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United States Small Business Administration

RS Number 137

July 1993

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Purpose

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

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

Scope and Methodology

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

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

Highlight

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

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

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

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

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

Ordering Information

The complete report is available from:

National Technical Information Service

5285 Port Royal Road

Springfield, VA 22161

(800) 553-6847

Ordering Number: PB93-209377

Price Codes: A07 ($27), Paper; A02 ($12) Fiche
*Last Modified 6-11-01