysis Required

Small Entities Affected:

Government Levels Affected:

42 USC 7412 (r)

40 CFR 68

None

The Agency promulgated the Accidental Release Prevention Requirements on June 20, 1996 (61

FR 31668). The regulations apply to all stationary sources with processes that contain more than

a threshold quantity of a regulated substance. Processes are divided into three categories based on

the potential for offsite consequences associated with a worst-case accidental release; accident

history; or compliance with the prevention requirements under OSHA's Process Safety

Management (PSM). Processes that have no potential impact on the public in the case of an

accidental release have minimal requirements. For other processes, sources must implement a

risk management program that includes more detailed requirements for hazard assessment,

prevention, and emergency response. Processes in industry categories with a history of accidental

releases and processes already complying with OSHA's PSM are subject to prevention program

requirements that are virtually identical to parallel elements of the OSHA standard. All other

processes are subject to streamlined prevention requirements. All sources must prepare a risk

management plan based on the risk management programs established at the source. The sources

submit the plan to EPA. The first submission was on June 20, 1999. Some sources re-submitted

their plans or revised their plans after the first submission. The second submission was due on

June 20, 2004. There are approximately 15,000 sources subject to the accidental release

prevention regulations. This new entry in the Regulatory Agenda announces that EPA will review

this regulation pursuant to section 610 of the Regulatory Flexibility Act (RFA) (5 U.S.C. 610).

EPA solicits comments on the following factors: (1) The continued need for the rule; (2) the

nature of complaints or comments received concerning the rule from the public since

promulgation; (3) the complexity of the rule; (4) the extent to which the rule overlaps, duplicates

or conflicts with other Federal rule, 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.

In the Agency's view, there is a continued need for the rule because it calls on sources to reduce

the probability and adverse consequences of accidental releases of substances that have the

potential to cause immediate harm to public health and the environment, and stimulates

dialogue between industry and the public to improve accident prevention and emergency

response practices. The Agency has received few complaints about this rule from small

businesses. The Agency has developed many guidance documents to help small entities comply

with the rule. Efforts were made to minimize the burden and complexity of the rule by taking a

tiered approach. In other words, entities with complex processes have to follow more rigorous

requirements and those with simple processes follow only some of the requirements. EPA

believes that there is no conflict or overlap between this rule and any other rule except for

OSHA's PSM rule as indicated above. This is the first time the rule has been evaluated under the

RFA section 610. EPA has established a public docket for this effort, Docket No. OAR-2005-

0166 at http://www.epa.gov/edocket.

10/00/05

01/00/06

04/00/06

No

No

None

Action Date

:

90
Additional Information

Agency Contact:

:

:

:

: SAN No. 5018

____________________________________________________________________________

The following example is intended to be used as a guide, not a template.

All of EPA's semi-annual Regulatory Agenda entries are submitted to OMB via EPA's Rule

and Policy Information and Development System (RAPIDS). Your pre-rule entry announcing the

review (Regulatory Agenda Review Form) is still in RAPIDS. Update your abstract to indicate the

results of your review. Insert the date the review ended, and insert "Rule will remain in

effect without modification", or "New rulemaking started, see SAN # (

.) Each office has a different system for updating and submitting Agenda

entries. Your Regulatory Steering Committee representative will give you appropriate instructions

when it is time to prepare your semi-annual Regulatory Agenda entry.

TSCA 402 and 404; 15 USC 2682; 15 USC 2684 CFR

40 CFR 745 subpart L; 40 CFR 745 subpart Q

None

Sicy Jacob, Environmental Protection Agency, Solid Waste and Emergency Response, 5104A,

Washington, DC 20004 Phone: 202 564-8019 Fax: 202 564-2625 Email: jacob.sicy@epa.govVanessa Rodriguez,

Environmental Protection Agency, Solid Waste and Emergency Response, 5104A, Washington, DC 20460 Phone:

202 564-7913 Fax: 202 564-2625 Email: rodriquez.vanessa@epa.gov RIN: 2050-AG26

either

insert SAN# of newly

started rulemaking

Title:

Priority:

Legal Authority

Citation

Legal Deadline

Abstract:

LEAD; REQUIREMENTS FOR LEAD-BASED PAINT ACTIVITIES IN TARGET HOUSING

AND CHILD-OCCUPIED FACILITIES (Completion of a SECTION 610 REVIEW)

Info./Admin./Other

In August, 1996, the Environmental Protection Agency (EPA) promulgated regulations

under section 402 of the Toxic Substances Control Act (TSCA) to ensure that individuals

conducting lead-based paint activities in target housing and child-occupied facilities are properly

trained and certified, that training programs providing instruction in such activities are

accredited and that these activities are conducted according to reliable, effective and safe work

practice standards. EPA also finalized a Federal regulation under section 404 of TSCA that allows

States and Indian tribes to seek authorization to administer and enforce the regulations

developed under section 402 for the training and certification of individuals conducting LBP

activities and the accreditation of training programs for LBP activities in 1996 (August 29, 1996,

61 FR 45778). EPA performed an analysis of the potential impacts on small entities and

determined that this action is likely to have a modest adverse economic impact on a substantial

number of small entities. The TSCA section 404 regulations became effective August 29, 1998.

The final rule then provided for an additional phase- in period for the requirements for training

program accreditation, individual and firm certification, and work practice standards.

Regulations for accreditation of training programs became effective on March 1, 1999.

Regulations for certification of individuals and firms became fully effective on March 1, 2000.

EPA is reviewing the 1996 regulation pursuant to section 610 of the Regulatory Flexibility Act (5

USC 610). The purpose of this review is to determine whether the rule should be continued

without change, or should be amended or rescinded, to minimize economic impacts on small

entities while still complying with the provisions of the Toxic Substances Control Act (TSCA).

8.14 Example Entry for Completed Section 610 Review

9
EPA has already solicited comment on the continued need for the rule; the complexity of the

rule; the extent to which it overlaps, duplicates, or conflicts with other Federal, State, or local

government rules; and the degree to which technology, economic conditions or other relevant

factors have changed since the rule was promulgated. No comments were received, and EPA has

concluded that the rule needs no revisions at this time to minimize impacts on small entities. See

EPA Docket ID number OPPT-2003-0015 at www.epa.gov/edocket.

Timetable:

Final Action 1

Begin Review

Comment Period End

End Review

Regulatory Flexibility Analysis Required:

Small Entities Affected:

Government Levels Affected:

Additional Information:

Agency Contact:

Action Date FR Cite

08/29/96 61 FR 45778

05/27/03 68 FR 30942

12/22/03 68 FR 73 543

12/13/04 69 FR 73889

No

No

None

SAN No. 4788, EDocket No. OPPT-2003-0015;

Cindy Wheeler, Environmental Protection Agency, Office of Prevention,

Pesticides and Toxic Substances, 7404T, Washington, DC 20460 Phone: 202-566-0484 Fax: 202

566-0470 Email: wheeler.cindy@epamail.epa.gov Julie Simpson, Environmental Protection

Agency, Office of Prevention, Pesticides and Toxic Substances, 7404T, Washington, DC 20460

Phone: 202-566-1980 Fax: 202 566-0471

Email: simpson.julie@epamail.epa.gov

RIN: 2070-AD65

The 1996 SBREFA amendments to the RFA gave small entities adversely affected by a rule

the right to seek judicial review of our compliance with the requirements of section 610. A

reviewing court has wide discretion in deciding what the appropriate remedy should be for an

Agency's failure to comply with section 610, including remanding the rule or deferring

enforcement of the rule against small entities, unless the court finds that continued enforcement

of the rule is in the public's interest.

8.15 Section 610 Judicial Review

92
EPA

United States

Environmental Protection Agency

(1808)

Washington, DC 20460

Official Business

Penalty for Private Use $300

Recycled/Recyclable -- Printing with Vegetable Oil Based inks on 100% (Minimum 50% postconsumer) Recycled Paper