## Final Guidance for EPA Rulewriters:



# Regulatory Flexibility Act

as amended by the

Small Business Regulatory Enforcement Fairness Act

November 2006

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 fa cts 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.[This page intentionally left blank][This page intentionally left blank]TABLE OF CONTENTS

List of Acronym s

.............................................................. i

P r e f a c e

..................................................................... ii

Chapter 1 Introduction to the Regulatory Flexibility Act

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

. 1 W h a t i s t h e R F A ?

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

. 2 W h a t i s S B R E F A ?

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

................... 2 1

. 4 W h a t i s E P A ' s P o l i c y f o rI mp l e m e n t i n g t h e R F A ?

........................ 3 1

. 5 W h a t R u l e s A r e S u b j e c t t o t h e R F A ?

................................. 4 1

. 6 W h a t P a r t o f R F A C o mp l i a n c e i s J u d i c i a l l y R e v i e w a b l e ?

.................. 5 1

. 7 W h a t i s i n t h i s G u i d a n c e ?

........................................... 6 1.8 W h at are the RFA Procedural Requirem e nts for Rule Proposal?

............. 8 1

. 9 W h a t a r e t h e R F A P r o c e d u r a l R e q u i r e m e n t s f o rF i n a l R u l e P r o m u l g a t i o n ?

..... 9 1.10 How Does this Guidance Differ from the 1999 Revised Interim Guidance?

.... 9

Chapter 2 RFA/SBREFA Screening Analysis: Assessing Im pacts on Sm all Entities

.......... 11 2

. 1 R F A : T h e B a s i c s

................................................. 11 2.2 W h at is a Screening Analysis and W hy Should I Do One?

................. 12 2

. 3 I s a S c r e e n i n g A n a l y s i s N e e d e d f o rM y R u l e ?

.......................... 13 2

. 4 W h a t B a s i c S t e p s M a k e u p a S c r e e n i n g A n a l y s i s ?

....................... 14 2.5 Step 1: Determ ining W h ich Sm all Entities are Subject to the R u l e ’ s R e q u i r e m e n t s

.............................................. 16 2.6 Step 2: Determ ining Appropriate Measures of Econom ic Im pacts

........... 21 2.7 Step 3: How Should I Use the Screening Analysis to Determ ine If a Rule May Be Certified under the RFA?

........................................... 25 2.8 Step 4: W h at Should I Do after Assigning My Rule to a Category?

.......... 34

Chapter 3 Preparing the Initial and Final Regulatory Flexibility Analyses

................... 37 3

. 1 W h a t a r e I R F A s a n d F R F A s ?

....................................... 37 3.2 W hat is the Relationship Between the IRFA/FRFA and a Rule’s Broader Econom ic Analysis?

.............................................. 39 3

. 3 W h a t i s t h e R e l a t i o n s h i p o f t h e I R F A / F R F A t o t h e S B A R P a n e l P r o c e s s ?

.... 41 3

. 4 H o w D o I P r e p a r e a n I R F A ?

........................................ 41 3

. 5 H o w D o I P r e p a r e a F R F A ?

......................................... 47

Chapter 4 Im plem enting Sm all Entity Outreach: Inform ing, Listening, Responding

........... 5 1 4.1 Sm all Entity Outreach: The Basics

................................... 5 1 4.2 W h at Does “Outreach” Mean?

...................................... 5 2 4.3 Is Sm all Entity Outreach Subject to FACA?

............................ 5 34.4 Should I Coordinate My Stakeholder Involvem ent Activities?

.............. 5 3 4.5 W hat Kind of Outreach Does the RFA Require?

......................... 5 4 4.6 W h ere Can I Get Assistance with My Sm all Entity Outreach?

.............. 5 4 4.7 W h at Steps Can I Take to Reach Sm all Entities?

........................ 5 6 4

. 8 W h e r e C a n I G e t M o r e I n f o r m a t i o n ?

.................................. 59

Chapter 5 The Sm all Business Advocacy Review Panel Process for Proposed Rules

.......... 6 1 5.1 W h at is a Sm all Business Advocacy Review Panel?

...................... 6 1 5

. 2 W h a t a r e t h e S t a t u t o r y P a n e l R e q u i r e m e n t s ?

........................... 6 1 5

. 3 W h a t H e l p i s A v a i l a b l e t o M e i n P r e p a r i n g f o r a P a n e l ?

................... 6 3 5.4 W h at Circum stances Require EPA to Convene a Panel?

.................. 6 6 5

. 5 C a n I R e q u e s t a W a i v e rf r o m t h e S B A R P a n e l P r o c e s s ?

.................. 6 6 5.6 W hen Should W e Convene a Panel?

.................................. 67 5.7 W hat Should Be Done Before My Panel Can Be Convened?

............... 68 5

. 8 W h a t C a n I E x p e c t f r o m P a n e l R e v i e w ?

............................... 7 6 5.9 Consideration of the Panel Report During Developm ent of the Proposed Rule and Initial Regulatory Flexibility Analysis

............................. 8 0

Chapter 6 Sm all Entity Com p liance Guides

........................................... 8 1 6.1 EPA’S Approach to Sm all Entity Com pliance Guides

.................... 8 1 6

. 2 W h a t i s t h e G o a l i n W r i t i n g a C o m p l i a n c e G u i d e ?

....................... 8 3 6

. 3 W h o P a r t i c i p a t e s i n t h e D e v e l o p m e n t o f a C o mp l i a n c e G u i d e ?

............. 8 3 6.4 W h en Should I Develop a Com p liance Guide?

.......................... 8 4 6.5 W h at Sorts of Questions Should I Ask My Sm all Entity Reviewers?

......... 8 4 6

. 6 H o w D o I D o c u m e n t D e v e l o p m e n t o f t h e G u i d e ?

........................ 8 5 6

. 7 W h o C a n H e l p M e w i t h D i s t r i b u t i o n ?

................................. 8 5 6

. 8 H o w D o W e E n s u r e t h a t C o m p l i a n c e G u i d e s a r e K e p t U p t o D a t e ?

.......... 8 6 6

. 9 T e m p l a t e f o rC o mp l i a n c e G u i d e s

.................................... 87

Chapter 7 Ongoing Inform al Sm all Entity Guidance

................................... 97 7.1 Overview of EPA’s Section 213 Program

............................. 97 7

. 2 L i s t o f C o m p l i a n c e A s s i s t a n c e R e s o u r c e s

............................. 98

Chapter 8 P e r i o d i c R e v i e w o f F i n a l R u l e s a s R e q u i r e d b y R F A S e c t i o n 6 1 0

................ 10 1 8.1 Introduction

.................................................... 10 1 8.2 W h at’s a Section 610 Review?

..................................... 10 1 8.3 Rules not Certified by EPA that will not have a Section 610 Review

........ 10 2 8

. 4 H o w D o W e I d e n t i f y a n d T r a c k R u l e s f o rR e v i e w ?

..................... 10 2 8.5 Scheduling Section 610 Reviews

.................................... 10 3 8

. 6 M u s t W e R e v i e w a R u l e M o r e t h a n O n c e ?

............................ 10 3 8

. 7 W h a t I f a R u l e h a s b e e n S u b s e q u e n t l y A m e n d e d ?

...................... 10 3 8

. 8 D o W e R e v i e w a R u l e o r a C F R P a r t o rS e c t i o n ?

....................... 10 48.9 Can a Section 610 Review Be Deferred?

.............................. 10 4 8.10 Conducting the Review

........................................... 10 4 8.11 Does the Line-by-line Review also Satisfy Section 610 Requirem e nts?

...... 10 6 8.12 Announcing the Results of the Review

............................... 10 6 8.13 Follow-up to the Section 610 Review

................................ 10 6 8.14 Exam ple of “Prerule”Sem i-annual Regulatory Agenda Entry

........ 10 6 8.15 Exam ple Entry for Com p leted Section 610 Review

..................... 1 08 8.16 Section 610 Judicial Review

....................................... 1 09

Figure 1 R FA Process Overview For Proposed Rules

. . . . . . . . . . . . . . . . . . . . . . . . . after iii Figure 2 R FA Process Overview For Final Rules . . . . . . . . . . . . . . . . . . . . . . . . after Figure 1 Figure 3 S creening Analysis Overview

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Figure 4 S m a ll Business Advocacy Review Panel Process

. . . . . . . . . . . . . . . . . . . . . . . . 6 4 Figure 5 S m all Entity Com p liance Guid es

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2 Table 1 R ecom m ended Quantitative Metrics for Econom ic Im pact Screenin g

. . . . . . . . . . . . 24 T a b l e 2 S I S N O S E C e r t i f i c a t i o n D e c i s i o n P r o c e s s

............... . . . . . . . . . . . . . . . . . 2 8[This page intentionally left blank]List of Acronyms

APA A dm inistrative Procedure Act CFR C ode of Federal Regulations FRFA Final Regulatory Flexibility Analysis IRFA Initial Regulatory Flexibility Analysis NPRM Notice of Proposed Rulem a king OPA O ffice of Public Affairs (EPA) OCIR Office of Congressional and Intergovernm e ntal Relations (EPA) OECA Office of Enforcem ent and Com p liance Assurance (EPA) OGC Office of General Counsel (EPA) OIRA Office of Inform ation and Regulatory Affairs (OMB) OMB Office of Managem e nt and Budget OPEI Office of Policy, Econom ics and Innovation (EPA) ORPM Office of Regulatory Policy and Managem e nt (EPA) RFA R egulatory Flexibility Act RMD R egulatory Managem e nt Division (EPA) SBA S m a ll Business Adm i nistration SBAC Sm all Business Advocacy Chair (EPA) SBAR Sm all Business Advocacy Review Panel SBO S m a ll Business Om budsm a n (EPA) SBREFA Sm all Business Regulatory Enforcem ent Fairness Act SER S m a ll Entity Representative SISNOSE S ignificant econom ic Im pact on a Substantial Num b er Of Sm all Entities

iPreface A Quick Glimpse at this Guidance and the RFA Process

The purpose of this Guidance is to help you, the rulewriter, understand how the requirem e nts of the Regulatory Flexibility Act (RFA) as am ended by the Sm all Business Regulatory Enforcem ent Fairness Act (SBREFA) fit into the Agency’s Action Developm ent Process. 1 The Agency refers to the RFA as am ended by SBREFA sim p ly as the RFA.

W h en EPA initiates a regulatory developm ent action, RFA com p liance should be near the top of the list of issues you address in your project plan or Analytic Blueprint. 2 This guidance outlines the analytical and sequential process that will apply to m o st rules subject to the RFA. Figure 1 illustrates the RFA process for proposed rules and Figure 2 illustrates the RFA process for fi nal rul e s.

Assessing a Rule’s Economic Impact on Small Entities

. Once you have determ ined that your rule is subject to the RFA (i.e., you are required to publish a notice of proposed rulem a king under the APA or any other statute), the first thing you need to do for RFA com p liance is to determ ine what, if any, im pact your rule m a y have on sm all entities. To do this, you need to perform a screening analysis on your proposed and final rules. Screening analyses are discussed in detail in Chapter 2 of this guidance.

Preparing the Initial and Final Regulatory Flexibility Analyses

. These are analyses of

econom ic im pacts on sm all entities that you m u st prepare if you do not certify that your rule does not have a significant econom ic im pact on a substantial num ber of sm all entities (SISNOSE). These analyses are discussed in detail in Chapter 3

. Implementing Small Entity Outreach

. If the screening analysis indicates that your rule m a y have som e im pact on som e sm all entities, or you find that you need m o re inform ation to m a ke that determ ination, Chapter 4 will provide you with guidance for identifying and engaging in a dialogue with representatives of sm all entities that m a y be subject to the rule under developm ent.

Small Business Advocacy Review Panels

. If the screening analysis of your rule indicates that the rule is likely to have a SISNOSE, you should plan to prepare for a Sm all Business Advocacy Review Panel. In Chapter 5 you will find detailed inform ation about how you should go about

com p lying with the requirem e nt that the Agency convene a Sm all Business Advocacy Review Panel for proposed rules which are likely to have a SISNOSE.

1 See EPA’s Action Development Process: Guidance for EPA Staff on Developing Quality Actions, June 30, 2004. EPA’s Action Development guidance can be found at EPA’s Action Development Process Library site: http://intranet.epa.gov/adplibrary.

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

.
iiSmall Entity Compliance Guides

. If you m u st prepare a final regulatory flexibility analysis for
your final rule (i.e., you do not certify the rule as not having a significant econom ic im pact on a substantial num ber of sm all entities), the RFA also requires you to prepare a sm all entity

com p liance guide. Chapter 6 answers questions regarding what constitutes such a guide and gives guidance f o r designing a sm all entity com p liance guide.

Ongoing Informal Small Entity Guidance

. W h en planning for the post-prom ulgation stage of your rule, refer to the discussion in Chapter 7 regarding the RFA provision on giving inform al advice to sm all entities in response to inquiries.

Periodic Review of Rules

. RFA section 610 requires a periodic review of prom ulgated rules which have or will have a significant econom ic im pact on a substantial num ber of sm all entities. Chapter 8 explains the Agency’s strategy for continued com p liance with this requirem e nt.

Please note : This guidance is not a binding Agency procedural rule. In determ ining and

m itigating im pacts on sm all entities, we anticipate that there will be m a ny situations in which Agency staff and m a nagem e nt m u st exercise c onsiderable judgm ent. Nevertheless, we intend this guidance to provide you with an analytic and sequential structure that should be sufficient for m o st covered rulem a kings. Should you com e 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 m a kes sense, you need to consult with your Regulatory Steering Com m ittee representative, the Sm all Business Advocacy Chair in the Office of Policy, Econom ics and Innovation (OPEI), and attorneys from the Office of General Counsel (OGC).

This guidance was developed for practical use. Occasionally, it repeats inform ation 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. Som e readers

m i ght 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 em barking on a rulem a king likely to directly regulate sm all entities.

This docum ent supersedes and revokes all prior Agency guidance on the Regulatory Flexibility Act. This guidance incorporates the inf o rm ation on preparing initial and f i nal regulatory f l exibility analyses that was contained in the EPA Guidelines for Implementing the Regulatory Flexibility Act, April 1992. That inform ation is contained in a new Chapter 3 in this guidance. In addition, a revised Chapter 2 based on the Agency’s continuing im plem entation of the RFA is included. A few m i nor editorial changes have been m a de to other chapters such as deleting outdated contact inform ation and updati ng footnote references to other docum ents.

Please direct any questions to the Sm all Business Advocacy Chair’s staff in the Office of Regulatory Policy and Managem e nt of OPEI.

iiiInitial AnalyticInitiate ActionDevelopmentAnyPrepareAssessment:OutreachNPRMPerformAdverseYESto SmallLikelyNOImpact onto CertifyPackageScreeningEntitiesAnalysis2Any SmallRule?3CompletePanelReport[Chapter 5]Prepare IRFA4PrepareConvenefor OMB[Chapter 4]Entity?for SBARSBARReview[Chapter 2]Panel5Panel[Chapter 5] [Chapter 5]NOYESDraft CertificationMay NeedPrepare NPRMStatement &to PreparePackage forFactualNPRMAgencyExplanationPackage forSignature andThereofOMBRouting to[Chapter 2]ReviewFederal RegisterRFAProcessOverviewFor Proposed RulesNotes:General:Referencesto “Chapters”in theflowchart refertothechaptersin thisguidancedocument.SeeTableofContents.1Onlyrulessubject tonotice-and-commentrequirementsare subject totheregulatoryflexibilityanalysisrequirementsofthetheRFA.See Chapter 1and2formoredetails.2It maybeappropriatetostart outreachtosmall entitiesbefore orconcurrent withperformingascreeninganalysis.SeeChapter2 for moredetails.3ItisEPA’spolicytoassessimpactsonsmallentitiesandminimizeimpacts totheextentfeasible.Ifyoudo not haveenoughinformationto determine withconfidencethattheAgencycancertify(noSISNOSE), proceedwith “NO.”4Under the RFA,youmust prepareanIRFAand meetotherrequirementsforyour ruleproposal,unlessthe Administrator certifiesthat the rule“willnot,ifpromulgated,havea significanteconomic impactonasubstantialnumberofsmallentities.”See Chapter1 forgeneralinformation and Chapter3 formore detailedinformation onpreparation ofanIRFA.Adecisiontoconvene aPanelisnotacommitmenttoprepareanIRFA(oraFRFAfor rulepromulgation), nor doesitprevent EPAfromcertifyingyourproposedorfinalruleifitssubstanceso warrants.5Althoughthe preparation ofthe IRFAandthetermofthe Panelare representedhereasconcurrentactivities,in reality,thereisnofirmlinkageintimingfor thetwo tasks.However,the two tasksmayinformeachotherandtheIRFAshouldnotbecompleteduntilthe panelreport issigned.Figure1Draft FinalRule:Consi deronsiderComments &Comments &Sele ctAlternativesCertifyFinalRule?1NOPrepareFRFA2PrepareComplianceGuide[Chapter 6]YESCertifyFinalRule?1NOPrepareFRFA2PrepareComplianceGuide[Chapter 6]YESPrepare FRMPackage forOMBReviewand/ orAgencySignature andSignature andRouting toFederal RegisterDraft CertificationDraft CertificationStatement&FactualFinal Rule isPublished inFederal RegisterIssueComplianceGuide[Chapter 6]Final Rule isPublished inFederal RegisterIssueComplianceGuide[Chapter 6]ProvideOngoingInformalInformalSmall EntitySmall EntityGuidanceGuidance[Chapter 7][PeriodicPeriodicReview RulesWhich Have aWhich Have aSignificantSignificantImpact on aImpact on aSubstantialSubstantialNumber ofNumber ofSmall EntitiesSmall Entities[Chapter 8][ExplanationExplanationThereo f[Chapter 2][RFAProcessOverviewForFinalRulesNotes:General:References to“Chapters”in theflowchartrefertothechaptersinthisguidancedocument.See TableofContents.1Ifyouhavenotgonethroughthe SBARPanelprocess forruleproposal,butthink thatyou maynotbeabletocertifyyourfinalrule,consultwithyourOGCattorney.1Ifyouhavenotgonethroughthe SBARPanelprocess forruleproposal,butthink thatyou maynotbeabletocertifyyourfinalrule,consultwithyourOGCattorney.2Underthe RFA,you mustpreparea FRFA andmeetotherrequirementsforyourrule,unlesstheAdministratorcertifies thattherulewillnothavea significanteconomic2Underthe RFA,you mustpreparea FRFA andmeetotherrequirementsforyourrule,unlesstheAdministratorcertifies thattherulewillnothavea significanteconomicimpactona substantialnumberofsmallentities.See Chapter1forgeneralinformationandChapter3 formoredetailedinformationonpreparation ofaFRFA.Figure2[This page intentionally left blank]

### Chapter 1 Introduction to the Regulatory Flexibility Act

1.1 What is the RFA?

President Carter signed the Regulatory Contents of Chapter 1 Flexibility Act (RFA) into law on Septem ber 19, Page No. 1980. In enacting the law, the Congress found 1

. 1 W h

a t

i s

t

h

e R F A ?

....................... 1 that “uniform Federal regulatory and reporting 1

. 2 W h

a t

i s

S B R E F A ?

...................... 1 requirem e nts have in num erous instances 1.3 W hat Do I Need to Know about the RFA and im posed unnecessary and disproportionately S B R E F A ?

............................. 2 burdensom e dem a nds . . . upon sm all [entities]

. 1.4 W hat is EPA’s Policy for Implementing R F A?

. 3 . . [T]he practice of treating all regulated 1

. 5 W h

a t

R u l e s a r

e S u b j e

c

t t

o t

h

e R F A ?

........ 4 [ e ntities] as equivalent m a y lead to inef f i cient use of regulatory agency resources, enforcem ent 1.6 W hat Part of RFA Compliance is Judicially R e

v

i e

w

a b

l e

?

.......................... 5 problem s and, in som e cases, to actions 1.7 W hat is in this Guidance?

................ 6 inconsistent with the legislative intent of health, safety, environm ental and econom ic welfare 1.8 W hat are the RFA Procedural Requirements for Rule Proposal?

........................ 8 legislation.” 3 1.9 W hat are the RFA Procedural Requirements
f o

r F i n a l R u l e P r o

m

u l g a t

i o

n ?

.............. 9 The RFA im poses both analytical and procedural requirem e nts on EPA and other 1.10 How Does this Guidance Differ from the 1999 Revised Interim Guidance?

............... 9 federal agencies. The analytical requirem e nts call for EPA to carefully consider the econom ic im pacts our rules will have on sm all entities. The procedural requirem e nts are intended to ensure that sm all entities have a voice when EPA

m a kes policy determ inations in shaping its rules. Together, these requirem e nts ensure that EPA caref ully considers the ef f

ect our regulations m a y have on sm all entities. However, the RFA' s analytical and procedural requirem e nts do not require EPA to reach any particular result regarding sm all entities.

1.2 What is SBREFA?

SBREFA is the Sm all Business Regulatory Enforcem ent Fairness Act, a regulatory reform statute passed by the 104 th Congress and signed into law by President Clinton on March 29, 1996. SBREFA (Pub Law No. 104-121) en acted a variety of provisions, including several am endm ents to the Regulatory Flexibility Act, 5 U.S.C. section 601 et seq , of particular im portance to EPA rulem a kings. The Agency refers to the RFA as am ended by SBREFA sim p ly as the RFA, but there are other SBREFA provisions as well.

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

1 ~ Chapter 1 Introduction ~RFA Guidance for EPA Rulewriters

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

In short, with respect to the Regulatory Flexibility Act (RFA), SBREFA established certain form al procedural and analytical requirem e nts (detailed below) for the lim ited num ber of rules developed by EPA with the potential to im pose a significant econom ic im pact on a substantial num ber of sm all entities. 4 More specifically, as a rulewriter, if your rule m a y im pose a significant econom ic im pact on a substantial num ber of sm all entities (see Chapter 2) you m o st likely will be required to prepare a form al analysis of the potential adverse econom ic im pacts on

sm all entities, participate in a Sm all Business Advocacy Review Panel (proposed rule stage), and prepare a Sm all Entity Com p liance Guide (f inal rule stage).

SBREFA also m a de other changes to Agency regulatory practice as it affects sm all entities. Many Agency actions under The Regulatory the RFA are now judicially reviewable, including decisions to Flexibility Act (RFA) certify a rule as not having a significant econom ic im pact on a was amended by the substantial num ber of sm all entities, the preparation of a Small Business regulatory f l exibility analysis and periodic review of f

i nal rules. Regulatory Flexibility SBREFA' s other provisions include Subtitles A through C, Act (SBREFA) in 1996. relating to enforcem ent of federal laws and regulations with The Agency refers to respect to sm all entities, and Subtitle E, wholly unrelated to the t h e RFA as amended sm all entity provisions of the rest of SBREFA, which provides f o r by SBREFA simply as Congressional review of virtually all final rules. 5 the RFA.
The purpose of the RFA is “to fit regulatory and inform ational requirem e nts to the scale of the businesses, organizations and governm e ntal jurisdictions subject to the

4 The Regulatory Flexibility Act definition of sm all entities includes sm all businesses, sm all governm e nts and

sm all organizations. The RFA references the definition of sm all business found in the Sm all Business Act, which authorizes the Sm all Business Adm i nistration (SBA) to fu rther define sm all business by regulation. The SBA’s

sm all business definitions are codified at 13 CFR secti on121.201. More inform ation on the definition of “sm a ll” can be found in Chapter 2.

5 For m o re inform ation, see the docum ent entitled Congressional Review Act, Guidance for Rule Writers , June 1998, available from OPEI or on EPA’s Action Developm ent Process Library intranet site: http://intranet.epa.gov/adplibrary.

2 ~ Chapter 1: Introduction ~RFA Guidance for EPA Rulewriters
regulation.” 6 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.” 7 The RFA does not require an agency to necessarily m i nim i ze a rule' s im pact on sm all entities if there are legal, policy, f actual or other reasons f o r not doing

so. The RFA requires only that agencies determ ine, to the extent feasible, the rule' s econom ic im pact on sm all entities, explore regulatory options for reducing any significant econom ic im pact on a substantial num ber of such entities, and explain their ultim ate choice of regulatory approach.

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

Since its enactm e nt in 1980, the RFA has required every federal agency to prepare regulatory f l exibility analyses f o r any rule f o r which the agency is required to issue a notice of proposed rulem a king under the Adm i nistrative Procedure Act or any other statute unless the agency certifies that the rule “will not, if prom ulgated, have a significant econom ic im pact on a substantial num ber of sm all entities.” One im portant f unction of this guidance is to establish workable guidelines for determ ining if a particular rule will have a “significant econom ic im pact” on a “substantial num ber” of sm all entities. Prior to the enactm e nt of SBREFA, EPA exceeded the requirem e nts of the RFA by preparing regulatory flexibility analyses for every rule that would have any im pact on any num ber of sm all entities, regardless of the size of im pact or the num ber of sm all entities affected. That policy was em bodied in the EPA Guidelines for Implementing the Regulatory Flexibility Act guidance docum ent dated April 1992 (1992 RFA Guidance). 8

W h en SBREFA becam e law in 1996, we developed additional procedures for full

com p liance with SBREFA’s m u ltiple and various provisions. To ensure the Agency gave top priority to this effort, a cross-Agency Task Force was established to develop com p rehensive procedures for our im plem entation of SBREFA. Th e efforts of the Task Force were reflected in the EPA Interim Guidance for Implementing the Small Business Regulatory Enforcement Fairness Act and Related Provisions of the Regulatory Flexibility Act guidance docum ent dated February 5, 1997 (1997 Interim SBREFA Guidance) and the subsequent “ R evised Interim Guidance for EPA Rulewriters: Regulatory Flexibility Act as Amended by the Small Business Regulatory Enforcement Fairness Act dated March 29, 1999.

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

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

7 Id.

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

3 ~ Chapter 1: Introduction ~RFA Guidance for EPA Rulewriters
of every rule on small entities and minimiz e any adverse impact to the extent feasible, regardless of the magnitude of the impact or number of small entities affected. In view of the changes m a de by SBREFA, however, the Agency decided to im plem ent the RFA as written; that is, a regulatory f l exibility analysis as specif i ed by the RFA will not be required sim p ly because the rule has som e im pact on som e num ber of sm all entities. Instead, such analyses will be required only in cases where we will not certif y that the rule will not have a significant

econom ic im pact on a substantial num ber of sm all entities. This approach allows us to m a nage our resources such that we can consider the potential sm all entity im pacts of all rules while preparing full regulatory flexibility analyses for those rules warranting such analyses under the RFA.

The SBREFA am endm ents also directed agencies to nam e a Sm all Business Advocacy Chairperson (SBAC) to act as perm anent chair of their review Panels. EPA’s Sm all Business Advocacy Chair is responsible for convening Sm all Business Advocacy Review (SBAR) Panels and, am ong other things, overseeing policy decisions regarding certification that a rule will not have a significant econom ic im pact on a substantial num ber of sm all entities. Chapter 5 provides detailed inform ation on the SBAR Panel process.

1.5 What Rules Are Subject to the RFA?

As a threshold m a tter, the RFA requirem e nt to prepare a regulatory f l exibility analysis or a certification of no significant econom ic im pact on a substantial num ber of sm all entities applies only to:

• proposed rules subject to notice-and-comment rulemaking requirements under the Adm i nistrative Procedure Act (APA) or any other statute, and

• final rules promulgated under the notice-and-comment rulemaking requirements of the APA.

Exem pt f r om the RFA requirem e nt to prepare either a regulatory f l exibility analysis or a certification are:

• A gency actions that are not rules (e.g., orders or adjudications), and

• r ules that the Agency is not required by statute to propose before prom ulgating.

Most EPA rulem a kings are subject to section 553 of the APA, which generally requires that an agency issue a notice of proposed rulem a king and take com m e nt on a rule before issuing it. The APA, however, exem pts from notice-and-com m e nt requirem e nts:

• r ules of agency organization, procedure or practice that do not substantially affect the rights of non-agency parties;

• r ules for which the agency finds "for good cause" that notice and an opportunity

4 ~ Chapter 1: Introduction ~RFA Guidance for EPA Rulewriters

to com m e nt are "im p racticable, unnecessary, or contrary to the public interest;" and

• r ules relating to agency m a nagem e nt 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 com m e nt) are generally subject to notice-and-com m e nt requirem e nts and are therefore subject to the RFA requirem e nts in this guidance. For m o re inform ation on direct final rulem a king see, Direct Final Rulemaking: Guidance for EPA Rule Writers , available on EPA’s Action Developm ent Process Library intranet site: http://intranet.epa.gov/adplibrary.

The procedures for som e EPA rulem a kings are governed by other statutes. For exam ple,

m a ny Clean Air Act (CAA) rulem a kings are subject to the procedural requirem e nts of section 307(d) of the CAA instead of the APA. In such cases, you should consult those statutes and your OGC attorney.

1.6 What Part of RFA Compliance is Judicially Review able?

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 or stay enforcem ent of the rule. During review of a rule, EPA m u st dem onstrate that we

com p lied with not only the substantive statutory requirem e nts of the im plem enting statute (e.g., the Clean Air Act), but also with requirem e nts cont ained in procedural statutes, such as the APA and RFA. During judicial review, EPA also m u st dem onstrate 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 Am endm ents to the RFA added provisions that now allow a small entity that is adversely affected by a final rule to seek review in court of an agency’s com p liance with the following RFA requirem e nts:

• S ection 601 - Establishing an alternative definition for sm all businesses, sm all
governm e ntal jurisdictions, and/or sm all non-profit organizations;

• S ection 604 - Final regulatory flexibility analysis (FRFA);

• S ection 605(b) - Certification of the proposed or final rule and the factual basis for the certif ication;

• S ection 608(b) - Delaying the com p letion of a FRFA for up to 180 days due to an

5 ~ Chapter 1: Introduction ~RFA Guidance for EPA Rulewriters

em ergency; and

• S ection 610 - Periodic review of final rules that were not certified within ten years of
prom ulgation.

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

rem e dy should be if the court finds an agency has not com p lied with the RFA’s requirem e nts (e.g., consulting with the Sm all Business Adm i nistration and providing notice and an opportunity for com m e nt before establishing an alternative sm all business definition or preparing

a m eaningful FRFA). Such rem e dies m a y include vacating and/or rem a nding the rule to the agency f o r f u rther action or def e rring enf o rcem ent of the rule against sm all entities.

Thus, even if you have fulfilled the requirem e nts of your im plem enting statute, have reasonably interpreted those statutory requirem e nts 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

com p ly with one or m o re RFA requirem e nts or fail to adequately explain your conclusions, a reviewing court could decide to vacate, rem a nd, or stay the rule on that basis. Indeed, one agency previously had a rule vacated for basing its RFA analysis on an alternative sm all entity definition it did not establish properly.

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

com m e nts challenging any aspect of the rule. This applies to an agency’s failure to respond to

com m e nts on the agency’s certification, the fact ual basis for the certification, or the initial regulatory f l exibility analysis.

1.7 What is in this Guidance?

The purpose of this Guidance is to help you, the rulewriter, to understand how the requirem e nts of the RFA fit into the Agency’s Action Developm ent Process. 9

W h en EPA initiates a regulatory developm ent action, RFA com p liance should be near the top of the list of issues you address in your project plan or Analytic Blueprint. 10 This guidance outlines the analytical and sequential process that will apply to m o st 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 figures are after page iii of the Preface).

9 See EPA’s Action Development Process: Guidance for EPA Staff on Developing Quality Actions, June 30, 2004. EPA’s Action Developm ent guidance can be found at EPA’s Action Developm ent Process Library intranet site: http://intranet.epa.gov/adplibrary.

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

6 ~ Chapter 1: Introduction ~RFA Guidance for EPA Rulewriters

Assessing a Rule’s Economic Impact on Small Entities

. Once you have determ ined that your rule is subject to the RFA (i.e., you are required to publish a notice of proposed rulem a king under the APA or any other statute), the first thing you need to do for RFA com p liance is to determ ine what, if any, im pact your rule m a y have on sm all entities. To do this, you need to perform a screening analysis on your proposed and final rules. Screening analyses are discussed in detail in Chapter 2 of this guidance.

Preparing the Initial and Final Regulatory Flexibility Analyses

. These are analyses of

econom ic im pacts on sm all entities that you m u st prepare if you do not certify that your rule does not have a significant econom ic im pact on a substantial num ber of sm all entities (SISNOSE). These analyses are discussed in detail in Chapter 3

. Implementing Small Entity Outreach

. If the screening analysis indicates that your rule m a y have som e im pact on som e sm all entities, or you find that you need m o re inform ation to m a ke that determ ination, Chapter 4 will provide you with guidance for identifying and engaging in a dialogue with representatives of sm all entities that m a y be subject to the rule under developm ent.

Small Business Advocacy Review Panels

. If the screening analysis of your rule indicates that the rule is likely to have a SISNOSE, you should plan to prepare for a Sm all Business Advocacy Review Panel. In Chapter 5 you will find detailed inform ation about how you should go about

com p lying with the requirem e nt that the Agency convene a Sm all Business Advocacy Review Panel for proposed rules which are likely to have a SISNOSE.

Small Entity Compliance Guides

. If you m u st prepare a final regulatory flexibility analysis for
your final rule (i.e., you do not certify the rule as not having a significant econom ic im pact on a substantial num ber of sm all entities), the RFA also requires you to prepare a sm all entity

com p liance guide. Chapter 6 answers questions regarding what constitutes such a guide and gives guidance f o r designing a sm all entity com p liance guide.

Ongoing Informal Small Entity Guidance

. W h en planning for the post-prom ulgation stage of your rule, refer to the discussion in Chapter 7 regarding the RFA provision on giving inform al advice to sm all entities in response to inquiries.

Periodic Review of Rules

. RFA section 610 requires a periodic review of prom ulgated rules which have or will have a significant econom ic im pact on a substantial num ber of sm all entities. Chapter 8 explains the Agency’s strategy for continued com p liance with this requirem e nt.

Please note : This guidance is not a binding Agency procedural rule. In determ ining and

m itigating im pacts on sm all entities, we anticipate that there will be m a ny situations in which Agency staff and m a nagem e nt m u st exercise c onsiderable judgm ent. Nevertheless, we intend this guidance to provide you with an analytic and sequential structure that should be sufficient

7 ~ Chapter 1: Introduction ~RFA Guidance for EPA Rulewriters

for m o st covered rulem a kings. Should you com e 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 m a kes sense, you need to consult with your Regulatory Steering Com m ittee representative, the Sm all Business Advocacy Chair in the Office of Policy, Econom ics and Innovation (OPEI) and attorneys from the Office of General Counsel (OGC).

1.8 What are the RFA Procedural Requirements for Rule Proposal?

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:

Certification statem ent and statem ent of factual basis

. You m u st prepare a certification
statem ent and a statem ent of factual basis supporting the certification that your rule will not have a significant econom ic im pact on a substantial num ber of sm all entities. The RFA section 605(b) requires you to publish in the Federal Register "a statem ent providing the factual basis for such certification." That certification and the factual basis for the certification are subject to judicial review. Accordingly, it is im portant that you pr ovide sufficient detail in your factual basis to explain why the Agency is certifying the rule.



### ~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:

Initial Regulatory Flexibility Analysis. Generally, the RFA requires EPA to prepare an Initial Regulatory Flexibility Analysis (IRFA) for each proposal, unless the Adm i nistrator certifies that the rule, if prom ulgated, will not have a significant econom ic im pact on a substantial num ber of

sm all entities (see Figure 1).



### ~AND~

Sm all Business Advocacy Review Panels. Under the RFA, EPA must convene a Sm all Business Advocacy Review Panel for a rule under developm ent, unless the Agency certifies that the rule will not im pose a significant econom ic im pact on a substantial num ber of sm all entities. Each Panel includes representatives from the Sm all Business Adm i nistration, the Office of Managem e nt and Budget, and EPA. The Panels conduct outreach to individuals representative of

sm all entities likely to be subject to the rule and prepare a report to the EPA Adm i nistrator f o r each rulem a king on the potential sm all entity im pacts of the rule and on potential ways to reduce those im pacts (see Figure 1). More detailed inform ation on the Sm all Business Advocacy Review Panel process is contained in Chapter 5.

8 ~ Chapter 1: Introduction ~RFA Guidance for EPA Rulewriters

1.9 What are the RFA Procedural Requi rements for Final Rule Promulgation?

If the RFA APPLIES to your rule and your anal ysis along w i th any information or analysis developed since the proposal indicates you r rule WILL NOT have a significant economic impact on a substantial number of small entities:

Certification statem ent and statem ent of factual basis

. You m u st prepare a certification
statem ent and a statem ent of factual basis to support the certification that your rule will not im pose a significant econom ic im pact on a substantial num ber of sm all entities. The RFA section 605(b) requires you to publish in the Federal Register "a statem ent providing the factual basis for such certification." Under SBREFA, th at certification and the factual basis for the certification are subject to judicial review. Accordingly, it is im portant that you provide sufficient detail in your factual basis to explain why the Agency is certifying the rule.



### ~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:

Final Regulatory Flexibility Analysis. For each rule that EPA prom ulgates and does not certify as not having a significant econom ic im pact on a substantial num ber of sm all entities, the Agency m u st prepare a Final Regulatory Flexibility Analysis (FRFA; see Figure 2). Im portantly, RFA requires that each FRFA sum m a rize the significant issues raised by public

com m e nts on the IRFA, assess these issues, and describe any changes m a de in response to the public com m e nts.



### ~AND~

Sm all Entity Com p liance Guide. For each final rule where RFA requires preparation of a FRFA, the Agency m u st also issue a sm all entity com p liance guide providing a Plain Language explanation of how to com p ly with the regulation (see Figure 2). More guidance on developing

a sm all entity com p liance guide can be found in Chapter 6.

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

This guidance incorporates the inf o rm ation on preparing initial and f i nal regulatory f l exibility analyses that was contained in the EPA Guidelines for Implementing the Regulatory Flexibility Act, April 1992. That inform ation is contained in a new Chapter 3 in this guidance. In addition, a revised Chapter 2 based on the Agency’s continuing im plem entation of the RFA is included. A few m i nor editorial changes have been m a de to other chapters such as deleting outdated contact inform ation and updating footnote references to other docum ents.

9 ~ Chapter 1: Introduction ~RFA Guidance for EPA Rulewriters

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10 ~ Chapter 1: Introduction ~

### Chapter 2 RFA/SBREFA Screening Analysis: Assessing Impacts on Small Entities

Contents of Chapter 2 Page No. 2

. 1 R F A : T h e

B

a

s

i c

s

............................................................................... 1 1 2.2 W hat Is a Screening Analysis and Why Should I Do One?

.............................................. 1 2 2.3 I s a Screening Analysis Needed for My Rule?

........................................................ 1 3 2.4 W hat Basic Steps Make up a Screening Analysis?

.................................................... 1 4 2.5 S tep 1: Determining Which Small Entities Are Subject to the Rule’s Requirements

........................... 1 6 2.6 S tep 2: Determining Appropriate Measures of Economic Impacts

........................................ 2 1 2.7 S tep 3: How Should I Use the Screening Analysis to Determine If a Rule May Be Certified under the RFA?

....... 2 5 2.8 S tep 4: What Should I Do after Assigning My Rule to a Category?

........................................ 3 4

This chapter describes the screening process for determ ining whether a regulatory flexibility analysis or a certification of no significant econom ic im pact on a substantial num ber of sm all entities (SISNOSE) should be prepared for a proposed or final rule.

2.1 RFA: The Basics
SISNOSE The purpose of the Regulatory Flexibility Act (RFA) is to ensure S ignificant economic that, in developing rules, agencies identify and consider ways of tailoring I mpact on a regulations to the size of the regulated entities. The RFA does not require S ubstantial an agency to m i nim i ze a rule' s im pact on sm all entities if there are legal, N umber O

f policy, factual or other reasons for not doing so. The RFA generally requires that for certain rules, you: S mall E ntities

• determine , to the extent f easible, the economic impact on sm all entities subject to the rule,

• explore regulatory options for reducing any significant econom ic im pact on a substantial num ber of such entities, and

• explain your ultim ate choice of regulatory approach.

This chapter, and Chapter 3, provide you with guidance on how to com p ly with the analytical requirem e nts of the RFA and EPA’s policy for im plem enting those requirem e nts. In

m a ny respects, the advice and direction provided here go beyond what the law requires, and instead reflect Agency policy about how best to ensure that sm all entity concerns are considered in the rulem a king process.

Unless the Agency certif ies 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

11

~ Chapter 2: Screening Analysis ~RFA Guidance for EPA Rulewriters

m eeting the applicable statutory requirem e nts. More inform ation on preparation of regulatory flexibility analyses can be found in Chapter 3. It bears repeating, however, that even w h ere the Agency certifies that a rule w ill not have a SISNOSE, EPA’s policy is to make an assessment of the rule's direct adverse impa ct on any small entities, to engage the potentially regulated entities in a dialog regar ding the rule, and to minimiz e the impact of the rule on small entities to the extent feas ible w h ile remaining consistent w i th applicable statutory requirements

. As always, program m a nagers should determ ine what level of outreach is appropriate given the expected level of im pact.

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

Once you have determ ined that your rule is subject to the RFA (see Chapter 1 and Section 2.3 of this Chapter), it is m o st im portant for you to determ ine if your rule m a y have a SISNOSE. Generally, this determ ination is m a de by conducting a “screening analysis.” For purposes of the RFA, a screening analysis is an assessm ent of the potential econom ic im pacts of a rule on sm all entities and generally indicates whether you can certify the rule as not having a SISNOSE. Under the RFA and SBREFA, you m u st either:

• C ertif y that the rule will not have a SISNOSE (5 U.S.C. section 605(b)); or

• U ndertake the f o llowing activities:

– p repare a regulatory flexibility analysis (5 U.S.C. sections 603-604), see Chapter 3;

– c onvene a Sm all Business Advocacy Review Panel (5 U.S.C. section 609), see Chapter 5; and

– p repare a Sm all Entity Com p liance Guide (SBREFA section 212, PL 104-121), see Chapter 6.

The RFA does not analytically define the term s significant or substantial with regard to extent of econom ic im pact and num ber of sm all entities affected. In this chapter we suggest guidelines for determ ining if a particular rule m a y have a SISNOSE. W e recognize that there can be no one-size-fits-all m e thodology for m a king this determ ination. Therefore, we

recom m e nd specific approaches but leave you the flexibility to use alternative m e thods or reach different conclusions where appropriate in the c ontext of a particular rule. However, rem e m b er that the rationale underlying your ultim ate conclusions should be included in the rulem a king record and is judicially reviewable.

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

12

~ Chapter 2: Screening Analysis ~RFA Guidance for EPA Rulewriters

It is im portant to note that a screening analysis is not the sam e as an initial or f i nal regulatory flexibility analysis (IRFA/FRFA). IR FA/FRFAs analyze a rule’s econom ic im pact on

sm all entities, including alternative regulatory or policy options that would m i nim i ze signif i cant

econom ic im pacts. Chapter 3 describes the requirem e nts related to IRFAs and FRFAs. The Agency m u st 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 m eans by which EPA determ ines and docum ents its decision to either certify that a rule will not have a SIS NOSE or prepare the IRFA/FRFA, convene a Sm all Business Advocacy Review Panel, and prepare a Sm all Entity Com p liance Guide. It m a y also be used to provide the required factual basis for a certification of no SISNOSE.

2.2.2 How is a Screening Analysis Different from the Economic Analysis Described in Executive Order 12866?

The difference between a screening analysis and the broader econom ic analysis described in Executive Order (E.O.) 12866 11 is that a screening analysis focuses exclusively on econom ic im pacts to sm all entities, while a broader econom ic analysis focuses on costs and benefits to society as a whole.

W h en a general econom ic 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 econom ic analysis, provided that the inform ation on sm all entity im pacts is set out clearly. Each econom ic analysis perform e d for a given rule should strive to m a ke consistent assum p tions and interpretations of results. However, in cases where different approaches call for alternative

assum p tions, those differing assum p tions should be highlighted and the reasons for using them should be clearly explained. 12

2.3 Is a Screening Analysis Needed for My Rule?

Only rules that are required to undergo notice and com m e nt under the Adm i nistrative Procedure Act (APA), or other applicable statut es, are subject to the requirem e nts of the RFA (5 U.S.C. sections 603-604). Therefore, if your rule is not required by statute to undergo notice and com m e nt, it is not subject to the RFA and you do not need to prepare a regulatory flexibility

11 For m o re inform ation on Executive Order 12866' s econom ic analysis - see EPA’s Action Developm ent Process Library intranet site: http://intranet.epa.gov/adplibrary/statutes.htm #om breview.

12 For exam ple, the sim p le screening m e thods outlined in this Chapter assum e that affected entities absorb the full cost of the regulation, while the broader econom ic an alysis m a y assum e som e cost pass-through. An analyst choosing to exam ine cost pass-through to inform the SI SNOSE determ ination should adopt assum p tions that are consistent with relevant assum p tions m a de in other econom ic analyses conducted for the rule.
13

~ Chapter 2: Screening Analysis ~RFA Guidance for EPA Rulewriters
analysis or a certification of no SISNOSE. See Section 1.5 for a m o re com p lete discussion of which rules require notice and com m e nt.

However, as a m a tter of Agency policy, even if your rule is not subject to the RFA, to the extent that you foresee that your rule w ill have an adverse economic impact on small entities, you should assess those impacts a nd make efforts to minimiz e them through consultation w i th the small entities likely to be regulated, w h ile remaining consistent w i th applicable statutory requirements

. In addition, even if your rule is not subject to the RFA, the
pream bles to the proposed and final rules should include a "Regulatory Flexibility" section that explains why the rule is not subject to the RFA.

2.4 What Basic Steps Make up a Screening Analysis?

If you have determ ined that your rule is subject to the RFA, you should conduct a screening analysis to determ ine if you can certify the rule as not having a SISNOSE. This section provides an overview of the four basic steps that m a ke up a screening analysis. This approach is also illustrated in Figure 3

. More details on specific com ponents 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). 13 The four steps in the screening analysis process are:

Step 1 Determ ine which sm all entities are subject to the rule’s requirem e nts (see Section 2.5);

Step 2 Select appropriate m easures for determ ining econom ic im pacts on these sm all entities and estim ate those im pacts (see Section 2.6);

Step 3 Determ ine whether the rule m a y be certified as not having a SISNOSE (see Section 2.7); and

Step 4 Docum e nt the screening analysis and include the appropriate RFA statem ents in the pream ble (see Section 2.8).

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 determ in ing whether to certify a rule as not having a SISNOSE.
14

~ Chapter 2: Screening Analysis ~ScreeningAnalysisOverviewStep1(Section 2.5)Step2(Section2.6)Step3(Section 2.7)Step4(Section 2.8)DocumenttheAnalysisIdentifythetypes ofentities(regardlessofsize)thataresubject totheruleDefine“small”foreachtypeofentityAreanysmall entitiessubjecttothe rule?Selectmeasure(s)forassessingeconomicimpactsandestimateimpactsAssignruletoaSISNOSEcertification categoryShouldthe rulebecertified ashavingnoSISNOSEunderRFA?Certifythe ruleashavingnoSISNOSE andprovide astatementoffactualbasisforwhynosmallentitiesaresubjecttotheregulationCertifythe ruleashavingnoSISNOSE andprovide astatementof factualbasisConduct activitiesrequiredforrulesthatarenotcertifiedashavingnoSISNOSE(seeChapters3-6)YESYESNONOFigure3RFA Guidance for EPA Rulewriters

2.5 Step 1: Determining Which Small Entiti es are Subject to the Rule’s Requirements

The first step in the screening analysis process is determ ining which, if any, sm all entities are subject to the rule’s requirem e nts. This step involves three activities:

• I dentif y the entities or types of entities (regardless of size) subject to the rule’s requirem e nts (Section 2.5.1);

• D efine “sm a ll” for each type of entity (Section 2.5.2); and

• D eterm i ne whether it is likely that any of the entities subject to the rule’s requirem e nts are sm all (Section 2.5.3).

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

It is likely that the types of entities regulated by the rule were identif ied during the developm ent of the rule and preparation of the prim ary econom ic analysis. For a screening analysis, you should re-exam i ne these entities to identify those sm all entities that are subject to the rule’s requirem e nts.

The determ inative question is "who is subject to the requirem e nts of the rule? ” If a sm all entity will have obligations im posed on them directly by the rule, then the sm all entity is subject to the requirem e nts of the rule and it should be included in the RFA screening analysis. If a

sm all entity does not have an obligation im posed 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

econom ic analysis, either for purposes of com p lying with Executive Order 12866 or the Unfunded Mandates Reform Act. Given that the SISNOSE determination is subject to judicial review , it is important to limit the s creening analysis to w h at is needed to make the SISNOSE determination. 14

Further, you should analyze who is subject to the requirem e nts of the rule even if the rule is either not im m e diately enforceable or does not im pose im m e diately applicable requirem e nts on those subject to the rule. You should perform this analysis as long as you know: (1) who will be regulated; and (2) what requirem e nts will be im posed. For exam ple, the prom ulgation of effluent lim itations guidelines in the water program does not result in im position of requirem e nts on direct dischargers until the lim itations are included as conditions in the discharger' s NPDES

14 EPA believes that only rules that will have a direct significant adverse econom ic im pact on a substantial

num ber of sm all entities that are subject to the rule require an IRFA or FRFA, since the purpose of both analyses is to identify adverse im pacts on sm all entities and discuss regulatory alternatives that minimize significant econom ic im pacts on sm all entities (see 5 U.S.C. section 603-604). Thus, rules that relieve regulatory burden, or otherwise have a positive net econom ic effect on the sm all entities subject to the rule, do not require an IRFA or FRFA.
16

~ Chapter 2: Screening Analysis ~RFA Guidance for EPA Rulewriters

perm it. Either EPA or States m u st take som e action before a specific discharger m u st com p ly with the requirem e nts. W e can, however, generally develop this screening assessm ent (and a Regulatory Flexibility Analysis if needed) because EPA m u st include conditions im plem enting guidelines in any perm its it issues and State laws generally m u st be at least as stringent as EPA’s. Moreover, EPA knows who will be regulated (we define that in each effluent lim itation guideline). W e can perform a screening analysis prem ised on a reasonably clear prediction as to who will be regulated and with what econom ic im pact.

2.5.2 Define “Small” for Each Type of Entity

The RFA provides separate def i nitions f o r what constitutes “sm a ll” f o r three types of entities:

• s m a ll businesses

sm all governm e ntal jurisdictions, and

• s m a ll organizations.

Under the RFA the Agency can adopt alternative definitions for sm all business, sm all organization and sm all governm e ntal 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 m a y be appropriate to apply an alternative definition and the procedures to follow when establishing an alternative definition.

What is a “small business”?

The RFA incorporates and uses the definition of "sm a ll business" found in the Sm all Business Act (5 U.S.C. section 601(3)). The Sm all Business Act authorizes the Sm all Business Adm i nistration (SBA) to define “sm a ll business” by issuing regulations. The SBA periodically reviews and reissues these definitions. SBA has established size standards for various types of

econom ic activities, or industries, under the No rth Am erican Industry Classification System (NAICS). These size standards generally define sm all businesses based on the num ber of

em ployees or annual receipts. The current ve rsion of SBA’s size standards can be found at http://www.sba.gov/size

. Note that the SBA def i nition of a sm all business applies to a f i rm ’s parent com p any and all af f iliates as a single entity.

What is a “small governmental jurisdiction”?

The RFA defines “sm a ll governm e ntal jurisdiction” as the governm e nt of a city, county, town, township, village, school district, or speci al 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 governm e nts are not considered sm all governm e nts.

What is a “small organization”?

17

~ Chapter 2: Screening Analysis ~RFA Guidance for EPA Rulewriters

The RFA defines “sm a ll organization” as any “not-for-profit enterprise which is independently owned and operated and is not dom inant in its field” (5 U.S.C. section 601(4)).

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

In determ ining whether any sm all entities are subject to your rule’s requirem e nts, you should first group the entities subject to the rule by type (i.e., business, governm e nt, nonprofit entity). Next, for each type of entity, apply the definition of “sm a ll,” 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).

2.5.4 What is the Relationship Betw een th e Definition of “Small” Used in the Analysis and the Definition (if any) Used in the Rule?

Som e rules m a y include special provisions to m i nim i ze econom ic im pacts on certain classes or categories of entities otherwise subject to the particular rule. These classes or categories m a y, in som e cases, include or be lim ited to sm all entities or subsets of sm all entities. In cases where the universe of entities to which such provisions apply is not lim ited to "sm a ll entities" as def i ned in the RFA, the provisions of such rules m a y em ploy a def i nition of sm all entity f o r those entities subject to the special provisions that is dif f

e rent f r om the def i nition 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 sm all entities. For exam ple, it m a y be the case that only a subset of the sm all entities captured in the screening analysis’ def i nition faces significant econom ic im pacts. In such a case, the rule m i ght provide relief to only the subset of sm all entities m o st in need of special treatm e nt. You do not need to propose an alternative size standard under the RFA to provide regulatory flexibility to a subgroup of the

sm all entities m o st af f

ected by the rule.

It m a y also m a ke sense to define "sm a ll" for environm ental regulatory purposes in term s other than revenue or num ber of em ployees -- the com m on SBA size m easures for characterizing business entities. For exam ple, the regulations f o r perm itting concentrated anim al f e eding operations (CAFOs) require only that anim al feeding operations designated as "sm a ll CAFOs"

m u st obtain perm its. EPA' s regulations define "sm a ll CAFOs" in term s of, am ong other things, the num bers of anim als they confine, rather than revenues or em ployees, because the num ber of anim als relates to the degree of environm ental im pact. W h ile such an environm entally relevant def i nition m a y not correlate exactly with the def i nition used in the regulatory f l exibility analysis, it m a y nonetheless offer an environm entally appropriate way to provide relief to m o st "sm a ll entities" as def i ned by the RFA. In the case of the CAFO rules, while a f e w sm all entities are regulated as large CAFOs because they happen to confine large num bers of anim als, the regulatory definition of sm all CAFO nonethele ss excludes from coverage hundreds of thousands of anim al feeding operations that are "sm a ll" bot h in term s of the degree of their environm ental im pact and in term s of the SBA size standards.

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~ Chapter 2: Screening Analysis ~RFA Guidance for EPA Rulewriters

2.5.5 Alternative Small Entity Definitions

Section 601 of the RFA allows you to establish an alternative definition of sm all for the entities subject to your rule when the definition is “appropriate to the activities of the agency.” An alternative definition of sm all governm e ntal jurisdiction m u st also be based on “such factors as location in rural or sparsely populated areas or lim ited revenues due to population of such jurisdiction” (5 U.S.C. section 601(5)).

2.5.5.1 In What Situations Should I Consider Establishing an Alternative Small Entity Definition? 15

In general, there are several situations in which an alternative definition m a y be appropriate:

• SBA’s size standards are not most appropriate for considering impacts on small entities subject to the rule. Section 601(3) of the RFA adopts the SBA size standards established under section 3 of the Sm all Business Act (15 U.S.C. 632) which are prim arily intended to determ ine whether a business entity is eligible for governm e nt program s and preferences reserved for sm all businesses (13 CFR 121.101), i.e., the SBA size standards are prim arily intended to “seek to ensure that a concern that m eets a specific size standard is not dom inant in its field of operation” (13 CFR 121.102(b)). See also section 632(a)(1) of the Sm all Business Act. You m a y determ ine that the SBA size standard for

som e industrial sectors are not generally the best standards to use in assessing the potential im pacts on sm all businesses. For exam ple, in som e industrial sectors, businesses that are considered large m u lti-national com p anies in other contexts (such as when regulated under the Federal Insecticide, Fungicide and Rodenticide Act or Toxic Substances Control Act) m a y qualify as sm all businesses when applying SBA size standards that are based on num ber of em ployees.

• The Act’s definitions are difficult to implement given methodological or data limitations of the analysis. You m a y be lim ited in the precision with which you can apply a size definition because of data or m e thodology used for the analysis. For exam ple, a rule m a y cover businesses in m a ny different industr ies encom p assing m a ny different SBA size categories. Using the SBA size definition specific to each industry m a y be

m e thodologically difficult.

15 W h en developing and applying alternative definitions of sm all business, sm all governm e nt and sm all nonprofit organization, you should be careful to develop alternative definitions that do not confuse sm all entities with entities of any size that em it a sm all volum e of pollution. It m a y be appropriate for the Agency to provide regulatory flexibility or relief to sm all-volum e polluters on general policy grounds, but the focus of the RFA is on entities whose size or resources are sm all in com p arison to other entities of their type.
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~ Chapter 2: Screening Analysis ~RFA Guidance for EPA Rulewriters

• The applicable environmental statute already employs a suitable alternative definition. In these instances, the program m a y prefer to use the definition contained in the applicable environm ental statute not only in the rule itself, but also in the RFA analysis. For exam ple, the Safe Drinking W a ter Act has num erous provisions for separate requirem e nts for “sm a ll system s,” which are defined in term s of the num ber of custom ers served, not em ployees or revenue of businesses, or the population of the governm e ntal jurisdiction. Another exam ple of a statutory- specific definition of "sm a ll business" is the one found in the Pesticide Registration Im provem e nt Act of 2003 (PRIA). Under PRIA,

a sm all business is defined in term s of both its num ber of em ployees and its annual global gross revenues from pesticides.

2.5.5.2 What Procedures Should I Follow to Establish an Alternative Small Entity Siz e Standard?

The RFA specifies procedures for adopting an To Establish an Alternative alternative definition. For all alternative definitions you m u st Definition of “Small”: publish the alternative def i nition in the Federal Register and 

### < Provide an opportunity for provide an opportunity for public com m e nt (5 U.S.C. section public comment; 601). For alternative definitions of “sm a ll business” you 

### < Publish the alternative m u st also consult with the Chief Counsel for Advocacy of the definition in the Federal SBA (5 U.S.C. section 601(3)). Your consultation m a y Register ; and include a letter to SBA' s Chief Counsel for Advocacy. 

### < Consult with the Chief Docum e nt any consultation with SBA to establish an Counsel for Advocacy of the alternative sm all business size standard (e.g., letters, em ail, SBA (for alternative phone conversations) and place the docum entation in the definitions of “small rulem a king docket. business”)

. If you plan to adopt an alternative definition, it is
extrem ely im portant to com p ly with these specif i c procedures. At least one federal agency has had a rule vacated for basing its RFA analysis on an alternative sm all entity definition it did not properly establish. In addition, rem a in cognizant of the tim ing of the establishm ent of an alternative def i nition in relation to a Panel (if required), so as not to exclude any sm all entities f r om the Panel process by prem aturely em ploying an alternative definition. In light of these potential pit

f

a lls, it is imperative that you consult w i th your Regulatory Steering Committee representative and the Small Business Advocacy Chair staff before you proceed w i th the adoption or use of an alternative definition. If you decide not to adopt a proposed alternative definition, you should use the SBA size standards or other previously established alternative

sm all entity definition for your rulem a king.

You should specify clearly in the rulem a king notice in which an alternative definition is proposed whether you are proposing to use the alternative definition for:

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~ Chapter 2: Screening Analysis ~RFA Guidance for EPA Rulewriters

• t hat particular rulem a king only,

• t hat rulem a king and any subsequent am endm ents, or

• t hat rulem a king as well as all subsequent rulem a kings regulating the sam e sm all entities under the sam e authority.

If you fail to clearly state the applicability of the alternative definition to later rulem a kings in your original notice or proposed rule, you m a y have to repeat the process of adopting the alternative definition for subsequent rules (i.e., give notice, take com m e nt and, for an alternative def i nition of “sm a ll business,” consult with SBA). Once an alternative def i nition 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

sam e process described above. Re-establishing a previous definition also requires notice and opportunity for public com m e nt and m a y require consultation with SBA if re-establishing a definition for “sm a ll business.”

2.6 Step 2: Determining Appropriate Measures of Economic Impacts

The analytic objective of your screening analysis is to allow you to determ ine whether or not you m a y certify your rule as not having a SISNOSE. The RFA does not establish a form ula for estim ating the econom ic im pact of a rule on sm all entities. Nor does it define the term s significant or substantial as they pertain to the extent of econom ic im pact and the num ber of

sm all entities affected. Based on past experience, we’ve identified several m e thods or quantitative m easures that m a y be used to assess econom ic im pact on sm all entities. You have the flexibility to select the m o st appropriate m e thod for your rulem a king. 16

For purposes of the screening analysis, the question for the rulewriter is: can we properly certif y that the rule, if prom ulgated, will not im pose a SISNOSE. To answer this question, you should address two subquestions:

1) W h at is the best way to m easure a rule’s econom ic im pacts on affected entities?

2) W h at level of econom ic im pact (i.e., threshold), on what num ber of sm all entities is sufficient to establish that there m a y 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 subquestion.

16 Regardless of the analytic m e thods you use, you should e xplain your reasons for selecting the m e thods in the docum entation of the analysis.
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~ Chapter 2: Screening Analysis ~RFA Guidance for EPA Rulewriters
In addition to this guidance docum ent, the Agency has published a com p rehensive

m a nual on conducting econom ic analysis, Guidelines for Preparing Economic Analyses (Septem b er 2000), which is available at http://www.epa.gov/econom ics

. Chapters 8 and 9 of the Guidelines provide a com p rehensive discussion of m e thods for estim ating costs and econom ic im pacts of proposed regulations. The Guidelines also discuss m e thods for considering equity and distributional concerns as part of the econom ic analysis of the rule. The econom ic im pacts

on sm all entities are discussed as a specific subset of total im pacts. You should refer to the Guidelines for an in-depth discussion of these m e thods.

2.6.1 The Role of Qualitative Analysis

Before beginning a quantitative analysis of the econom ic im pact of the rule on sm all entities, you should qualitatively think through the actions a sm all entity will have to take to

com p ly with the rule and how those actions m i ght differ from those taken by large com p anies. For exam ple, will sm all entities incur the sam e initial com p liance costs – such as for buying and installing equipm ent, establishing new procedures, and/or record keeping – as large entities, or are initial costs likely to be proportionate to the size of the com p any? W ill initial com p liance costs be high enough that entities will need to obtain financing and, if so, do sm all entities have the sam e access to financing as large entities? W ill sm all entities have to obtain access to professional or adm i nistrative services that large entities m i ght m a intain “in-house?”

Although the broader econom ic analysis for a rule m a y identify and include som e separate cost elem ents for sm all entities, the econom ic analysis m a y not identify every

m eaningful aspect of costs to sm all entities (see Section 2.2.2 for m o re inform ation on the relationship between the broader econom ic analysis and the screening analysis). A

com p rehensive qualitative assessm ent provides a good foundation for quantitative analysis of the regulation. A thorough understanding of the com p liance procedures will help you develop

m eaningful quantitative analyses of the rule, such as selecting appropriate m e thods for estim ating econom ic im pacts, collecting relevant data, and using professional judgem e nt to

com p ensate for m i ssing data. A thorough, qualitative analysis of sm all entities’ com p liance actions, and associated costs, provides the foundation for the SISNOSE determ ination.

If a qualitative assessm ent indicates that you m a y not be able to certify your rule, you

m a y choose to prepare an IRFA (and, later, FRFA) on that basis and avoid the need for a detailed, quantitative screening analysis, although the IRFA (or FRFA) itself will require som e quantitative inform ation. IRFAs and FRFAs are discussed in Chapter 3. W h ere a qualitative

assessm ent indicates that a rule will not have a SISNOSE, you m a y be able to certify the rule on that basis or you m a y need to conduct a quantitative analysis to confirm the results of the qualitative assessm ent. For exam ple, where the inform ation necessary to conduct a quantitative analysis is not reasonably available, it m a y be appropriate to certify the rule based on the qualitative assessm ent alone. Because the decision to certify a rule m a y be judicially reviewable, you should prepare a quantitative analysis whenever possible to support a decision to certify.

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~ Chapter 2: Screening Analysis ~RFA Guidance for EPA Rulewriters
You should consult your Regulatory Steering Committee representative and the Small Business Advocacy Chair w h en you anticipate relying solely on a qualitative analysis to certify a rule.

2.6.2 Quantitative Analysis

Assessm ent of econom ic im pacts on sm all entities can include m a ny different factors, such as the cost of com p liance relative to the entities’ incom e or assets, the ability of the entities to pass com p liance costs through to custom ers or suppliers, and the relative econom ic im pacts on

sm all entities com p ared to those on large entities. 17 The m o st appropriate m e thod for a particular screening analysis will usually depend on the data available and on the m e thodology used for the

econom ic analysis of the rule. In general, m o re detailed analysis requires m o re data and

resources. Therefore, it is preferable to start with a relatively sim p le m e thodology and add m o re

com p lexity as needed to reach an acceptable leve l of confidence in the determ ination of whether the rule m a y have a SISNOSE.

The sim p lest m e thod of screening for econom ic im pacts on sm all entities is the direct

com p liance cost m e thod. This m e thod m a y be used as an initial screening analysis. More sophisticated analyses can be conducted later to refine the estim ate if a determ ination about SISNOSE is not clear from the initial analysis (see Section 2.7.4 for m o re inform ation on additional analysis).

Under the direct com p liance cost m e thod, the com p liance costs faced by sm all entities 18 (estim ated as the capital, operating, m a intenance, adm i nistrative, and other direct com p liance costs associated with the rule) are com p ared to one or m o re financial statistics (e.g., sales, profits, operating expenditures) of the regulated sm all entities. Annualizing the com p liance costs is appropriate when a stream of cash flows or a large capital expenditure is involved with

com p liance. There are several variations of this m e thod that differ by the financial statistic used as the basis of com p arison. Selection of the appropriate financial statistics depends on the type of

sm all entity being regulated and the availability of f

i nancial data on those sm all entities.

Conceptually, we believe that a profits test represents the m o st accurate screening analysis for determ ining whether a regulation will pose a significant econom ic burden on sm all businesses. However, because of procedural and operational issues associated with the

17 Note that an analysis of relative im pacts should not be used as the sole basis for certifying a rule as not having a SISNOSE. The phrase “significant econom ic im pact on a substantial num ber of sm all entities” describes an absolute m easure of econom ic im pacts on sm all entities, not one that is relative to econom ic im pact on large entities. Nevertheless, an analysis of relative econom ic im pacts can be useful to characterize the distribution of effects.

18 Chapter 9 of EPA’s Guidelines for Preparing Economic Analyses provides m o re inform ation on estim ating

com p liance costs.
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~ Chapter 2: Screening Analysis ~RFA Guidance for EPA Rulewriters

im plem entation of a prof its test, a sales test rem a ins our pref erred quantitative guideline at this tim e. Because data on profits are lim ited, especia lly for sm all businesses, routine use of a profits test would require us to estim ate profits for sm all businesses where there are currently insufficient data. A sum m a ry of preferred and alternative m e trics for estim ating the econom ic im pacts on each type of sm all entity (businesses, governm e nts, nonprofit organizations) is presented in Table 1

.

TABLE 1: Recommended Quantitative Metrics for Economic Impact Screening Analy ses a ( & 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 T he selection of threshold values for determining w hether a given level of economic impact constitutes a “significant economic impact” is discussed in Section 2.7.1.

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~ Chapter 2: Screening Analysis ~RFA Guidance for EPA Rulewriters

W h ile you m a y choose to apply any of the suggested m easures based on the type of inform ation available, the table indicates a preferred guideline for each type of sm all entity:



### < For sm all businesses - annualized com p liance cost as a percentage of sales; 19



### < For sm all governm e nts - annualized com p liance cost as a percentage of annual
governm e nt revenues; and



### < For sm all nonprofit organizations - annualized com p liance cost as a percentage of annual operating expenditures.

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 m easures shown in Table 1 will yield quantitative estim ates of the econom ic im pact on the sm all entities subject to the rule. The question addressed in this section is how to interpret those values in the context of determ ining whether your rule m a y be certified as “no SISNOSE”. Since there can be no single form ula to produce a consistently appropriate answer, the Agency encourages program offices to consider the unique factors associated with a particular rulem a king in order to reach a conclusion appropriate to the case at hand. To assist you with this process, EPA has developed general guidelines for determ ining 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 com p arison of the econom ic im pacts (e.g., one or m o re

m easures such as those listed in Table 1) to specific thresholds established based on the circum stances of your rule and the num ber of entities with im pacts above the threshold(s). The thresholds you define for the circum stances of your rule define what level of im pact is considered significant and the num ber of sm all entities that is considered substantial

. Sections 2.7.1 and 2.7.2 discuss how you m a y define the significant im pact and substantial num ber thresholds. Com p aring the m a gnitude of the im pacts, and the num ber of sm all entities f acing the im pacts, to the thresholds will determ ine which SISNOSE certification category you assign to your rule. The SISNOSE certification categories are as follows:

19 W h en sales data are unavailable, revenue or receipts (t hough technically different than sales) can usually serve as a reasonable proxy for sales.
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~ Chapter 2: Screening Analysis ~RFA Guidance for EPA Rulewriters

Presum ed No The rule is presumed not to have a significant economic impact on a SISNOSE: substantial number of small entities

. However, your Assistant Adm i nistrator m a y exercise discretion to prepare an analysis of the

econom ic im pacts of the rule on sm all entities. 20

Uncertain - No No presumption applies . You m a y consult with the Sm all Business Presum ption: Advocacy Chair (SBAC) if you believe that your rule should be certified as not having a SISNOSE.

Presum ed The rule is presumed to be ineligible for certification . Unless you can Ineligible f o r dem onstrate, through further analysis, that the rule nonetheless should be Certif ication: certified as not having a SISNOSE, you should contact the SBAC through your Regulatory Steering Com m ittee representative, prepare a regulatory flexibility analysis, and participate in a Sm all Business Advocacy Review Panel.

Table 2 represents an example of a decision process you m a y use to determ ine whether your rule m a y have a SISNOSE (i.e., which category to assign to your rule). The thresholds displayed in Table 2 are 1% and 3% for determ ining the significance of the econom ic im pact on

sm all entities, and 100 and 1000 and/or 20% for determ ining if the num ber of sm all entities im pacted is substantial

. These thresholds are only examples. No bright line exists for determ ining whether a given set of econom ic im pacts constitutes a SISNOSE. The RFA does not define the term s significant or substantial as they pertain to the extent of econom ic im pact and the num ber of sm all entities af f

ected. EPA has not established f i xed def i nitions f o r the
term s, reflecting the practical difficulty of stipulating what would uniform ly represent a significant econom ic im pact or a substantial num ber in every regulatory circum stance. Even when EPA issues a rule adhering to the full procedural and analytic requirem e nts of the RFA (i.e., without certification), the Agency does not state the rule positively will im pose a SISNOSE, since it m a y or it m a y not. In such cases, we sim p ly refrain from certifying it.

As in the exam ple decision process in Table 2, you determ ine the num erical thresholds that are appropriate to the circum stances of your rule. The thresholds represent three factors that

m a y be considered in m a king your SISNOSE determ ination. The three factors are:

20 The term s 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 som e or all of the required elem ents of and IRFA or FRFA, the docum entation of your analysis should be titled “Sm a ll Entity Flexibility Analysis” and not IRFA or FRFA.
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~ Chapter 2: Screening Analysis ~RFA Guidance for EPA Rulewriters
(1) m agnitude of econom ic im pact that m a y be experienced by regulated sm all entities;

(2) t otal num ber of regulated sm all entities that m a y experience the econom ic im pact; and

(3) p ercentage of regulated sm all entities that m a y experience the econom ic im pact.

The first factor relates to defining a num er ical threshold for the significance of the

econom ic im pact and is discussed in Section 2.7.1. The second and third factors relate to the

num erical thresholds for substantial num ber of sm all entities and are discussed in Section 2.7.2.

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~ Chapter 2: Screening Analysis ~TABLE 2: Example SISNOSE Certificat ion Decision Process a

Economic Impact Number of Small Entities Subject to the Rule and Experiencing Giv en Economic Impact Percent of All Small Entities Subject to the Rule That are Experiencing Giv en Economic Impact Certification Category b

Less than 1% for all affected small entities Any number Any percent Presumed No SISNOSE

1% or greater for one or more affected small entities c Fewer than 100 Less than 20% Presumed No SISNOSE

Fewer than 100 20% or more Uncertain - No Presumption

100 - 999 d Less than 20% Presumed No SISNOSE

100 - 999 20% or more Uncertain - No Presumption

1000 or more Any percent Uncertain - No Presumption

3% or greater for one or more affected small entities Fewer than 100 Less than 20% Presumed No SISNOSE

Fewer than 100 20% or more Uncertain - No Presumption

100 - 999 d Less than 20% Uncertain - No Presumption

100 - 999 20% or more Presumed Ineligible for Certification

1000 or more Any percent Presumed Ineligible for Certification

a This table and the numbers in it are giv en only as examples of the decision process and thresholds that may be chosen for a particular rule. The certification decis ion should not be solely based upon the applicat ion of this table nor should this tabl e be referenced in y our preamble. Additional information and other factors may be relevant in deciding w hether to prepare a regulat ory flex ibility analy s is or certify under the RFA.

b There may be cases in w h ich the extent of the impact on sm all entities (measured in quantitative or qualitative terms) is particularly severe, even though the total number of small entitie s experiencing that impact is small (i.e., few e r than 100 or 20%). In such cases, the lead office shoul d consider placing the rule in a ca tegory more applicable to the situation.

C For purposes of apply i ng this portion of t he table, the number of small entities that w ill ex perience an impact of 1% to 3% sh ould be aggregated w i th the number of small entities that w ill ex perienc e an impact of 3% or greater. The total number of small ent ities that w ill ex perience an impact of 1% or greater should be used her e in order to determine w hether the number of small entities so impacted is large enough to w a rrant preparat ion of a regulatory flex ibility analy s is.

d As the number of small entities that w ill 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 sm all entities may become less relevant in determining w hether a regulatory flex ibility analy s is or a certification should be prepared.RFA Guidance for EPA Rulewriters

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

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 econom ic im pact m easures that have been estim ated. The thresholds you define should establish whether the level of econom ic im pacts faced by the sm all entities can be presum ed as not significant. The variations of

econom ic im pact m easures, regulatory requirem e nts, and characteristics of potentially affected

sm all entities is too great to allow EPA to establish threshold values for each m easure that could be em ployed in Table 1. This section, theref ore, discusses factors you should consider when establishing threshold values for your screening analysis.

The lower econom ic im pact threshold is particularly im portant because it is used to screen out rules that generally will not have a significant econom ic im pact and, therefore, can be
presum ed not to require an IRFA/FRFA (i.e., if all sm all entities subject to a rule face econom ic im pacts less than the lower threshold, then the rule m a y be assigned to the Presum ed No SISNOSE Category). For this reason the lower econom ic im pact threshold should be set conservatively, at a level that precludes any reasonable possibility that a rule placed in the Presum ed No SISNOSE Category m i ght later be found to im pose a “significant econom ic im pact on a substantial num ber of sm all entities.” The upper threshold defines a level of econom ic im pact that would be unquestionably significant for a sm all entity.

In analyzing previous rules, EPA has often defined the lower threshold as com p liance costs of 1% of sales and the higher threshold as com p liance costs of 3% of sales as shown in the

exam ple in Table 2. 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.

There are several types of inform ation that can help you identify the appropriate threshold values. For exam ple, prof its can be a better indicator of ability to pay than sales. Moreover, variation in profit-to-revenue ratios exists across industries. Therefore, the m a gnitude of im pacts defined as the lower and upper threshold for a particular rulem a king m a y take into consideration the average prof it m a rgins of the af f

ected sm all entities and the ability of the entities to pass com p liance costs to either custom ers or suppliers. To the extent that these types of inform ation are available, you m a y wish to use them to inform your selection of appropriate thresholds.

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

Consideration of the num ber of sm all entities f acing regulatory costs is dependent on the characteristics of the affected industry or group of sm all entities being regulated. One hundred

sm all businesses m a y represent a sm all f r action of the total num ber of sm all businesses in som e

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~ Chapter 2: Screening Analysis ~RFA Guidance for EPA Rulewriters
sectors, such as gasoline service stations, while the total num ber of sm all businesses in som e niche m a rkets m a y be less than a dozen. For this reason, analysts should exam ine both the total

num ber and percentage of regulated sm all entities experiencing significant econom ic im pacts when determ ining whether a “substantial num ber” of sm all entities m a y be signif i cantly im pacted.

W h ile the num ber thresholds provided in Table 2 are typical of those used in m a ny past screening analyses, circum stances of a particular rule m a y cause an analyst to define thresholds differently. For exam ple, there m a y be cases where the extent of econom ic im pact (m easured in quantitative or qualitative term s) is particularly severe, even though the num ber of affected sm all entities totals considerably fewer than 100 – or 20% – of all regulated sm all entities. In such cases, the lead office should consider not certifying the rule, but rather placing it in the Uncertain

- No Presum ption or Presum ed Ineligible for Certification categories. Indeed, in the past the Agency has em ployed such discretion by choosing not to certify a proposed rule that directly regulated only a sm all num ber of sm all businesses, but with com p liance costs considerably greater than 3% of sales. Likewise, the relative im portance of the two m easures of the num ber of

sm all entities im pacted can vary with the situation. For exam ple, as the total num ber of sm all entities bearing “significant” costs approaches a num ber like 1000, the relevance of the 20% threshold becom e s far less significant.

It is im portant to rem e m b er that these numbers and the process outlined in Table 2 are only guidelines for assessing w h ether a rule may have a SISNOSE. They suggest categories that support presum ptions. Agency m a nagem e nt should exercise its own judgm ent in deciding whether to certify a particular rule.

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

W h ile a decision on whether to certify the rule is m a de based on consideration of the im pacts on all sm all entities subject to the rule, your analysis should consider econom ic im pacts on each of the three types of sm all entities that m a y be af f

ected: sm all businesses, sm all
governm e ntal jurisdictions, and sm all nonprofit organizations. W h ile m a ny rules affect only a single type of sm all entity (e.g., sm all businesses), they m i ght affect a variety of entities within the type (e.g., businesses in different industries). Other rules m a y affect m o re than one type of

sm all entity (e.g., sm all businesses and sm all 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 sm all entity (e.g., only sm all businesses). Section 2.7.3.2 addresses situations in which affected sm all entities are of different types (e.g., sm all businesses and sm all governm e ntal jurisdictions).

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2.7.3.1 Economic Impacts on Entities Within a Type Should Be Aggregated

A rule m a y apply to m o re than one kind of business, governm e nt, or nonprofit organization. For exam ple, a rule m a y apply the sam e requirem e nts to dry cleaners and auto body shops. In assessing the econom ic im pact of such a rule on “sm a ll business,” it m a y be appropriate to analyze the rule’s im pact on each kind of business separately, particularly where the rule m a y im pose significantly higher costs on som e kinds of businesses than on others. However, f o r the purposes of deciding whether to prepare a regulatory f l exibility analysis or to certify no SISNOSE, the im pacts of the rule on the two types of business should be aggregated and the decision based on the aggregated im pact.

W h en both a decrease and increase in burden will occur to exactly the sam e entities, it is appropriate to consider the net im pact on those sm all entities. However, when a rule will reduce burdens on som e sm all entities and create or increase burden on others, these should not be netted (even if all the affected entities fall within the sam e industry). In this case, only the adverse im pacts are relevant to the SISNOSE determ ination.

2.7.3.2 Economic Impacts on Entities of Different Types Should Be Assessed Both Separately and Aggregated

W h ere the rule will apply to m o re than one type of sm all entity (i.e., sm all businesses,

sm all governm e nts, and sm all nonprofit organizations), you should analyze the econom ic im pact separately for each type of entity subject to the ru le. For exam ple, for a rule that will im pose the

sam e (or substantially sim ilar) requirem e nts on sm all businesses and sm all governm e nts, you should analyze the rule’s im pact on sm all businesses using an econom ic m e asure appropriate to

sm all businesses, and analyze the im pact on sm all governm e nts using an econom ic m e asure appropriate to sm all governm e nts. You should then determ ine categories separately for each type of entity. The rule will thus be categorized twice – once f o r its im pact on sm all businesses and a second tim e for its im pact on sm all governm e nts.

W h ere a rule applies to m o re than one type of sm all entity, and im pacts have been analyzed for each type of sm all entity separately, one further analytic step is required to categorize the rule. This involves applying the total num ber and percentage thresholds to the aggregate num ber of sm all entities affected by the rule. These steps are necessary because the screening process uses total num bers as well as percentages to assess whether the rule is eligible for certification. The total num bers provide a suggested floor and ceiling for considering

num bers of sm all entities that m a y be im pacted above or below the suggested thresholds. For

exam ple, a rule im posing “significant” econom ic im pacts on over 1000 sm all entities is
presum ed to m eet the substantial num ber threshold, even if that num ber represents less than 20% of

af f

ected sm all entities.

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~ Chapter 2: Screening Analysis ~RFA Guidance for EPA Rulewriters

The total num ber threshold should be chosen as indicative of a substantial num ber not only with respect to any one type of sm all entity, but with respect to all sm all entities taken together. Thus, for the exam ple thresholds displayed in Table 2, a rule with an im pact of 2% of sales, revenues or assets with respect to 334 sm all businesses, 334 sm all governm e nts and 334

sm all organizations, where 334 is less than 20% of each type of sm all entity, would be categorized as Presum ed No SISNOSE if each type of entity were exam ined separately. However, the rule would actually fall into the Uncertain - No Presum ption category since m o re than 1000 sm all entities m a y be significantly affected by the rule.

For som e rules, the issue of applying the m a trix to each type of sm all entity m a y be a two step process – that is, you should apply the matrix separately to different kinds of small businesses, small governments, or small nonprofits. A rule m a y, for exam ple, apply the sam e requirem e nts to dry cleaners and auto-body shops, but the rule’s econom ic im pact m a y be m u ch greater on one than on the other kind of business. As indicated above, it would be appropriate in such a case to analyze the im pact of the rule separately for the two kinds of business. For purposes of deciding whether to prepare a regulatory f l exibility analysis or a certif ication, however, the im pacts of the rule, once assessed for the two kinds of business, should be aggregated and the aggregate fed into the m a trix. Please note that if your rule is certified, the Agency is assuring the public that the rule will not im pose a significant econom ic im pact on a substantial num ber of sm all entities of all types taken together. It is not appropriate to prepare separate certifications for small businesses, small governments, and small non-profit organiz ations.

2.7.4 What Additional Information Can I Provide to Decision-makers When the Rule Falls into the “Uncertain - No Presumption” SISNOSE Category?

W h en the sim p le direct com p liance cost screening m e thod produces an uncertain answer to the question of whether your rule can be certified as not having a SISNOSE, you m a y wish to consider doing additional analysis in order to provide a better picture of whether the econom ic im pact on sm all entities is significant or substantial. The decision to conduct m o re analysis, and what type and level of analysis, will depend on m a ny f actors including: qualitative inf o rm ation that points to the rule being certif ied or not, data availability, and resource or tim e constraints.

Som e analyses that m a y be helpful in refining an “Uncertain - No Presum ption” SISNOSE category are an analysis of cost pass-th rough, use of or exam ination of profits or profit

m a rgins, m easurem ent of the f i nancial health of entities, or com p aring the relative im pacts on

sm all entities versus large entities. W h ile the sim p le initial screen for econom ic im pacts typically assum e s that entities are not able to shif t som e of the burden of higher costs onto

consum ers, an estim ate of cost pass-through can re veal if entities are facing the full burden of the direct com p liance costs. W h en data on profits is available, that inform ation m a y be used directly, by applying a profit test (see Table 1) , or indirectly, by using inform ation on profit

m a rgins to inform your selection of appropriate thresholds (see Section 2.6.1) for use with other

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~ Chapter 2: Screening Analysis ~RFA Guidance for EPA Rulewriters

m easures (e.g., cost as a percentage of sales). The financial literature contains m a ny m e thods of predicting f i rm (or other entity) health and or closures. Finally, a com p arison of a rule’s im pact

on sm all entities versus large entities m a y reveal whether the im pacts are disproportionately burdensom e to the sm all entities. 21 More inform ation on these analyses and others can be found in Chapter 9 of the Guidelines for Preparing Economic Analyses

.

2.7.5 What Other Issues Should I Consider?

2.7.5.1 Data Issues

If you are unable to obtain adequate inform ation regarding the entities affected by your rule, one option is to m odel such inform ation based on other available data or on reasonable proxies. For exam ple, you m a y choose to use quantitative inform ation on another type of sm all entity whose behavior and f i nancial characteristics are sim ilar to those subject to the rule. Another exam ple m i ght entail the creation of baseline financial characteristics for a set of sm all entities drawing upon and adjusting quantitative inform ation available for larger entities in the

sam e industrial or governm e ntal sector. In general, where quantitative inform ation is sought, the goal is to obtain the type of data that allow f o r the m o st reliable f o rm of quantitative analysis to be used. But where data lim itations persist, you should identify and consider other reliable alternatives.

2.7.5.2 Baseline Compliance w i th Existing Regulations

In calculating the costs the rule will im pose on sm all entities, you should presum e full

com p liance with all existing applicable statutory or regulatory requirem e nts. For exam ple, if the new rule is designed to address widespread non-com p liance with an existing rule, you should not

assum e full com p liance with the existing rule, as this could underm ine the basis for the new rule. Generally, in the case of a rule revising an existing rule, you should assess only the increm ental cost of the rule revision. In such cases, you should consult with your Regulatory Steering Com m ittee representative, the SBAC, and the OGC attorney for your rule before conducting the analysis. This issue is discussed m o re fully in Chapter 5 of the Guidelines for Preparing Economic Analysis

.

2.7.5.3 Evaluating Multiple Regulatory Approaches or Options

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 econom ic im pact on a s ubstantial num ber of sm all entities” describes an absolute

m easure of econom ic im pacts on sm all entities, not one that is relative to econom ic im pact on large entities. Nevertheless, an analysis of relative econom ic im pacts can be useful to characterize the distribution of effects.
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~ Chapter 2: Screening Analysis ~RFA Guidance for EPA Rulewriters

W h en you plan to propose m u ltiple regulatory alternatives (i.e., two or m o re approaches from am ong which one will be selected for prom ulgation in the final rule), you preferably should conduct a screening analysis on each of the proposed alternatives, but, at a m i nim u m , you should analyze the alternative that m o st likely would have the greatest econom ic im pact on sm all entities.

Sim ilarly, if you plan to propose a single regulatory approach but seek com m e nt on variations of that approach or on different approaches altogether, you should analyze not only the proposed approach but also the m o st potentially burdensom e variation or approach that has a significant chance of being prom ulgated. You should contact your Regulatory Steering Com m ittee 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.

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

2.8.1 Document the Screening Analysis

For m a ny rules, f u ll docum entation of the screening analysis will be contained within the larger econom ic analysis prepared for the rule. If this is not the case, the screening analysis should be docum ented in the sam e m a nner as any good econom ic analysis by fully describing the data and m e thods used, assum p tions m a de, uncertainties and lim itations involved, and conclusions reached. If you are certifying a rule as not having a SISNOSE, you m u st describe the f actual basis f o r the certif ication within the pream ble f o r the rule. 22 (See 5 U.S.C. section 605(b)) The text included in the pream ble does not have to contain the com p lete docum entation of the screening analysis (see 5 U.S.C. section 605(a)), but should at least present a sum m a ry of the findings and cite the docum ent where the full docum entation can be found. 23 The certification and statem ent of factual basis you include in the pream ble to a final rule are subject to judicial review.

2.8.2 What Other Steps are a Part of the RFA Process?

22 Please see the Rulewriter' s Guide: Preamble Templates for the Regulatory Flexibility Act ( RFA)

, (Office of Policy, Econom ics and Innovation, Regulatory Managem e nt Division, Decem ber 2004) for m o re guidance on writing the RFA section of a pream ble.

23 The term s “IRFA” and “FRFA” are included only in rule s that are not certified. If a rule is certified as not having a SISNOSE and you perform an analysis that contains som e or all of the required elem ents of an IRFA or FRFA , the docum entation of your analysis should be titled “Sm a ll Entity Flexibility Analysis” and not IRFA or FRFA.
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~ Chapter 2: Screening Analysis ~RFA Guidance for EPA Rulewriters
For rules that can be certified as not having a SISNOSE, a certification statem ent and justification m u st be prepared (see 5 U.S.C. section 605(b)) and included in the pream ble for the rule (see Section 2.7.1 above). W h en a rule will not be certified, you should consult with both your SBAC staff and Regulatory Steering Com m ittee representative (see http://intranet.epa.gov/adplibrary/ f

o r contact inf o rm ation). These representatives will help guide you and your rule through the RFA process, including:

• p reparing the screening analysis (this Chapter);

• p reparing an IRFA or FRFA (see Chapter 3);

• c onducting outreach (see Chapter 4);

• c onvening a Panel (see Chapter 5); and

• p reparing a sm all entity com p liance guide (see Chapter 6).

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### Chapter 3 Preparing the Initial and Final Regulatory Flexibility Analyses

Contents of Chapter 3 Page No.
3.1 W hat are IRFAs and FRFAs?

.................................................................... 3 7
3.2 W hat Is the Relationship Between the IRFA /FRFA and a Rule’s Broader Economic Analysis?

.................. 3 9
3.3 W hat Is the Relationship Between the IRFA/FRFA and the SBAR Panel Process?

........................... 4 1
3.4 H ow Do I Prepare an IRFA?

..................................................................... 4 1
3.5 H ow Do I Prepare a FRFA?

...................................................................... 4 7

3.1 What are IRFAs and FRFAs?

An Initial Regulatory Flexibility Analysis (IRFA) and a Final Regulatory Flexibility Analysis (FRFA) are the analyses of econom ic im pacts on sm all entities that you m u st prepare unless your rule is certified as not having a significant econom ic im pact on a substantial num ber of sm all entities (SISNOSE). See 5 U.S.C. sections 603 and 604. This chapter explains these analyses, how they are perform e d and inform ation that the RFA requires each to contain.

What is an IRFA?

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 certif ies that the rule will not have a SISNOSE. 24 As noted in Section 1.5, only proposed rules subject to notice-and-com m e nt rulem a king requirem e nts under the Adm i nistrative Procedure Act (APA) or any other statute are subject to the requirem e nts of the RFA. An IRFA describes the econom ic im pact of the proposed rule on sm all entities and any significant alternatives to the proposed rule that would accom p lish the objectives of the rule while m i nim i zing significant econom ic im pacts on sm all entities.

An IRFA ensures that the agency has explicitly considered sm all entities before the requirem e nts of the rule are finalized. It is not sim p ly a stand-alone paperwork exercise. In

m o st cases, IRFAs m u st be m a de available for public com m e nt along with the proposed rule. 25

24 Chapter 2 describes the process for determ ining if a rule can be certified as not having a SISNOSE.

25 Section 608(a) of the RFA authorizes agencies to waive or delay the com p letion of an IRFA if the agency publishes a finding that the rule is being prom ulgated in response to an em ergency that m a kes com p liance or tim ely (continued...)

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~ Chapter 3: Preparing the Initial and Final Regulatory Flexibility Analysis ~RFA Guidance for EPA Rulewriters
Although an IRFA is not subject to judicial re view, it is im portant that you carefully prepare each required com ponent of the analysis.

What is a FRFA?

Section 604 of the RFA requires agencies to prepare a final regulatory flexibility analysis (FRFA) for final rules that are prom ulgated under the notice-and-com m e nt rulem a king requirem e nts of the Adm i nistrative Procedure Ac t (APA) after a notice of proposed rulem a king required by the APA or any other law, unless the agency certif ies that the rule will not have a SISNOSE. A FRFA is sim ilar, but not identical, to an IRFA. W h ile both types of analysis contain som e sim ilar elem ents, there are several requirem e nts specific to a FRFA. One such requirem e nt is that the FRFA m u st sum m a rize and respond to com m e nts received on the IRFA.

A FRFA docum ents the Agency’s consideration of alternatives to m i nim i ze econom ic im pacts on sm all entities. In m o st cases, the FRFA m u st be prepared in tim e f o r it to be available to the public when the final rule is published (see 5 U.S.C. section 604) . 26 The FRFA is subject to judicial review so it is crucial that you carefully com p lete each required com ponent of the analysis.

Are the IRFA and FRFA Solely Quantitative Analyses?

No. The IRFA and FRFA contain both quantitative and qualitative inf o rm ation and describe several factors in addition to the potential econom ic im pacts of a proposed or final rule

on sm all entities. The central focus of the IRFA is to present the opportunities for, and outcom e s of, alternative regulatory or policy options that could m i nim i ze the rule' s potentially significant

econom ic im pacts on sm all entities subject to the rule. The purpose of the IRFA is to provide the decision m a ker with an analytic f r am ework to inf o rm the ultim ate decision on the f i nal rule and provide the public with inform ation on the alternatives considered by the agency. The central focus of the FRFA is to describe the considerations particularly those related to sm all entity im pacts underlying the ultim ate decision on the final rule. The IRFA and FRFA include discussions of program design and scope issues, as well as quantitative econom ic analysis (see Sections 3.4.1 and 3.5.1 for the specific required elem ents of an IRFA and FRFA).

25 (...continued)

com p liance with the IRFA requirem e nt im practicable. The finding m u st be supported by reasons and published in the Federal Register by the tim e the final rule is published.

26 Section 608(b) of the RFA allows the agency head to delay com p letion 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
prom ulgated in response to an em ergency that m a kes com p liance or tim ely com p liance with the FRFA requirem e nt im practicable. The finding m u st be supported by reasons a nd published in the Federal Register by the tim e the final rule is published. If the FRFA has not been prepared w ithin 180 days, the rule lapses and cannot be reprom ulgated until the FRFA has been com p leted.
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~ Chapter 3: Preparing the Initial and Final Regulatory Flexibility Analysis ~RFA Guidance for EPA Rulewriters
Both the IRFA and FRFA usually contain quantitative inform ation about the potential

econom ic im pacts of the rule on sm all entities. Section 607 of the RFA indicates that as an
agency com p lies with the requirem e nt to prepar e an IRFA or FRFA, it “m ay provide either a quantifiable or num erical description of the eff ects of a proposed rule or alternatives to the proposed rule, or m o re general descriptive statem ents if quantification is not practicable or reliable.” The Agency’s approach should be based on factors such as the quality and quantity of available inform ation and the anticipated econom ic im pact on sm all entities that are subject to the rule. The quantitative inf o rm ation estim ated by the screening analysis m a y be included as part of the IRFA or FRFA (see Chapter 2 for inform ation on screening analyses).

3.2 What is the Relationship Betw een th e IRFA/FRFA and a Rule’s Broader Economic Analysis?

W h ile the RFA m a y require an IRFA or FRFA for a rule, Executive Order (E.O.) 12866

m a y call for a broader econom ic analysis of a rule. 27 The focus of the IRFA and FRFA is the im pact of the rule’s requirem e nts on the sm all entities that are subject to the rule, while the f o cus of an E.O. 12866 econom ic analysis, on the other hand, is social costs and benefits aggregated across all entities and individuals, not just those directly subject to the rule. 28 This broader focus provides a picture of the rule’s im pact on society as a whole. 29 This difference in focus derives from the different objectives of the m a ndates for the two types of analyses. Please note, however, that an E.O. 12866 econom ic analysis m a y contain a sm all entity im pact section that

m a y be written to satisf y the IRFA/FRFA requirem e nts of the RFA.

Another difference in the analyses is that the RFA requires EPA to identify and consider (but not necessarily adopt) alternatives that m i nim i ze a rule' s significant econom ic im pacts on

sm all entities subject to the rule. 30 The RFA, however, does not require the agency to adopt the alternative that has the least im pact on sm all entities. E.O. 12866, on the other hand, encourages agencies, when legally perm issible, to adopt the regulatory alternative that m a xim i zes the net benefit to society. An E.O. 12866 analysis can encom p ass all econom ic im pacts attributable to

27 Other statutes also m a y require the analysis of econom ic im pacts. For exam ple, the Safe Drinking W a ter Act and Clean W a ter Act both require EPA to consider the ec onom ic achievability or affordability of regulatory options when developing lim itations and standards.

28 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.”

29 See EPA’s Guidelines for Preparing Economic Analysis (Septem b er 2000) for m e thods of estim ating a rule’s benefits and costs. The Guidelines can be accessed on the internet at http://yosem ite.epa.gov/ee/epa/eed.nsf/webpages/Guidelines.htm l

.

30 Section 603(c) requires an IRFA to describe the a lternatives while section 604(a)(5) requires a FRFA to state why any significant alternatives which affect the im pact on sm all entities were rejected.
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~ Chapter 3: Preparing the Initial and Final Regulatory Flexibility Analysis ~RFA Guidance for EPA Rulewriters
the rule, whether experienced by large or sm all entities, whether im posed directly or experienced indirectly downstream from the com p liance activity, or whether borne by parties subject to the rule or other parties not bound by enforceable requirem e nts. 31 Although these requirem e nts differ, they are generally consistent. Indeed, the alternative that achieves statutory and regulatory objectives while m i nim i zing econom ic im pacts under the RFA m a y be identical to the alternative that im poses the least burden on society. In som e cases, however, the lead office m a y find that the E.O. 12866 broader econom ic 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 Sm all Business Advocacy Chair (SBAC).

Another difference between IRFA/FRFAs and E.O. 12866 econom ic analyses is the rules to which they apply. E.O. 12866 requires agencies to prepare econom ic analyses for all rules deem ed to be “significant regulatory actions,” which are defined as any regulatory action likely to result in a rule that m a y:

(1) H ave an annual effect on the econom y of $100 m illion or m o re or adversely affect in a m a terial way the econom y, a sector of the econom y, productivity,

com p etition, jobs, the environm ent, public health or safety, or State, local, or tribal governm e nts or com m unities;

(2) C reate a serious inconsistency or otherwise interfere with an action taken or planned by another agency;

(3) M aterially alter the budgetary im pact of entitlem e nts, grants, user fees, or loan
program s or the rights and obligations of recipients thereof; or

(4) R aise novel legal or policy issues arising out of legal m a ndates, the President' s priorities, or the principles set f o rth in this E.O.

The RFA, on the other hand, requires preparation of IRFAs and FRFAs only for noticeand-com m e nt rules that are subject to the RFA and are not certified as having no SISNOSE. 32 It is possible, therefore, that a rule m a y be subject to the RFA’s analytic requirem e nts while not being a “significant regulatory action” or vice versa.

31 Note that E.O. 12866 also requires consideration of “a ny adverse effects on the efficient functioning of the

econom y, private m a rkets (including productivity, em ploym en t, and com p etitiveness)...” This m a y also entail im pact analysis.

32 The term s “IRFA” and “FRFA” are used only in rules th at are not certified as having no SISNOSE. If a rule is certified as not having a SISNOSE, the docum entation of your analysis should be titled “Sm a ll Entity Flexibility Analysis” and not IRFA or FRFA even if the docum entation contains all the elem ents required of an IRFA or FRFA.
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~ Chapter 3: Preparing the Initial and Final Regulatory Flexibility Analysis ~RFA Guidance for EPA Rulewriters

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

A Sm all 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)). 33 The IRFA and the Panel share a com m on objective: to consider opportunities for m i nim i zing a rule’s significant econom ic im pacts on sm all entities. The Panel provides an additional m eans for

sm all entities to provide input into certain EPA rulem a kings and to ensure that the unique concerns of sm all entities are caref ully considered during the rulem a king process. The FRFA docum ents how the input received through the Panel and IRFA processes were used to arrive at a f i nal rule.

The RFA requires the Agency to consider the Panel Report and, where appropriate, to

m odify the proposed rule, the IRFA, or the decision on whether an IRFA is required (5 U.S.C. section 609(b)). W h ile you are not required to provi de the Panel with a copy of the draft IRFA – indeed, the Panel typically convenes before the IRFA has yet been assem b led in draft – the Panel process can be enhanced through the review of prelim inary estim ates or qualitative descriptions, where available, of the universe of sm all entities to which the proposed rule will be applicable; requirem e nts of the proposed rule; Federal rules which m a y duplicate, overlap or conflict with the proposed rule; and inform ation on significant alternatives that still accom p lish the statutory objective of the proposed rule.

The IRFA should docum ent the results of the Panel process and its role in the Agency' s deliberations. You should also sum m a rize the substantive Panel recom m e ndations, and the Agency’s actions in response to them , in the RFA section of the pream ble of your proposed rule.

3.4 How Do I Prepare an IRFA?

This section discusses the com ponents of an IRFA and considerations in preparing an IRFA. Section 3.4.1 outlines the elem ents of an IRFA required by section 603 of the RFA. Section 3.4.2 discusses different types of analys es that program offices m a y consider doing in order to enhance the inform ation provided in an IRFA. Guidance on how to assem b le the IRFA and proposed rule pream ble appear in Section 3.4.3.

3.4.1 Required Elements of an IRFA

The RFA states that an IRFA “shall describe the im pact of the proposed rule on sm all entities” (5 U.S.C. section 603(a)) and lists several elem ents that each IRFA shall contain. The statutory language for each required elem ent of an IRFA, as codified by 5 U.S.C. section 603, is presented below. Rem e m b er that if the inform ation is contained in the pream ble to the proposed

33 Guidance on the Sm all Business Advocacy Review Panel is provided in Chapter 5.
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~ Chapter 3: Preparing the Initial and Final Regulatory Flexibility Analysis ~RFA Guidance for EPA Rulewriters

rule or another rulem a king docum ent, you do not need to repeat it in the IRFA, rather you can reference the discussion in the other docum ent (see 5 U.S.C. section 605).

Element 1: Description of the reasons w h y action by the agency is being considered (5 U.S.C. section 603(b)(1))

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, w h ere feasible, an estimate of the number of small entities to w h ich the proposed rule w ill apply (5 U.S.C. section 603(b)(3))

The IRFA should at a m i nim u m identify, by North Am erican Industry Classification System (NAICS) code, the sm all entities subject to the rule and the size standard for each type of

sm all entity. 34 See Section 3.4.2 for a discussion of supplem ental analysis that m a y enhance your description of sm all entities subject to the rule.

Most of the inform ation required for Elem ent 3 m a y be available from the RFA screening analysis (see Chapter 2), if one was conducted. Other sources of inform ation m a y include the E.O. 12866 econom ic analysis, im pact analyses prepared pursuant to other statutes, technical background docum ents, and risk analysis, if any of these were prepared for the rule. W h atever the source of inform ation used, it should be well docum ented within the IRFA. If you are not able to provide an estim ate of the num ber of sm all entities, you should provide an explanation of the reasons for this om ission.

Element 4: Description of the projected rep orting, record keeping and other compliance requirements of the proposed rule, including an estimate of the classes of small entities w h ich w ill be subject to the requirement and the type of professional skills necessary for preparation of the report or record (5 U.S.C. section 603(b)(4))

This elem ent of your IRFA, a description of the proposed rule’s requirem e nts, should provide details of the im pacts on the sm all entities that will be subject to the proposed rule, as set forth in section 603(a) of the RFA. Analysts have generally provided estim ates of the proposed rule’s costs on the sm all entities subject to the rule to describe the sm all entity im pacts of the proposed rule. To address this elem ent, you m a y refer to the costs estim ated 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 exam ple, if an Inform ation Collection Request is prepared for a rule,

34 See Section 2.5.2 on defining “sm a ll” for each type of sm all entity. If applicable, a description of the steps taken to develop an alternative definition of sm all for th e sm all entities should be included in the IRFA (see Section 2.5.5).
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~ Chapter 3: Preparing the Initial and Final Regulatory Flexibility Analysis ~RFA Guidance for EPA Rulewriters

estim ates of the costs and adm i nistrative burdens associated with reporting and record keeping and the prof essional skills needed to prepare required reports or records m a y be obtained f r om the paperwork burden analysis prepared under the Paperwork Reduction Act. Section 3.4.2 discusses supplem ental analyses you m a y choose to consider for enhancing your description of the proposed rule’s im pacts on sm all entities.

If you plan to propose m u ltiple regulatory alternatives (i.e., two or m o re approaches, one of which will be selected for prom ulgation in the final rule), you should describe the im pacts to

sm all entities of each of the proposed alternatives or , at a m i nim u m , of the alternative that would likely have the greatest econom ic im pact on sm all entities. Sim ilarly, if you plan to propose a single regulatory approach, but also seek com m e nt on variations of that approach or on different approaches altogether, you should ordinarily de scribe not only the proposed approach, but also the potentially m o st burdensom e variation.

Element 5: Identification, to the extent prac ticable, of all relevant federal rules w h ich may duplicate, overlap or conflict w i th the proposed rule (5 U.S.C. section 603(b)(5))

Many EPA rules com p lem e nt requirem e nts im posed by other EPA rules or rules
prom ulgated by other Federal Agencies. EPA’s authority and responsibility intersect with those of m a ny other Federal Agencies and Departm e nts (e.g., OSHA, Transportation, Energy, Interior). In principle, these controls should all work together to create a com p rehensive system of environm ental m a nagem e nt. Each agency should, therefore, coordinate its regulatory requirem e nts with those already in place. The lead OGC attorney for your rulem a king can assist in identifying duplicate, overlapping, or conflicting rules. These m a y also be identified through the Panel process (see Section 5.2).

Element 6: Description of any significant alternatives to the proposed rule w h ich accomplish the stated objectives of applicable statutes and w h ich minimiz e any significant economic impact of the proposed rule on small entities

. Consistent with the stated objectives of applicable statutes, the analysis shall discuss significant alternatives such as:

• t he establishm ent of differing com p liance or reporting requirem e nts or tim etables that take into account the resources available to sm all entities;

• t he clarification, consolidation, or sim p lification of com p liance and reporting requirem e nts under the rule for such sm all entities;

• t he use of perform a nce rather than design standards; and

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~ Chapter 3: Preparing the Initial and Final Regulatory Flexibility Analysis ~RFA Guidance for EPA Rulewriters

• a n exem ption from coverage of the rule, or any part thereof, for such sm all entities. (5 U.S.C. section 603(c)).

Elem ent 6 requires the IRFA to describe signif i cant alternatives to the rule which

accom p lish the stated objectives of applicable statutes and which m i nim i ze significant im pacts of the proposed rule on sm all entities. Discussion of regulatory options included in the rule (see Elem ent 4 above) m a y already include one or m o re “significant alternatives.”

How Many Significant Alternatives Do I Need to Consider?

By law, an IRFA need only explore significant regulatory alternatives “which accom p lish the stated objectives of applicable statutes and which m i nim i ze any significant economic impact of the proposed rule on sm all entities” (section 603(c) (em phasis added)). At a m i nim u m the IRFA should describe any significant alternatives that m eet this criteria. The internal rulem a king process or the RFA Panel process m a y identify other regulatory m e chanism s that could m i nim i ze the significant econom ic im pact on sm all entities.

What if the Statute Is Very Prescriptive in the Type of Regulatory Option to Be Used for Achieving its Environmental Goal?

The lead office, working with OGC, should determ ine whether the objectives of the
statute m a y be achieved in m o re than one m a nner. In m a ny cases even when a statute appears to be prescriptive, there still m a y be ways to m i nim i ze econom ic im pacts on sm all entities.

If it is determ ined 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 sim p ler 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

m i nim i ze adverse econom ic im pacts, the lead office should prepare an IRFA as described in this section.

How Much Analysis Do I Need to Conduct on Each Regulatory Option?

The prim ary purpose of the analysis is to provide the decision m a ker with inform ation that will facilitate the choice of a sound regulator y option. As with the rest of the required elem ents of an IRFA, qualitative descriptions will suf f i ce when quantitative inf o rm ation is not practically available (5 U.S.C. section 607). A qualitative analysis m i ght include: a description of

the alternative requirem e nts, the sm all entities to which they would apply and a qualitative discussion of the change in the num ber of sm all entities that would experience signif i cant

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~ Chapter 3: Preparing the Initial and Final Regulatory Flexibility Analysis ~RFA Guidance for EPA Rulewriters

econom ic im pacts. As data, tim e, and resources allow, program s m a y wish to pursue som e of the quantitative analysis described in the next section (3.4.2).

3.4.2 Supplemental Analysis

In som e instances, a supplem ental analysis m a y provide a m o re detailed picture of the

econom ic im pacts on sm all entities than is required by the RFA. Preparing such supplem ental analyses m a y take significant additional tim e and resources. However, in som e instances the inform ation obtained through supplem ental analysis m a y be useful. The decision to undertake such analyses depends on the quality and quantity of available data, the severity of a rule’s anticipated econom ic im pact on sm all entities subject to the rule, and the potential consequences of additional delay in the regulatory schedule. This section sum m a rizes som e different types of

sm all entity im pact analyses that go beyond what is required by the RFA, and m a y provide inform ation helpful to understanding the im pacts on sm all entities in a broader context.

In addition to the description required by Elem ent 3, the lead office m a y wish to consider
segm enting the affected entities along lines that are useful for distinguishing am ong those that

are m o re and less susceptible to the econom ic im pacts of the proposed regulation. For exam ple, if an industrial category consists of a collection of firm s having disparate financial characteristics (e.g., annual sales) or operating characteristics (e.g., processes used or pollution generated), it would be preferable to exam ine the econom ic im pacts in a fram ework that accounts for this variability. The goal is to provide as detailed a picture as possible of the sm all entities that will be affected by the proposed regulation. Failure to distinguish properly am ong sm all entities m a y lead to an overstatem e nt or understatem e nt of the anticipated econom ic im pacts of the regulation
or to m i ssed opportunities to m i nim i ze the econom ic im pacts on sm all entities.

An evaluation of the pollution contributed by sm all entities relative to other entities being regulated is another exam ple of a supplem ental analysis. This inform ation m a y highlight how reducing the burden on sm all entities is com p atible with the environm ental goals of the rule (e.g., when sm all entities m a ke a relatively sm all contribution to the environm ental problem being addressed) or why regulatory accom m odations for sm all entities should not be granted in a particular instance (e.g., when an environm ental problem is arising from the actions of an industry or sector that is m a de up prim arily of sm all entities).

A supplem ental analysis related to Elem ent 4 m a y include a com p arison of the costs of

com p liance f o r sm all and large entities to determ ine if sm all entities are af f

ected disproportionately. Other estim ated im pacts that m a y be presented are the ability of sm all entities to pass on these costs in the f o rm of price increases or user f ees; the ef f

ects on profitability or the ability to provide services; or effects (if any) on closures, production, and

em ploym ent in each class. W h ile the RFA does not require an IRFA to discuss these im pacts, providing this inf o rm ation m a y provide a m o re detailed picture of how sm all entities are af f

e cted by the proposed rule.

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~ Chapter 3: Preparing the Initial and Final Regulatory Flexibility Analysis ~RFA Guidance for EPA Rulewriters

The descriptions of significant alternatives described under Elem ent 6 m a y be expanded by providing estim ates for each alternative of the change in costs of the requirem e nts on sm all entities; the change in pollution contribution of the sm all entities subject to the rule relative to other entities being regulated; and the changes in other m easures of econom ic im pact such as closures, production levels, em ploym ent or profit. As previously m e ntioned, the provision of this type of detailed analysis f o r alternatives will depend on data, tim e and resource constraints as well as on the anticipated im pact on sm all entities of the proposed rule and alternatives described.

3.4.3 Assembling the IRFA and Preamble

What Should Be the Format of the IRFA?

The IRFA m a y be prepared as a stand-alone docum ent or a chapter in the E.O. 12866

econom ic analysis, if one has been prepared. In either case, it should include distinct sections for each of the requirem e nts specified in the RFA, as discussed above. If you do not include text for one or m o re sections in the IRFA because it is included in another docum ent supporting the rule (such as the pream ble or a broader econom ic analysis), you should explicitly reference and

sum m a rize the other text.

Do I Have to Repeat Text Included in Other Regulatory Support Documents?

No. The statute allows agencies to avoi d duplicating effort by perform i ng the required analyses in conjunction with, or as part of, any other analyses, if the other analyses satisfy the requirem e nts of the RFA (5 U.S.C. section 605( a)). Several of the IRFA requirem e nts will generally be m e t by other analyses or docum ents prepared for the proposed rulem a king, such as the RFA screening analysis, the E.O. 12866 econom ic analysis, or the pream ble. In lieu of repeating text from these docum ents, you m a y cross-reference the relevant portions of the docum ents and sum m a rize their conclusions in the relevant sections of the IRFA.

Should the IRFA Be Discussed in the Preamble to the Proposed Rule?

Yes. The IRFA should be sum m a rized in the Statutory and Executive Order Reviews section of the proposed rule’s pream ble. The sum m a ry of the IRFA should note, in particular, the ways in which the Agency designed the proposed rule to reduce burdens on sm all entities. The full IRFA should be placed in the rulem a king docket and the pream ble sum m a ry should indicate where the IRFA can be found.

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~ Chapter 3: Preparing the Initial and Final Regulatory Flexibility Analysis ~RFA Guidance for EPA Rulewriters
What Else Should Be in the Preamble with Respect to Small Entities?

Besides sum m a rizing the IRFA when a rule is not certified as not having a SISNOSE, the Statutory and Executive Order Reviews section of the pream ble should also describe or

sum m a rize the actions the Agency took to involve sm all entities in the rule' s developm ent, including outreach to sm all entity stakeholders (see Chapter 4) and convening of a SBAR Panel (see Chapter 5).

3.5 How Do I Prepare a FRFA?

This section discusses the com ponents of a FRFA and considerations in preparing a FRFA. As FRFAs are judicially reviewable, each section m u st be com p leted carefully. Section 3.5.1 outlines the elem ents of an FRFA required by section 604 of the RFA. Guidance on how to

assem b le the FRFA and final rule pream ble 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 inf o rm ation relevant to the analysis of the rule, the FRFA can repeat or cross-reference applicable sections of the IRFA.

3.5.1 Required Elements of a FRFA

The statutory language for each required elem ent of a FRFA, as codified by 5 U.S.C. section 604, is presented below. Rem e m b er that if the inform ation is contained in the pream ble to the proposed rule or another rulem a king docum ent, you do not need to repeat it in the FRFA, rather you can reference the discussion in the other docum ent (see 5 U.S.C. section 605(a)).

Element 1: Succinct statement of the need for, and objectives of, the rule (5 U.S.C. section 604(a)(1))

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))

The RFA requires that a FRFA sum m a rize the significant issues raised by public

com m e nts on the IRFA, sum m a rize the agency' s assessm ent of such issues, and describe any changes the agency m a de in response to the com m e nts. To the extent that the program office prepares a single response-to-com m e nts docum ent for the whole rule that accom p lishes these objectives, the FRFA m a y rely on and cross-reference that docum ent.

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~ Chapter 3: Preparing the Initial and Final Regulatory Flexibility Analysis ~RFA Guidance for EPA Rulewriters

Element 3: Description of and an estimate of the number of small entities to w h ich the rule w ill apply or an explanation of w h y no such estimate is available (5 U.S.C. section 604(a)(3))

This description is likely to be an updated version of the corresponding section of the IRFA. If you are not able to provide an es tim ate of the num ber of sm all entities, you m u st provide an explanation of the reasons why not.

Element 4: Description of the projected rep orting, record keeping and other compliance requirements of the rule, including an estimate of the classes of small entities

w h ich w ill 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))

This section of the FRFA should discuss the option selected for the final rule. Other options considered m a y be discussed in the last section (see Elem ent 5 below). Com p letion of this section should involve only updating the descri ption in the IRFA to incorporate any changes to the requirem e nts of the final rule relative to those of the proposed rule.

Element 5: Description of the steps the agency has taken to minimiz e the significant economic impact on small entities consistent w i th 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 w h y each one of the other significant alternatives to the rule considered by the agency

w h ich affect the impact on small entities w a s rejected (5 U.S.C. section 604(a)(2))

The m o st critical com ponent of the FRFA is the requirem e nt that an agency explain the "factual, policy and legal reasons" for selecting the regulatory approach prom ulgated in the final rule and for rejecting "each one of the other significant alternatives to the rule considered by the agency which af f

ect the im pact on sm all entities."

W h ile the RFA does not require that an agency necessarily m i nim i ze regulatory burdens

on sm all entities, it does require that the agency describe the "steps the agency has taken to

m i nim i ze the significant econom ic im pact on sm all entities consistent with the stated objectives of applicable statutes." It is, therefore, im portant to thoroughly docum ent all considerations of alternatives to reduce significant econom ic im pacts on sm all entities, as well as any sm all entity outreach conducted (see Chapter 4) and the SBAR Panel process (see Chapter 5). To the extent this requirem e nt is m e t by the m a in body of the pream ble of the final rule, the FRFA m a y crossreference that text.

3.5.2 Assembling the FRFA and Preamble

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~ Chapter 3: Preparing the Initial and Final Regulatory Flexibility Analysis ~RFA Guidance for EPA Rulewriters
What Should Be the Format of the FRFA?

The FRFA m a y be prepared as a stand-alone docum ent or as a chapter in the E.O. 12866

econom ic analysis, if one has been prepared. If you do not include text for one or m o re sections in the FRFA because it is included in another rule support docum ent (such as the pream ble or broader econom ic analysis), you should explicitly reference and sum m a rize the other text. In either case, it should include distinct sections for each of the requirem e nts specified in the RFA, as discussed above.

Do I Have to Repeat Text Included in Other Regulatory Support Documents?

No. The statute allows agencies to avoi d duplicating effort by perform i ng the required analyses in conjunction with or as part of any other analyses, if the other analyses satisfy the requirem e nts of the RFA. Several of the FRFA requirem e nts will generally be m e t by other analyses or docum ents prepared for the proposed rulem a king, such as the RFA screening analysis, broader econom ic analysis, or the pream ble. In lieu of repeating text from these docum ents, you m a y cross-reference the relevant portions of the docum ents and sum m a rize the conclusions of the analysis in the FRFA (5 U.S.C. section 605(a)).

Should the FRFA Be Discussed in the Preamble?

Yes. The FRFA should be sum m a rized in the Statutory and Executive Order Reviews section of the final rule' s pream ble. The sum m a ry of the FRFA should note, in particular, the ways in which the Agency reduced the econom ic im pact of the final rule on sm all entities. The full FRFA m u st be placed in the rulem a king docket and the pream ble sum m a ry should indicate where the FRFA can be found (5 U.S.C. section 604(b)).

What Else Should Be in the Preamble with Respect to Small Entities?

Besides sum m a rizing the FRFA, the Statutory and Executive Order Reviews section of the final rule' s pream ble should describe the actions the Agency took to ensure that sm all entities had a m eaningful opportunity to com m e nt on the rule. That section should also reference the sections of the proposed rule' s pream ble describing the SBAR Panel convened for the rule, if applicable (see Chapter 5). This inform ation regarding the Agency' s outreach efforts helps the Agency prepare the report used when it subm its the rule to Congress and the Governm e nt Accountability Office under the congressional revi ew provisions of the Congressional Review Act (CRA) 5 U.S.C. sections 801-808. 35

35 The CRA was enacted by Subtitle E of the Sm all Bu siness Regulatory Enforcem ent Fairness Act (5 U.S.C. sections 801-808). All final rules m u st be assessed to determ ine if the Congressional review requirem e nts apply whether or not the final rule has any effect on sm a ll entities. EPA guidance on the CRA, “Congressional Review (continued...) 49

~ Chapter 3: Preparing the Initial and Final Regulatory Flexibility Analysis ~35 (...continued) Act: Guidance for Rulewriters” (July 1998) can be accesse d at EPA’s intranet website, “ Action Developm ent Process Library, ” http://intranet.epa.gov/adplibrary

.RFA Guidance for EPA Rulewriters 

### Chapter 4 Implementing Small Entity Outreach: Informing, Listening, Responding

4.1 Small Entity Outreach: The Basics Contents of Chapter 4
The Sm all Business Regulatory Page No. Enforcem ent Fairness Act (SBREFA) am ended 4

. 1 S m a l l E n t i t y O u t r e

a c

h : T h e B

a

s

i c

s

........ 51 the Regulatory Flexibility Act (RFA) to bolster 4.2 W hat Does “ O utreach” Mean?

............ 5 2 the RFA’s requirem ents that agencies provide 4.3 Is Small Entity Outreach Subject to FACA?

. . 5 3 sm all entities with a m eaningful opportunity to 4.4 S hould I Coordinate My Stakeholder Involvement participate in the developm ent of rules that m ay A c

t i v

i t i e

s ?

............................ 5 3 significantly affect them

. EPA’s success in 4.5 W hat Kind of Outreach Does the carrying out our obligations under the RFA RFA Require?

......................... 5 4 requires early and continuing interaction with 4.6 W here Can I Get Assistance with My Small sm all entities throughout the regulatory E n t i t y O u t r e

a c

h ?

...................... 5 4 developm ent process. The RFA process, and your 4.7 W hat Steps Can I Take to Reach Small interactions with sm all entities in general, should E n t i t i e

s ?

........................... 5 6 be a genuine dialogue with m eaningful 4.8 W here Can I Get More Information?

....... 5 9 engagem e nt and exchange of ideas and inform ation. The goal of sm all entity outreach is to ensure prom ulgation of a rule that is tailored to achieve a specific environm ental goal while taking into account the particular concerns of sm all entities. 36

It is im portant that outreach to sm all entities occur as early as possible in regulation developm ent. Indeed, it will of ten be appropriate to start outreach before or concurrently with perform a nce of a Early outreach and prelim inary screening analysis (see Figure 1). Early outreach accommodation of and accom m odation of sm all entity issues has proven to have a small entity issues has substantial positive im pact on the quality of our regulations. proven to have a First, sm all entities can often fill gaps in our knowledge and substantial positive experience to provide alternate, less burdensom e regulatory impact on the quality options that can accom p lish a stated environm ental goal. Second, of regulations. you can gain support for the regulatory option ultim ately selected by bringing sm all entities into the process early on, listening and

36 As a practical m a tter, m o st of the outreach we describe in this chapter will take place in the pre-proposal phase of the rule developm ent process. W h ile further outreach m a y be appropriate in the post-proposal stage, any contact with sm all entities at that tim e is subject to the sam e ex parte restrictions that govern all external contacts once the public com m e nt period closes.

51 ~ Chapter 4: Small Entity Outreach ~RFA Guidance for EPA Rulewriters
responding to their concerns, and having that input influence the direction of your rule. W h en you believe that is unlikely that you will be able to certify that your rule, if prom ulgated, will not have a significant econom ic im pact on a substantial num ber of sm all entities (SISNOSE), this early involvem e nt should also include OGC and staff to the Agency’s Sm all Business Advocacy Chair (SBAC). At a later point it will be appropriate to involve the Sm all Business Adm i nistration’s (SBA) Office of Advocacy a nd the Office of Managem e nt and Budget’s (OMB) Office of Inform ation and Regulatory Affairs.

Detailed below is a strategy outlining how you can identify and engage in dialogue with representatives of sm all entities that m a y be subject to your rule.

4.2 What Does “Outreach” Mean?

According to the EPA Manual on Consultative Processes, 37

Outreach is a m eans by which the Agency keeps its constituencies - those who are interested in or affected by its action - inform ed about what it is doing, what it is planning, and what its needs are. Outreach is basic com m unication. In addition to inform ing those affected of the Agency’s activities, outreach also encourages and provides the m eans by which m e m b ers of the public can com m unicate their needs and desires to the Agency so they m a y be taken into account when m a king decisions.

In sum
, outreach includes inform ing potentially regulated parties about EPA’s regulatory plans, listening to their concerns and suggestions about how the rule m a y affect them , and responding through appropriate action to m eet environm ental objectives while m i nim i zing unnecessary burden.

There are m a ny f o rm s and styles available f o r providing inf o rm ation to sm all entities potentially subject to a rule, including:

• public announcem ents • m agazine and journal articles

• i nterviews • s peeches

• i nform a l and form al m eetings • dockets, and

• w eb sites and list serves • p ress releases.

37 EPA Manual on Consultative Processes: Better Decisions Through Consultation and Collaboration , Draft

- October 1998.

52 ~ Chapter 4: Small Entity Outreach ~RFA Guidance for EPA Rulewriters

W h ile each of these m e thods of com m unication can be used to transm it necessary inform ation to m e m b ers of the public, sim p ly providing notice of EPA’s intent is not enough. Adequate outreach also requires that we seek opportunities for genuine engagem e nt that places the Agency in a position to hear from and respond to sm all entities.

4.3 Is Small Entity Outreach Subject to FACA?

Som e form s of outreach are regulated by statute. Specifically, the Federal Advisory Com m ittee Act (FACA) establishes requirem e nts for the convening and operating of an official advisory com m ittee. However, m a ny groups are exem pt fromFACA coverage including: factfinding and inform ation exchange groups, m eetings with persons providing individual advice or

recom m e ndations (as opposed to collective advice or recom m e ndations); and m eetings with groups of people to interactively discuss and debate individual opinions or recom m e ndations. 38

Outreach in com p liance with the RFA has com m only occurred in the form of inform ation exchanges. According to the EPA Manual on Consultative Processes, inform ation exchanges prim arily seek to enhance the parties’ understanding of the situation. During inform ation exchanges, at least one side will be providing inf o rm ation or advice to the other and of tentim es there will be an exchange of views or concerns. Im portantly, the participants involved in inform ation exchanges are not expected to reach agreem ent. Sections 4.4 and 4.6 (below) provide m o re specific inform ation on where to get assistance with your outreach efforts and steps to take to reach sm all entities. A stakeholder involvement process is not an end in itself; it is a means t o a bet t e r, 4.4 Should I Coordinate My Stakeholder Involvement Activities? more widely accepted decision. You are strongly encouraged to coordinate your stakeholder activities and allow these distinct processes -- e.g.,

- EPA Ma nua l o n internal workgroup, peer review, FACA com m ittee, SBAR Panel Consultative Processes -- to inform each other. Although each group has its own policies and procedures, they do not take place in isolation; indeed, they m a y have overlapping m e m b ership. 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 dem onstrate a willingness to share inform ation not only with your stakeholde rs but also between your stakeholder groups to nurture that trust. Beyond the im portance of these considerations, you should m a ke the m o st of your tim e and resources. As you invest tim e at the outset of your rulem a king to develop an Analytic Blueprint or other planning docum ent for your rule, you should be able to recognize

38 For more information on FACA and other public i nvolvement, see http://www.epa.gov/publicinvolvem e nt.

53 ~ Chapter 4: Small Entity Outreach ~RFA Guidance for EPA Rulewriters

som e efficiencies in coordinating som e of your stakeholder activities. For exam ple, if you engage a contractor to assist you in identifying pa rticipants for a FACA com m ittee, as part of the

sam e effort, the contractor m a y be able to identify a group of potential sm all entities for a SBAR Panel. Sim ilarly, outreach docum ents prepared for one group m a y be appropriate for your other stakeholders.

4.5 What Kind of Outreach Does the RFA Require?

The RFA requires an agency to “assure that sm all entities have been given an opportunity to participate in the rulem a king” process for any rule that “will have a significant econom ic im pact on a substantial num ber of sm all entities.” 5 U.S.C. section 609(a). The RFA also directs us to ensure sm all entity participation through the reasonable use of techniques such as those listed in section 609(a), as follows:

• u se of com puter networks to solicit and receive com m e nts;

• publication of general notice of proposed rulem a king in publications likely to be obtained by sm all entities;

• d irect notif ication of interested sm all entities;

• c onduct of open conferences or public hearings concerning the rule for sm all entities;

• i nclusion in an advance notice of proposed rulem a king, if issued, of a statem ent that the proposed rule m a y have a significant econom ic effect on a substantial

num ber of sm all entities, and

• t he adoption or m odification of agency procedural rules to reduce the cost and

com p lexity of participation in the rulem a king f o r sm all entities.

SBREFA strengthened the RFA’s outreach provisi ons in two principal ways. First, the RFA now requires EPA to convene a Sm all 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 f

o r which EPA does not certif y that the rule will not, if prom ulgated, have a SISNOSE). As described in detail in Chapter 5, the Panels are required to consult with representatives of sm all entities that will be subject to the rule. Second, the am ended RFA allows sm all entities adversely affected by the final rule to sue agencies in court for failure to com p ly with specified RFA provisions, including section 609(a), which requires agencies to assure that sm all entities have an opportunity to participate in rulem a kings that will have a SISNOSE.

4.6 Where Can I Get Assistance w i th My Small Entity Outreach?

54 ~ Chapter 4: Small Entity Outreach ~RFA Guidance for EPA Rulewriters
You should first consult your Regulatory Steering Com m ittee representative to determ ine what resources are available to you within your program office. EPA also has several offices that m a y be able to assist you with outreach th roughout different stages of rule developm ent. EPA’s Sm all Business Om budsm a n (SBO) can provide support and assistance in your outreach activities to sm all entities. The SBO m a intains an updated list of key sm all entity contacts, which will be m a de available to you upon request. These sm all entity contacts include:

• n ational sm all entity trade association executives and contact persons;

• c ontacts for the CAA State section 507 Program , including the Sm all Business Om budsm a n, Sm all Business Assistance Program , and the Com p liance Advisory Panels; and

• E PA Regional Sm all Business Liaisons.

Additional support and assistance with outreach and developm ent of sm all entity contacts is available from the Office of Public Affa irs (OPA) and the Office of Congressional and Intergovernm e ntal Relations (OCIR). Also, OCIR supports a sm all town FACA group, the Sm all Com m unity Advisory Subcom m ittee of the Local Governm e nt Advisory Com m ittee. OCIR assistance m a y include: 1) help creating an outreach strategy to support the rulem a king; 2) supporting the distribution of inform ation; and 3) help developing and m a intaining a

com p rehensive list of sm all entity contacts f o r use by individual program of f i ces.

The RFA defines “sm a ll governm e ntal jurisdiction” as the governm e nt of a city, county, town, township, village, school district, or speci al district with a population of less than 50,000 (5 U.S.C. section 601(5)). There are about 40,000 such sm all governm e ntal jurisdictions in the United States, with 33,000 of those having populations of less than 10,000. Broken down further, roughly 26,000 governm e ntal jurisdictions have populations under 2,500. All told, over 90% of U.S. governm e ntal jurisdictions have populations under 50,000. 39

In addition to experiencing m a ny of the problem s and concerns that af f

ect large cities,

sm all governm e ntal jurisdictions in the U.S. often face other hardships due to their individual characteristics and situations. Sm all governm e ntal jurisdictions often experience disproportionate im pacts from Federal regulations, particularly with regard to the cum u lative im pact of environm ental regulations. In m a ny sm all jurisdictions, while the pressure for services and infrastructure m a intenance and repair continues to grow, the capacity to provide all necessary services rem a ins quite lim ited. Over one-third of sm all governm e ntal jurisdictions in the U.S. have no em ployees, while others operate on part-tim e assistance from dedicated citizens. These com m unities m o st of ten have no engineering or environm ental m a nagem e nt

39 Results of the 1994 EPA Survey of Small Local Governments, Septem ber 1997.

55 ~ Chapter 4: Small Entity Outreach ~RFA Guidance for EPA Rulewriters
capacity of their own. Their lim ited financial resources due to sm all tax bases and often declining econom ic activity only serve to further exacerbate the problem

. These are but a few of the reasons why RFA-m a ndated consultation with sm all
governm e ntal jurisdictions is so im portant. W ith the Sm all Com m unity Advisory Subcom m ittee’s finding that EPA should increase dir ect involvem e nt of sm all jurisdictions in the regulatory process, the Agency is prepared to ensure that RFA-m a ndated consultation is carried out with optim al effectiveness. W h ile tim ely, substantive involvem e nt of sm all governm e ntal 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 sm all jurisdictions can m o re reliably im plem ent. W ith this in m i nd, the Office of Congressional and Intergovernm e ntal Relations’ guide entitled Planning for Intergovernmental Outreach and Consultation can serve as a valuable resource in your consultation efforts. To obtain the guidance and consult about sm all governm e ntal jurisdictions and outreach to them , contact OCIR’s Intergovernm e ntal Relations Team

. In addition to these general resources, each program office is encouraged to develop and

m a intain a com p rehensive contact list of sm all entity representatives, keyed to their program area of responsibility. These could include:

• s m a ll business trade associations; and

• o rganizations representing townships, counties and m unicipalities, and decision-m a king individuals within these organizations (public and private non-profit).

You could use this contact list to help identify knowledgeable individuals who m a y serve

as sm all entity representatives for your rulem a king.

EPA’s Sm all Business Advocacy Chair (SBAC) is responsible for overseeing policy decisions regarding certif ying that a rule will not have a SISNOSE, as well as decisions to convene a Sm all Business Advocacy Review Panel. The SBAC and SBAC staff are responsible for coordination of SBAR Panels, including com m unication with SBA and OMB and Panel logistics.

4.7 What Steps Can I Take to Reach Small Entities?

The following sections outline som e suggested steps you can take in developing a proposed rule, particularly if it appears that it m a y not be possible to certify that your rule will not have a SISNOSE. As noted above, you s hould also check with your Regulatory Steering Com m ittee representative to explore what resources are available to you within your own
program office.

4.7.1 Contact SBAC Staff

56 ~ Chapter 4: Small Entity Outreach ~RFA Guidance for EPA Rulewriters
If you believe that it m a y 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 Com m ittee representative. The SBAC staff will work to provide you with the support and service needed to m a ke each SBAR Panel process as efficient and productive as possible. SBAC staff can advise you on how the Panel process can fit into your rulem a king schedule, potential inclusion of SBA and OMB in outreach efforts, and the im plications of the results of your screening analysis, am ong other things.

4.7.2 Identify and Contact Small Entities

Stakeholders are those who have an interest -- direct or indirect -- in the action the Agency is planning to take. Sm all entities -- those that m eet the statutory def i nition of sm all business, sm all governm e nt or sm all non-profit enterprise -- are a subset of your broader stakeholder group. 40 As part of your outreach efforts, you should m a ke inform al contact with potential sm all entities to conf irm their sm all entity status.

There is an im portant distinction to note at this tim e between sm all entities which should be included as stakeholders through your broa der outreach efforts and official Sm all Entity Representatives for a Sm all Business Advocacy Review Panel process. Official Sm all Entity Representatives are chosen through a process of consultation with the EPA Sm all Business Advocacy Chair and the Sm all Business Adm i nistration. This process is described in m o re detail in Chapter 5. W h ile sm all entities with whom the Agency has consulted f r om the beginning are the chief candidates to serve later as official advisors to a Panel, small entities do not become official Small Entity Representati ves (know n as SERs) until they are officially designated as such by the Small Business Advocacy Chair. The form al selection of Sm all Entity Representatives is m a de af ter SBA’s response to form al notification from the SBAC, which is typically very close to the tim e a Panel convenes.

4.7.3 Consider Drafting Informal Notification to SBA

During the outreach process, if you believe that your rule m a y not be able to be certified as not having a SISNOSE (according to the screening analysis in Chapter 2), you should consider drafting an inform al notification to the Sm all Business Adm i nistration. You should route both inform al and form al notifications, as well as any com m unications regarding potential RFA issues, through your Regulatory Steering Com m ittee representative to the SBAC. Section 5.7.2 provides m o re inform ation on drafting an inform al notification. Outreach to sm all entities or inform al notification to SBA do not repres ent an EPA finding that your rule will have a significant econom ic im pact on a substantial num ber of sm all entities, nor does it com m it you to preparing a regulatory flexibility analysis or convening a Sm all Business Advocacy Review

40 See Chapter 2 for m o re inform ation on the definition of ‘sm a ll entity.’

57 ~ Chapter 4: Small Entity Outreach ~RFA Guidance for EPA Rulewriters

Panel. Sm all entities can provide input to help the Agency ultim ately determ ine if either of these activities are required. Further, they can of f

e r ideas to help the agency f o rm ulate alternatives that achieve your environm ental objective and do not im pose a SISNOSE.

4.7.4 Conduct Outreach to Small Entities (i.e., substantive engagement)

It is clear from the specific requirem e nts set forth by the RFA that Congress intended agencies to provide sm all entities with a m eaningful opportunity to participate in the developm ent of rules that m a y significantly affect them

. One of the keys to fostering productive participation is effective outreach and exchange of inform ation. In conducting sm all entity outreach, you should distribute sufficient inform ation to your sm all entity representatives about your regulation so that they can provide you with inform ed feedback on the elem ents of an Initial Regulatory Flexibility Analysis under section 603 of the RFA which Congress identified in SBREFA as key issues. Those elem ents are:

• A description of , and where f easible, an estim ate of the num ber of sm all entities to which the proposed rule will apply;

• A description of projected reporting, recordkeeping, and other com p liance requirem e nts of the proposed rule, including an estim ate of the classes of sm all entities which will be subject to the requirem e nts and the type of professional skills necessary for preparation of the report or record;

• A n identification, to the extent practicable, of all relevant Federal rules which m a y duplicate, overlap, or conflict with the proposed rule; and

• A description of any significant alternatives to the proposed rule which accom p lish the stated objectives of applicable statutes and which m i nim i ze any significant econom ic im pact of the proposed rule on sm all entities.

For sm all entities, it is advisable to request com m e nts in writing since these will be used later as part of your SBAR Panel convening docum ent or as docum entation of your factual basis for a certification of no SISNOSE (see also Keep Records section, below). You m a y 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 f

a m iliarity that the Sm all Entity Representatives and the Panel m e m b ers (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 w i th small entities, you can include this responsibility as part of your overall outreach efforts. EPA’s guidance on stakeholder involvem e nt, EPA’s Public Involvement Policy

58 ~ Chapter 4: Small Entity Outreach ~RFA Guidance for EPA Rulewriters
( http://www.epa.gov/publicinvolvem e nt/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 pl aying field” by affording smaller interests a chance to be heard independently from competing interests, including large entities likely to be regulated.

4.7.5 Keep Records

For any rule f o r 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 rulem a king docket for purposes of judicial review. It is crucial for you to dem onstrate and docum ent a pattern of dialogue with and outreach to all interested stakeholders with particular attention to the interests of sm all entities that m a y be subject to your regulation. For each m eeting, form al or inform al, with your stakeholders you should take notes regarding the m a jor topics of discussion and create m eeting sum m a ries. You should append any

m a terials you distribute or present, including agendas, outreach packages, fact sheets, and overheads to your m eeting sum m a ries.

It is also a good practice to m a intain a file docum enting outreach even for rules not requiring an IRFA. This will allow the program to dem onstrate its adherence to the Agency’s standing policy of outreach and, when feasible, accom m odation of sm all 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 im pose a SISNOSE, such docum entation m a y prove necessary to dem onstrate how the Agency considered sm all entities’ concerns in reaching its decision to certify.

4.8 Where Can I Get More Information?

For m o re inform ation, you can contact your office’s Regulatory Steering Com m ittee representatives, EPA’s Sm all Business Advocacy Chair (OPEI), staff to the Sm all Business Advocacy Chair (OPEI), and EPA’s Sm all Business Om budsm a n Program

.

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### Chapter 5 The Small Business Advocacy Review Panel Process for Proposed Rules

5.1 What is a Small Business Advocacy Contents of Chapter 5 Review Panel? Page No. A Sm all Business Advocacy Review 5.1 W hat is a Small Business Advocacy Review Panel (SBAR Panel or Panel) is an additional Panel?

................................ 6 1
m eans for sm all entities to provide input into 5.2 W hat are the Statutory Panel Requirements?

. . 6 1 certain EPA rulem akings to ensure that the 5.3 W hat Help is Available to Me in Preparing for a unique concerns of sm all entities are caref ully Panel?

................................ 6 3 considered during the rulem aking process. The 5.4 W hat Circumstances Require EPA to Convene a Sm all Business Regulatory Enforcem ent Fairness Panel?

................................ 6 6 Act (SBREFA) am ended the Regulatory 5.5 C an I Request a Waiver from the SBAR Panel Flexibility Act (RFA) to require EPA to convene P r o

c e

s s ?

.............................. 6 6 a SBAR Panel for any proposed rule for which 5.6 W hen Should We Convene a Panel?

......... 6 7 EPA is required to prepare an initial regulatory 5.7 W hat Should be Done Before My Panel Can Be f l exibility analysis (IRFA). Convened?

............................. 6 8
5.8 W hat Can I Expect from Panel Review?

...... 76 The RFA requires that we prepare an 5.9 C onsideration of the Panel Report During Rule IRFA for all rules for which EPA is required by Development and Preparation the IRFA

..... . . 80 statute to publish a NPRM unless the agency certif ies that the rule "will not, if prom ulgated, have a significant econom ic im pact on a substantial num ber of sm all entities (SISNOSE).” 41 If an IRFA is required for a proposed rule under the RFA, we m ust also convene a SBAR Panel. Each Panel consists of representatives from EPA, the Sm all Business Adm i nistration, and the Office of Managem e nt and Budget. Although the statutory nam e for the Panel refers only to

sm all businesses, each Panel must solicit and consid er the concerns of all small entities directly regulated by the rule, including small governmental jurisdictions and small nonprofit organiz ations, in addition to small businesses

.

5.2 What are the Statutory Panel Requirements?

Since the RFA was enacted in 1980, RFA section 609 has required all agencies to facilitate sm all entities’ participation in rulem akings that will have a significant econom ic im pact on a substantial num ber of sm all entities (see Chapter 4 f o r f u rther discussion of general outreach provisions). SBREFA expanded RFA section 609 to require EPA to convene SBAR

41 Because the term ‘significant econom ic im pact on a substantial num ber of sm all entities’ is cum b ersom e , it is

com m only called a "SISNOSE". W h en we determ ine that there will not be a significant adverse econom ic im pact on a substantial num ber of sm all entities, we call that a "No SISNOSE" finding or “m aking the RFA certification.”

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~ Chapter 5: SBAR Panel Process ~RFA Guidance for EPA Rulewriters

Panels to ensure that sm all entity representatives are involved in the developm ent of certain rules. 42

Under RFA section 609(b), we m u st convene a Sm all Business Advocacy Review Panel for any rule for which the Agency is required to prepare an IRFA. If we exercise our discretion
to m a ke the RFA certification (i.e., certify that a proposed rule will have No SISNOSE), we do not need to convene a Panel. Even if w e convene a Panel, EPA may defer the decision to certify a rule until after a Panel has concluded its w o rk. Also, RFA section 609(c) authorizes us to convene a Panel for a rule that we intend to certify, but that we believe m a y have “a greater than de m i nim i s im pact on substantial num ber of sm all entities.” Section 609(b) requires that the Panel process occur before publication of the IRFA, which m u st be m a de publicly available at the sam e tim e the proposed rule is published, except in cases of em ergency. Accordingly, we generally m u st convene a Panel before a rule is proposed.

Section 609(b) establishes the following statutory fram ework for the Panel process:

• F or any rule subject to the Panel requirem e nt, EPA is to notify the Chief Counsel for Advocacy of the Sm all Business Adm i nistration (SBA) and provide the SBA Chief Counsel with inform ation on the potential im pact of the proposed rule on sm all entities and the type of sm all entities that m i ght be af f

ected.

• T he SBA Chief Counsel has 15 days from receiving notification of a proposed rule to identif y individuals representative of the sm all entities likely to be regulated by the rule.

• E PA is to convene a review Panel consisting only of full-tim e federal em ployees, including representatives of the Agency office responsible for developing the rule, the Office of Managem e nt and Budget’s Office of Inform ation and Regulatory Affairs (OIRA), and the SBA Chief Counsel.

• T he Panel is to review any m a terial EPA has prepared in connection with the rulem a king, including any draft proposed rule, and collect the advice and recom m e ndations of each individual sm all entity representative selected by EPA, af ter consultation with the SBA Chief Counsel for Advocacy, on issues related to specific elem ents of an IRFA for the proposed rule under developm ent. The specific elem ents of an IRFA are:



### < a description of , and where f easible, an estim ate of the num ber of sm all entities to which the proposed rule will apply;

42 The Occupational Health and Safety Adm i nistrati on is also subject to the Panel requirem e nt.

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~ Chapter 5: SBAR Panel Process ~RFA Guidance for EPA Rulewriters



### < a description of projected reporting, recordkeeping and other com p liance requirem e nts of the proposed rule, including an estim ate of the classes of sm all entities which will be subject to the requirem e nt and the type of prof essional skills necessary for preparation of the record or report;



### < an identification, to the extent practicable, of all relevant Federal rules which m a y duplicate, overlap or conflict with the proposed rule; and



### < a description of any significant alternatives to the proposed rule which

accom p lish the stated objectives of applicable statutes and which m i nim i ze any significant econom ic im pact of the proposed rule on sm all entities.

• N ot later than 60 days after EPA convenes the Panel, the Panel m u st report on the

com m e nts of the sm all entity representatives and the Panel’s f i ndings with regard to the issues related to the IRFA elem ents listed above. The Panel Report m u st be included in the rulem a king record.

• I n light of the Panel Report, the Agency is to m odify, where appropriate, the proposed rule, the IRFA or the decision on whether an IRFA is required.

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

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 th e 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

.

5.3.1 How Can this Guidance Help Me wi t h M y P a n e l ?

This chapter provides you with a step-by-step approach to im plem enting the SBAR Panel requirem e nt. Our suggested approach is further illustrated in Figure 4. W h ile the SBREFA

am endm ents to the RFA establish the basic outline of the Panel process (described below), it also leaves us with discretion to determ ine m a ny 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 sm all entity representatives early in the rulem a king process. Early involvement helps ensure that small entity comments and insights inform EPA’s thinking about fundamental issues of rule design and scope, as w e ll as more specific issues posed by the particular regulatory program at issue.

63

~ Chapter 5: SBAR Panel Process ~ContinueContinueSmall EntitySmall Entitymall EntityOutreachOutreach[Section 5.7.1& Chapter 4]& Chapter 4Chapter 4Likely toLikely toNOCertifyRule?1Rule?YESDraft Certification Statement &Factual Explanation Thereof[Chapter 2]Draft C ertification Statement &Factual Explanation Thereof]raft Certification Statement &Contact SBACInformalContact SBACntact SBACStaff via YourStaff via Yourtaff via YourNotification toNotification tootification toSC Rep.SBASC Rep.[Section 5.7][Section 5.7.2]Section 5.7Section 5.7.2FormalNotification toNotification tootification toSBA[Section 5.7.3]Consider SBA’sConsider SBA’sonsider SBA’sInput & FinalizeInput & Finalizeput & FinalizeList of SERsList of SERsst of SERs[Section 5.7.4]ConductOutreach toOutreach toutreach toSERs[Section 5.7.5]Prepare forPrepare forrepare forSBAR PanelSBAR PanelAR Panel[Sections 5.7.6Sections 5.7.6& 5.7.7]& 5.7.75.7.7ConveneSBAR PanelSBAR PanelBAR Panel[Section 5.8.1]CompleteCompletePanel ReportPanel Reportanel Report[Section 5.8.4]SmallBusiness AdvocacyReviewPanelProcess forProposedRulesNotes:General:Referencesto“Sections”intheflowchartrefertothe sectionsinChapter5inthisguidancedocument(seeTableofContents).Inaddition,referencesto“Chapters”intheflowchartrefertothechaptersinthisguidancedocument.1ItisEPA’spolicytoassessimpactsonsmallentitiesandminimizeimpactstotheextentfeasible.IfyoudonothaveenoughinformationtodeterminewithconfidencethattheAgencycan1ItisEPA’spolicytoassessimpactsonsmallentitiesandminimizeimpactstotheextentfeasible.IfyoudonothaveenoughinformationtodeterminewithconfidencethattheAgencycancertify(noSISNOSE),proceedwith“NO.”Thedecisiontocertifycanbe madeatanytimebeforeproposal.certify(noSISNOSE),proceedwith“NO.”Thedecisiontocertifycanbe madeatanytimebeforeproposal.Figure4RFA Guidance for EPA Rulewriters
This Guidance reflects agency policy and practice in im plem entation of the RFA. At the

sam e tim e, we recognize the need for flexibility in im plem enting the RFA. Som e rules subject to the Panel requirem e nt m a y have developed in such a way that the Panel process m u st take place later in the rulem a king process than this guidance suggests. Nevertheless, this suggested process should work in m o st situations.

Our suggested Panel process is divided into several parts. You m a y not need to com p lete each part of the process if, during the course of rule developm ent, you (or, m o re accurately, your Assistant Adm i nistrator, who is responsible to the Adm i nistrator for the certification decision) determ ine that your rule will not have a SISNOSE. However, even if your rule will not have a SISNOSE (i.e., you are m a king the RFA certification), but m a y have some im pact on one or

m o re sm all entities, it is im portant for you to engage in consultation with the relevant sm all entity stakeholders (see Chapter 4 on sm all entity outreach).

5.3.2 Who Will Help Me w i th My Panel?

Under SBREFA section 244(b), 43 SBAR Panels are chaired by a Sm all Business Advocacy Chair designated by EPA’s Adm i nistrator. The Chair is responsible for im plem enting the Panel review process. The Sm all Business Advocacy Chair heads a sm all staff (SBAC staff) who m a inly work on RFA issues.

The SBAC staff can help you in several ways. Two of the m o st im portant are:

• t he SBAC staff serve as EPA' s experts in the Panel process, providing support to
program offices in resolving both com p lex and day to day issues; and

• t he SBAC staff provide support for m a ny of the m echanics of convening and operating the Panel.

A Sm all Business Advocacy Chair staff m e m b er will be assigned to work with you on your Panel. W e encourage you to m a ke contact with the SBAC staff as early as possible in the rule developm ent process. This staff-level in form al contact should also include your Regulatory Steering Com m ittee representative. You shoul d also check with your Regulatory Steering Com m ittee representative to explore what resources are available to you within your own
program office.

43 Pub. L. No. 104-121, Sec. 244(b). SBREFA has several pr ovisions that are not codified into the RFA but that still have an im pact upon RFA im plem entation. SBREFA section 244(b) is one such provision.

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~ Chapter 5: SBAR Panel Process ~RFA Guidance for EPA Rulewriters

5.4 What Circumstances Require EPA to Convene a Panel?

The first step you m u st take to determ ine whether we m u st 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 m u st prepare an Initial Regulatory Flexibility Analysis, and EPA m u st convene a Panel prior to proposal. Because the determ ination to convene a Panel can have a significant im pact on your rulem a king schedule, you should identify the rule’s potential im pact on sm all entities as soon as possible. After the screening analysis is

com p leted, you should consult with your Regulatory Steering Com m ittee 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 sm all entities while still m eeting the environm ental objective of the
statute. In doing so, you m a y find that it m a y be possible to certify the rule as not having a SISNOSE.

As stated in Chapter 2, we believe that only rules which

m a y have a direct significant adverse econom ic im pact on a EPA’s decision to substantial num ber of sm all entities require an IRFA, since the convene a Panel is not prim ary purpose of the IRFA is to identify and address a commitment to regulatory alternatives “which minimiz e any significant prepare an IRFA (for

econom ic im pact of the proposed rule on sm all entities.” (RFA rule proposal) or a section 603, em phasis added). Thus, if your rule will exclusively FRFA (for rule promulgation) nor relieve regulatory burden, or otherwise have a positive econom ic does it prevent you effect on the sm all entities subject to the rule, your rule m a y be from certifying your proposed or final rule. 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

com m itm ent to prepare an IRFA (for rule proposal ) or a FRFA (for rule prom ulgation), 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 inform al notification through com p letion 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 inform ation be discovered. For exam ple, you m a y adopt Panel recom m e ndations 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 com p lete an IRFA.

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

Under RFA section 609(e), EPA m a y request that the SBA Chief Counsel for Advocacy waive the Panel requirem e nt for a rule. The SBA Chief Counsel m a y grant a waiver if he or she finds that convening a Panel would not advance the effective participation of sm all entities in the

66

~ Chapter 5: SBAR Panel Process ~RFA Guidance for EPA Rulewriters

rulem a king process. (Note, however that the waiver applies only to the requirem e nt 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 sm all entity representatives.)

The SBA Chief Counsel will consider the extent to which you have already consulted with sm all entity representatives and taken their concerns into account; “special circum stances necessitating prom pt issuance of the rule;” and whether the Panel process would provide the

sm all entity representatives involved in the process a com p etitive advantage over other sm all entities. Before granting the waiver, the SBA Chief Counsel m u st consult with OMB and the

sm all entity representatives identified by the SBA Chief Counsel after receiving form al notification of the rule. The SBA Chief Counsel m u st also provide you with a written explanation of the waiver decision for the rulem a king record.

Your waiver request m u st be subm itte d through your Regulatory Steering Com m ittee representative to the Agency SBAC. EPA will only request the waiver of a Panel requirem e nt in exceptional circum stances (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 sm all entities such that a Panel would be dem onstrably redundant.

Even if the Agency decides to request a waiver, you, in cooperation with your Regulatory Steering Com m ittee representative and SBAC staf f contact, will still need to com p lete the f o rm al notif ication step of the process as outlined belo w. The SBAC will also inf o rm ally notif y the SBA Chief Counsel of the Agency’s intent to request a waiver before form ally requesting it. If the SBA Chief Counsel grants the waiver, you are not required to com p lete the rem a ining steps of the Panel process, but you should conduct as m u ch outreach as tim e perm its or as appropriate under the circum stances.

5.6 When Should We Convene a Panel?

It is EPA' s policy to convene Panels relatively early in the proposed rule developm ent process to give the Panel the best opportunity to inform decision m a kers during the initial stages of rule developm ent (i.e., prior to option selection). This is balanced with the need for sufficient shape and developm ent such that the sm all entity representatives and the Panel m e m b ers will have adequate inform ation to critically appraise EPA’s intention. Generally, the Agency SBAC will consult the other standing Panel m e m b ers with respect to an appropriate tim e to convene a Panel. However, no m a tter when in the regulatory developm ent process a Panel is convened, the Panel' s final report m u st be com p leted within 60 days of convening the Panel. EPA expects that the Panel process will norm a lly be concluded well in advance of Final Agency Review (or equivalent stage for Tier 3 rules), in order to be m o st useful to the developm ent of the proposed rule.

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~ Chapter 5: SBAR Panel Process ~RFA Guidance for EPA Rulewriters

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

Once you determ ine that we m u st convene a Panel for your rule, you should m a ke contact with the SBAC staff through your Regul atory Steering Com m ittee representative to find out who you will be working with on your Panel. You should share inform ation about your expectations for the Panel process and the rulem a king schedule. Bear in m i nd that the Panel itself should take no more than the 60 days provided by the statute to conduct its review ; how e ver, the entire Panel process -- once be gun in earnest w i th focused small entity outreach, through SBA notifications, preparation for and convening of the Panel and completion of the Panel Report -- w ill usually take betw een four and ten months. The

am ount of tim e is dependent on the com p lexity of the rule and the am ount of outreach done prior to the initiation of the Panel process. This tim e line m a y result in a change your rulem a king schedule or resource com m itm ents. W h en negotiating court schedules, program staff and

m a nagem e nt should take into consideration the tim e and resources that m a y be needed to com p ly with the RFA Panel requirem e nt. The Agency does not recom m e nd asking for an extension of any court-ordered deadlines solely to com p ly with the RFA Panel requirem e nts, so it is vital that the program fully consider these responsibilities in setting its initial rulem a king schedule.

Prior to convening a Panel, the typical steps include:

• i dentifying and m a king contact with sm all entity representatives (SERs) am ong your stakeholders;

• p roviding inform al notification of the Panel to SBA and OMB;

• c reating a dialogue with your SERs;

• p roviding form al notification of the Panel to SBA and OMB;

• hosting a final pre-Panel outreach m eeting with the SERs to which SBA and OMB are invited;

• p articipating in one or m o re pre-Panel m ee ting(s) with SBA and OMB staff to discuss available data, m a terials for the SERs and other related issues; and

• c reating a convening docum ent 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

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~ Chapter 5: SBAR Panel Process ~RFA Guidance for EPA Rulewriters

Com m ittee representative are available to give you support, review drafts and provide you with

exam ples of docum ents from previous Panels.

It is very im portant for you to keep records of all your sm all entity outreach efforts. An im portant part of convening your Panel will be dem onstrating that your office has worked with

sm all entities throughout developm ent of the rule. W h en you begin to involve SBA and OMB in
your sm all entity outreach efforts, it is im portant to ensure that your SBAC staff contact is also provided with any outreach m a terial, notices, or announcem ents. Your SBAC staff contact keeps the Agency’s official record of the Panel process including all com m unication between Panel m e m b ers regarding Panel issues.

5.7.1 Identify and Contact Small Entity Representatives

After it is determ ined that you will need to convene a Panel and you m a ke contact with the SBAC staff through your Regulatory Steering Com m ittee representative, your next step in the Panel process is to identif y potential sm all entity representatives that m a y be f o rm ally appointed later in the process. Sm all entity representatives (SERs) are typically a subset of your broader stakeholder group -- those representative of small entities likely to be directly subject to your regulation. Specifically, EPA prefers that SERs be owner-operators of sm all businesses, sm all Sma ll entity representatives (SERs) are typically a subset organizations or sm all governm e nt officials 44 potentially subject to the rule. Other representatives, such as trade associations that of your broader exclusively or at least primarily represent potentially regulated stakeholder group

- sm all entities m a y serve as sm all entity representatives. Persons those representative of other than owner-operators who wish to act as SERs are small entities likely to evaluated on a case by case basis. To avoid the appearance of be directly subject to conflict of interest, you should apply a general “reasonable your regulation. 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 sm all entities.

For each rule, or group of related rules, 45 you should identify as early as possible what types of sm all entities are likely to be directly and adversely af f

ected by the rule, and what those adverse im pacts are apt to be (to the extent feasible at this early stage). An im portant resource

44 Sm all businesses are defined by the Sm all Business Adm i nistration through the Sm all Business Act (codified at 13 CFR 121.201). See Chapter 2 for m o re inform ation on the definition of ‘sm a ll entity’ for RFA purposes.

45 RFA section 605(c) perm its, but does not require, EPA to "c onsider a series of closely related rules as one rule for the purposes of" preparing an IRFA. In certain circum stances, it m a y also be appropriate to convene one Panel to consider a series of closely related rules as well.

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for the Panel process will be the list of sm all entities that you developed under Chapter 4 to support your rulem a king activities generally. Once you identify candidate SERs, you m u st contact them to conf irm their sm all entity status and ask if they would agree to serve as a sm all 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 inf o rm ation sheets that will answer questions such as:



### < W hy Does EPA Need Sm all Entity Representatives?



### < W h at Is an EPA Sm all Entity Representative?



### < W ho Is Eligible to be a Sm all Entity Representative?



### < W ho Chooses Sm all Entity Representatives?



### < At W h at Stage in the Rulem a king Does the Panel Process Occur?



### < W h at W ill Being a Sm all Entity Representative Entail?



### < W h at W ill Be Done with Sm all Entity Input?



### < How Can I Get More Inform ation?

Fact sheets and other supporting docum ents are available on the RFA/SBREFA website ( http://www.epa.gov/sbrefa). You m a y distribute these fact sheets as part of your outreach

m a terials. More inform ation and ideas regarding sm all entity outreach are detailed in Chapter 4. Although this stage of the process will m o st likely take place before your rule is drafted, you should provide each potential SER with an outline describing the im portant com ponents of your rule and any significant alternative approaches under consideration. Indeed, these early discussions with your potential SERs m a y bring to light other ways of structuring the rule to avoid any significant econom ic im pact on a substantial num ber of sm all entities, in which case a Panel need not be convened.

To the extent that com m e nts from potential SERs (or any other inform ation) confirm the rule is likely to have im pacts warranting preparation of an IRFA, you m u st continue to prepare for the Panel process. If com m e nts received or changes m a de to the rule so warrant, it m a y still be possible to certify your rule. You should always consult with the SBAC staff and your Regulatory Steering Com m ittee representative if you stop preparations for a Panel.

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~ Chapter 5: SBAR Panel Process ~RFA Guidance for EPA Rulewriters

5.7.2 Prepare Informal Notification to SBA

Once you com p lete your screening analysis and it has been determ ined that your rule

m a y have a significant econom ic im pact on a substantial num ber of sm all entities, through your Regulatory Steering Com m ittee representative, you m u st request that the Agency SBAC give the SBA Chief Counsel informal notification that EPA is developing a rule that m a y be subject to the Panel requirem e nt, and that EPA m a y shortly ask SBA to nom inate sm all entity representatives according to the statutory procedure. This prelim inary notification is a courtesy to the Chief Counsel for Advocacy in order to provide SBA tim e to inform itself about the rule and review its own list of sm all entity contacts. At this tim e, the SBAC will provide the SBA Chief Counsel with a program office staff cont act (norm a lly this will be the workgroup chair), and will also ask f o r an SBA staf f contact. Typically, the SBAC sends the inf o rm al notif ication via e-m a il, with a courtesy copy also directed to OMB. Keep in m i nd that SBAC staff are always available to facilitate com m unication 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 inform al notification should be approved by your m a nagem e nt and OGC attorney before you send it forward for SBAC staff review.

You will need to draf t the inf o rm al notif ica tion f o r the SBAC to transm it to SBA. The inform al notification could include:

• t he title of the rule,

• r equested Panel convening date and projected NPRM date,

• t he statutory authority for this action and the environm ental objective,

• a n explanation of any alternatives that are or have been under serious consideration,

• t he potential im pacts of the rule on sm all entities, and

• a list of any potential SERS already identif ied.

SBAC staff are available to help you with this task and a m odel inform al notification is available from the SBAC staff.

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~ Chapter 5: SBAR Panel Process ~RFA Guidance for EPA Rulewriters

5.7.3 Prepare Formal Notification to SBA

To the extent that it continues to appear that your rule m a y have significant econom ic im pacts on a substantial num ber of sm all entities, you should work through your Regulatory Steering Com m ittee representative to request that the Agency SBAC provide formal notif ication to the SBA Chief Counsel that a rule is being developed that m a y be subject to the Panel requirem e nt. EPA transm its the form al notification in hard copy under the SBAC’s signature with a courtesy copy directed to OMB. Form al notification triggers the SBA Chief Counsel’s statutory obligation to nom inate sm all entity representatives within 15 days of receiving the notification. Form al notification does not com m it the Agency to convening a Panel. The
program of f i ce m a y still learn as a result of f

u rther consultations with sm all 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.

Beyond the basic rule identifying inform ation, you should provide the SBAC with the f

o llowing inf o rm ation f o r the f o rm al notif ication:

• a description of the problem the rule is trying to solve;

• a list of the types of sm all entities likely to be af f

ected;

• a list of potential sm all entity representatives you’ve already identified, if any;

• a ny m a terial you have already shared with sm all entity representatives; and

• p relim inary rulem a king schedule (e.g., preferred convening Panel date, proposed publication date, any court deadlines, etc.,)

The notice, prepared by you for the SBAC, w ill em phasize that the request to identify

sm all entity representatives does not represent an EPA f i nding that the rule will necessarily have a SISNOSE, nor does it com m it EPA to preparing a f o rm al regulatory f l exibility analysis or convening a form al Sm all Business Advocacy Review Panel. The form al notification should be reviewed and approved by your m a nagem e nt and OGC attorney before it is forwarded to SBAC staff. A sam p le of a form al notification to the SBA Chief Counsel is available from the SBAC
st aff.

5.7.4 Respond to SBA Input; Complete Recommendations for Small Entity Representatives

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In response to your form al 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 m a y identify individuals with whom the Agency has already been consulting, and possibly add new nam e s from SBA’s own experience. After consultation with your SBAC staff contact and SBA staff on the nam e s under consideration, you should

recom m e nd an official list of SERs for appoint m e nt by the SBAC. You should take great care to ensure that SERs are truly representing sm all entities likely to be directly regulated by the rule under consideration. It is better to take tim e to confirm a sm all entity’s status than to be forced to exclude som e one later if he or she is not eligible. As stated earlier, EPA prefers that SERs be owner-operators or of f i cials of sm all entities potentially subject to the rule. Other representatives such as trade associations that exclusively or prim arily represent potentially regulated sm all entities m a y serve as SERs, and SBA’s Chief Counsel for Advocacy has

som e tim es nom inated such representatives (see Section 5.7.1 for m o re discussion of SER selection).

W h ile 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 am ong those you recom m e nd for appointm e nt unless you discover any reason that one or m o re should be considered ineligible. You should consult with your SBAC staff contact before deciding whether or not to recom m e nd any SBA-suggested representative for the official list. You can include am ong your

recom m e ndations additional sm all entities not suggested by SBA, but ultim ately it is desirable that EPA reach consensus with the SBA Chief Counsel on the roster of sm all entity representatives. The SBAC will rely heavily on theProgram ’s recom m e ndations in appointing SERs for the Panel.

5.7.5 Conduct Outreach to Small Entity Representatives

In preparation for a Panel, you m a y need to conduct outreach to potentially regulated

sm all entities. This outreach m eeting should be conducted well in advance of the convening Panel date. Panel m e m b ers (SBA, OMB, and SBAC) should be invited to the m eeting. Your SBAC contact can assist you in this coordination.

There is additional inf o rm ation regarding sm all entity outreach in Chapter 4.

• Y ou should provide the SERs with enough inform ation about the rule for them to be able to judge the likely im pacts of the rulem a king on sm all entities. Outreach m a terials could include any draft of the rule or pream ble text, if such m a terials are available.

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• Y ou should solicit inform ation, advice and recom m e ndations on issues relating to the specific elem ents of an initial regulatory flexibility analysis (listed in Section 5.2) from each SER. 46

• Y ou should encourage SERs to put their com m e nts and suggestions in writing for inclusion in the convening docum ent and your rulem a king record.

• Y ou should keep detailed records of the SERs’ participation for later use in developing the rule and any regulatory f l exibility analysis or certif ication f o r the rule. The outreach
process m a y lead to, and help substantiate, a determ ination that the rule will not have a significant econom ic im pact on a substantial num ber of sm all entities. Also, docum ent your outreach efforts.

If the outreach process indicates that there will be no significant adverse econom ic im pact on a substantial num ber of sm all entities, it m a y be possible to certify your rule. In that case, the rem a ining steps of the Panel process would no longer apply to your rule.

5.7.6 Prepare a Convening Document for the Panel

The convening docum ent is critical to the operation of a Panel. It provides the context and analytical f r am ework f o r the Panel’s deliberations and m u ch of the Panel’s report will be based upon the convening docum ent you prepare. By following the outline suggested below, you will reduce the am ount of work you m u st do to com p lete the Panel Report. The organization outlined below has been used f o r m o st of the previous Panel Reports, so it of f

e rs the benef it of being fam iliar to the standing Panel m e m b ers (i.e., the Chair, OMB and SBA). The convening docum ent should include the following inform ation in approxim a tely the following order:

1. Introduction; 2. Background and Regulatory History; 3. Overview of Proposal Under Consideration; 4. Applicable Sm all Entity Def i nitions; 5. Sm all Entities that May Be Subject to the Proposed Regulation; 6. Sum m a ry of Sm all Entity Outreach; 7. List of Sm all Entity Representatives; and 8. Sum m a ry of Input from Sm all Entity Representatives.

46 Sm all entity representatives can be consulted individually , particularly since the RFA requires that the Panel collect the advice and recom m e ndations of “ each” represen tative. If, however, you choose to consult with sm all entity representatives as a group, be careful not to so licit a group recom m e ndation because issues under the Federal Advisory Com m ittee Act (FACA) m a y be raised.

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~ Chapter 5: SBAR Panel Process ~RFA Guidance for EPA Rulewriters
Typically, there are two opportunities for written SER com m e nts, once during the outreach process, and once during the Panel pro cess. The Agency typically provides outreach

m a terials to the potential SERs in advance of the outreach m eeting, and sets a deadline of about two weeks subsequent to the m eeting f o r the written com m e nts. W r itten com m e nts are norm a lly scheduled to arrive at least two weeks before the Panel convening, allowing the Agency to develop m a terials f o r the Panel, af ter being inf o rm ed by the written com m e nts.

You should attach copies of any m a terials previously shared with the SERs and the written com m e nts subm itted by the sm all entity representatives to EPA as an appendix to the convening docum ent. The convening docum ent should not contain a discussion of the regulatory option or options actually selected by the Agency, since this docum ent generally should be prepared before such decisions are m a de. The convening docum ent should be forwarded to the SBAC staff assigned to your Pane l at least one week prior to the convening date for the Panel. The SBAC staff are also availa ble to review drafts of your convening docum ent. A sam p le of a convening docum ent and tem p late are available from the SBAC staff.

5.7.7 Consider a Pre-Panel Meeting w i th SBA and OMB

Several program offices have consented to pre-Panel m eetings with SBA and OMB to discuss inform ation needs, and we have found this to be an increasingly valuable planning step. SBA and OMB tend to request a great deal of background inform ation that they consider potentially relevant to developing signif i cant alternatives to m i nim i ze burdens on sm all entities. SBREFA charges the Panel to review “any m a terial the Agency has prepared in connection with this chapter.” 47 At a m i nim u m , SBA and OMB typically expect to review any m a terials that describe the regulatory alternatives under consideration (to which sm all entities would be subject), their environm ental rationale and/or benefits, and the costs they would im pose on sm all parties, as well as the analysis and m e thods supporting these descriptions and estim ates. OMB and SBA norm a lly expect to review such inform ation if reasonably available and accurate, to enable the Panel m e m b ers to m a ke inform ed decisions. Such m a terials could also include narrative discussions of the advantages and disadvantages of these approaches. These m a terials, or a subset of these m a terials, m a y 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 m a y not becom e available until relatively late in the rulem a king, the “m aterials the agency has prepared,” as well as their stage of com p letion and level of supporting detail at the tim e of convening, will vary from rule to rule. In effect, the Panel encounters the rulem a king as a work in progress, with

47 “This chapter” refers to the RFA itself and suggests the elem ents of an IRFA, which include “a description of any significant alternatives to the proposed rule which accom p lish the stated objectives of applicable statutes and which m i nim i ze any significant econom ic im pact of the proposed rule on sm all entities.”

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~ Chapter 5: SBAR Panel Process ~RFA Guidance for EPA Rulewriters
the opportunity to affect its future developm ent to avoid unnecessary burden on sm all entities. EPA supports the Panel’s thorough, m eaningful consideration of such im pacts and the design of justifiable accom m odations for sm all entities. W e seek to provide the Panel with whatever inform ation m a y be available to prom ote 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 circum stances bearing on what inform ation is both available and relevant for the Panel’s review, a prelim inary m eeting to consider what m a terials the Panel will receive, as well as what m a y be suitably provided to our non-Federal advisors,

m a y be useful in clarifying the expectations of a ll m e m b ers. See further discussion of data needs under 5.8.2 below.

5.8 What Can I Expect from Panel Review ?

Each Sm all Business Advocacy Review Panel is chaired by the Agency Sm all Business Advocacy Chair (SBAC). The three other statutory Panel m e m b ers are:

1) an EPA senior m a nager from the program office developing the rule; 2) the SBA Chief Counsel for Advocacy; and 3) the Adm i nistrator of OMB’s Office of Inform ation and Regulatory Affairs.

Each of these officials signs the final Panel Report, though, as a practical m a tter, one or

m o re m a y be represented by a designee during a portion of the Panel’s deliberations. The Panel

m e m b er representing the EPA program should be a senior m a nager fam iliar with your rule who has the authority to negotiate the program ’s position on potential regulatory alternatives for

sm all entities. Remember, small entity representative s (SERs) are not members of the Panel -- they provide input to the Panel, but by statute the Panel com p rises only Federal

em ployees, as identified above.

5.8.1 When is the Panel Officially Convened?

The SBAC convenes the Panel at the first form al m eeting of the Panel m e m b ers. The SBAC sets the convening date in coordination with all the Panel m e m b ers through consultation facilitated by the SBAC staff. The convening docum ent and a program office presentation on the regulation are generally used as the m a in vehicles f o r initiating review. Once the Panel convenes, it is critical that all Panel m e m b ers review the sam e set of inform ation. Accordingly, during a Panel, all com m unication to the Panel m e m b ers should be channeled through the SBAC's st aff. 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.

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~ Chapter 5: SBAR Panel Process ~RFA Guidance for EPA Rulewriters

5.8.2 What Information Am I Required to Provide to the Panel?

The program office Panel m e m b er should be prepared to negotiate with SBA and OMB on the type and am ount of data and supporting inform ation that is needed to support the Panel’s discussions. W e have found that a pre-conveni ng m eeting(s) can provide a useful forum for arriving at workable understandings on this m a tter, but unexpected issues can arise during the 60-day Panel term as well. SBA and OMB som e tim es request inform ation and analyses that have not yet been perform e d. As detailed below, according to the statute, the Panel is to review any existing RFA-related m a terials and any draft proposed rule, if those m a terials have been prepared by the tim e the Panel convenes. The RFA does not require EPA to develop materials or perform analyses specifically for the Panel process.

The following describes the inform ation the RFA requires you to provide to the Panel:

• D raft regulatory text – Section 609(b)(4) states that “the Panel shall review any m a terial the agency has prepared in connection with this chapter, including any draft proposed rule.” W h ile 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

m u st provide it to the Panel m e m b ers;

• E conom ic im pact data – Section 609(b)(1) requires EPA to provide SBA “inform a tion on the potential im pacts of the proposed rule on sm all entities and the type of sm all entities that m i ght be affected.” Section 609(b)(1) does not specify the requisite level of analysis of the potential im pacts. EPA does not believe the RFA requires you to prepare a full

econom ic analysis of potential im pacts for the Panel process, nonetheless, EPA clearly

m u st provide som e inf o rm ation - either quantitative or qualitative - on the potential im pacts;

• R egulatory Alternatives – Section 603(c) requires the IRFA to include “a description of
any significant regulatory alternatives to the proposed rule which accom p lish the stated objectives of applicable statutes and which m i nim i ze any significant econom ic im pact of the proposed rule on sm all entities.” [Em phasis added] The RFA does not require you to prepare for com m e nt by the Panel what essentially would be a draft IRFA for all regulatory alternatives you have identified. You do, however, need to describe in suf f i cient detail, including som e analysis of the im pact on sm all entities and environm ental benefits, each significant regulatory alternative you have identified that

accom p lishes the statutory m a ndate. It is im portant to note that the Panel process precedes and is intended to contribute to the developm ent of the IRFA, not the reverse; and

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~ Chapter 5: SBAR Panel Process ~RFA Guidance for EPA Rulewriters

• T echnical and legal supporting m a terials – Pursuant to subsection 603(b)(2), an IRFA

m u st address the legal basis for a proposed rule. However, section 603(b)(2) is not one of the expressly enum erated subsections on which the Panel is to collect advice and

recom m e ndations. 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 inform ation to the Panel.

Although the above list describes what the RFA does and does not require you to provide to the Panel, as a m a tter of policy, EPA typically provides inform ation beyond the statutory

m i nim u m

. W h en doing so, you should consult with staff to the SBAC and establish clearly that the provision of such inform ation is not statut orily m a ndated. In previous Panel processes, several EPA program offices have m a de it a practice to provide requested inform ation to the Panel as long as the inform ation has been cleared by OGC for public release or otherwise would have been provided to any requestor. W e have also honored requests for m a terials not already prepared if f

u lf illing the request would not consum e excessive resources or delay the rulem a king/Panel schedule.

It is vital that program regulatory staff remain in close consultation w i th its ow n management to ensure that its provision of non-statutory information is neither inappropriately restrictive nor unacceptably intrusive on the program organiz ation’s internal priorities and schedules. SBAC staff can be helpful to you in establishing how the Agency has viewed and treated sim ilar requests for inform ation in other Panel settings. (See 5.7.7 for further discussion of how we typically anticipate such requests and determ ine whether and when the Agency can f u lf ill them .)

5.8.3 Panel Outreach to Small Entity Representatives

The RFA also tasks the Panel with perform i ng its own outreach to the Sm all Entity Representatives. Typically, this consists of a m eeting with the SERs, either in person or via teleconference. Prior to this m eeting, the Panel generally sends a letter from the SBAC inviting SERs to the outreach m eeting and a package of inform ation that provides them with additional inform ation about the rule for them to be able to judge the likely im pacts of the rulem a king on them selves and other sm all entities. The Panel agrees on the content, but developm ent of this outreach package is the responsibility of the EPA program office responsible for the rule. The outreach letter will request written com m e nts from each sm all entity representative on the four elem ents of an IRFA (see Section 5.2) as well as other issues identified by the Panel. The
program office should try to anticipate what inform ation the Panel would like to provide to the SERs and develop the SER outreach package prior to convening the Panel. W e encourage you to circulate the draft outreach package to the Pane l m e m b ers within one week of convening. The outreach m a terials are circulated and agreed upon by all Panel m e m b ers before they are sent out

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~ Chapter 5: SBAR Panel Process ~RFA Guidance for EPA Rulewriters
under the signature of the SBAC. An exam ple of an outreach package is available from SBAC
st aff.

At the outreach m eeting, chaired by the SBAC, the program office is generally responsible for a brief presentation on the proposal under consideration and the rem a inder of the tim e is devoted to feedback from and dialogue with the SERs. The program office is responsible for creating a summary of this meeting for inclusion in the Panel Report. The SER outreach m eeting should generally take place within the first 30 days of the Panel process.

5.8.4 Panel Deliberations and Generating the Panel Report

The Panel generally m eets very soon after the SER outreach m eeting to discuss the SER

com m e nts. It is useful at this point, for each Panel m e m b er to be able to bring to the table proposals for regulatory options that m a y m i nim i ze econom ic im pacts on sm all entities. Panel deliberations can occur through a series of face- to-face m eetings of the Panel m e m b ers (or their designees), conference calls, e-m a il exchanges or facsim ile transm issions. Deliberations generally center around the language that will be contained in the Panel Report. You should be prepared to devote a significant am ount of tim e and effort to drafting m a terials for your SBREFA Panel, especially toward the end of the 60-day process. The program office has the primary responsibility for drafting the Panel Report. The first com p lete draft of the Panel Report is based prim arily on SBA and OMB’s input (based on the SER com m e nts) to the convening docum ent. Each of the Panel m e m b ers will sign the com p leted Panel Report, therefore, each Panel m e m b er has a vested interest in the specifics of the Panel Report language. The program office Panel m e m b er should be prepared to negotiate with OMB and SBA on Panel

recom m e ndations; this could require a substantial am ount of tim e as well as direct, im m e diate feedback from m a nagem e nt.

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 tim ely input to the developm ent of the proposed rule. The Panel need not reach consensus in order to issue a final report; the views of each of the m e m b ers can sim p ly be reflected in that report. W h en possible, the report should state m a tters of Panel agreem ent, but no Panel m e m b er is under com pulsion to agree to any position. Indeed, any m e m b er m a y dem u r 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 com m e nt when the proposed rule is published. Since an EPA program office representative signs the Panel Report, it is generally recogniz ed that any recommendations agreed upon by the entire Panel are acceptable to the Agency, w h ether 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 w a rrant 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. The program office Panel

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m e m b er should not agree to any Panel recom m e ndation if it appears that the Agency cannot im plem ent it. The f i nal Panel Report will not contain a discussion of the option or options actually selected by the Agency, since the report will norm a lly be prepared bef o re such decisions

are m a de.

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

The RFA requires the Agency to consider the Panel Report in selecting proposed regulatory options to address sm all entity concerns, and where appropriate, to m odif y 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

recom m e ndations agreed upon by the entire Panel will be addressed in the proposed rule unless unforseen circum stances intervene between com p letion of the Panel Report and the tim e of proposal. You should docum ent the results of the outreach and Panel process, and their role in the Agency' s deliberations in the initial regulatory f l exibility analysis prepared f o r the rule. You should integrate the substantive Panel recom m e ndations into your pream ble text in the appropriate sections and also sum m a rize these results in the Regulatory Flexibility section of the
pream ble of your proposed rule. The Regulator y Managem e nt Division of EPA’s Office of Policy, Econom ics and Innovation, which is responsible for the review of regulations prior to OMB review and signature by the Adm i nistrator, will, in conjunction with OGC, ensure that
your pream ble language is sufficient.

EPA’s policy is to keep the Panel Report confidential until the rule is proposed, since w e 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 w ill be accessible to all parties interested in the rulemaking.

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~ Chapter 5: SBAR Panel Process ~

### Chapter 6 Small Entity Compliance Guides

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l i a n c e G u i d e

s

............ 8 7 or group of rules; and

• d istribute the guides to sm all entities through “com p rehensive sources of inform ation.”

W h ile com p liance guides are not judicially reviewable, they m ay be considered as evidence of the reasonableness or appropriateness of any penalties or dam ages in any civil or adm i nistrative action against a sm all entity. Accordingly, the statute gives us broad discretion with regard to im plem enting these requirem ents particularly in regard to designation, developm ent and distribution of the guides. A lthough guides are required only for final rules for which a regulatory flexibility analysis was prepared, rulewriters should start their planning for the guide during the proposed rule phase. Tim i ng 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 m a y not necessarily be required by SBREFA. As we continue to gain experience, we m ay issue additional guidance. Figure 5 illustrates our approach to developing a

sm all entity com p liance guide.

48 Pub. L. No. 104-121, Sec. 212. SBREFA has several provisi ons that are not codified into the RFA but that still have an im pact upon RFA im plem entation. SBREFA section 212 is one such provision. 81 ~ Chapter 6: Small Entity Compliance Guides ~Get Input fromAgency Workgroup,in particular fromOECA & OGC[Section 6.3]Prepare FinalLead Rule-Finalize Guide Issue ComplianceRule & Plan forWriting Office& GetGuide ASAP;Small EntityGuidePrepare DraftConcurrencePreferably within 2Distribute & KeepReviewUp-to-DateDevelopment &ComplianceFrom Both OGCMonths of& OECAPromulgation[Sections 6.7 & 6.8]DistributionGuide1[Section 6.3][Sections 6.4 & 6.6][Section 6.9][Section 6.3][Section 6.4]SmallEntityCompliance GuidesNotes:General:References to“Sections”inthe flowchartrefertothe sections inChapter6 inthisguidance document(see Table ofContents).1Ifyou are doing an AnalyticBlueprintyou should include plansfordeveloping the guide,including a timeline,and the resourcesneeded.Ifthere isno Blueprint,you shouldintegrateCompliance Guide developmentintoyouraction orworkplan.Figure 5RFA Guidance for EPA Rulewriters

6.2 What is the Goal in Writing a Compliance Guide?

As m e ntioned above, SBREFA section 212 requires the Agency to prepare and publish

one or m o re docum ents as sm all entity com p liance guides for a rule or group of rules for which we’ve prepared a f i nal regulatory f l exibility analysis and specif i cally “designate such publications as sm all entity com p liance guides.” Beyond m eeting the statutory obligation, the prim ary goal of the guide is to help sm all entities-- whether they are sm all businesses, sm all
governm e nts or sm all non-profit organizations-- to com p ly with the regulation. You should therefore write your guide using language suita ble for a non-technical audience. President Clinton’s m e m o randum of June 1, 1998 entitled “Plain Language in Governm e nt W r iting,” directs agencies to use plain language in all docum ents that explain how to obtain a benefit or service or com p ly with a regulation. You should focus your guide on what a sm all entity will need to know to com p ly with your regulation and m i nim i ze the inclusion of any other inform ation (see the tem p late in section 6.10, below). W h ile sm all entities are the prim ary audience for the guides, som e of the com p liance inform ation m a y also be applicable to large entities and you m a y choose to present these sim ilarities/differences as you develop your guide.

6.3 Who Participates in the Development of a Compliance Guide?

The lead rule-writing office is responsible for developing the rule-specific com p liance guide as part of the rulem a king 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 developm ent 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 th e guide, as appropriate. If your regulatory developm ent workgroup does not include representa tives of the appropriate offices, you should work through your Regulatory Steering Com m ittee representative to identify such individuals.

Sm all entity representatives should typically be involved in reviewing the draft

com p liance guide after the rule is prom ulgated so that we have the benefit of their com m e nts and advice in preparing the final version of the gui de. Generally, draft com p liance guides should not be released to outside parties prior to the rule’s prom ulgation. In those unusual circum stances where the outline of the com p liance guide is clear to you at pre-proposal, then you m a y seek review and feedback from sm all entity stakeholde rs at that stage. You should share the draft

com p liance guide and solicit com m e nt from sm all entity stakeholders after prom ulgation, but will need to balance such review with equal concern f o r tim ely issuance of the guide.

Before issuing a com p liance guide, obtain concurrence from both OGC and OECA. Norm ally, you can ask m e m b ers of your workgroup from these offices to ensure that appropriate levels of m a nagem e nt in their of f i ces approve the draf t. (OGC and OECA will determ ine the level of concurrence from their offices.) 83 ~ Chapter 6: Small Entity Compliance Guides ~RFA Guidance for EPA Rulewriters

6.4 When Should I Develop a Compliance Guide?

You should integrate developm ent of the guide into the rulem a king process. Generally, you should begin work on your guide as soon as you have enough inform ation to do so. This point will vary from rule to rule; som e tim es it is clear even before the rule is proposed, and in other cases not enough is known until just prior to final prom ulgation. In either event, you should plan to devote time during the rule making process for development of a guide. How e ver, the Agency w ill not ask for an exte nsion of any court-ordered deadlines in order to complete compliance guides.

Keep in m i nd that the goal is to m a ke the guide available after prom ulgation in sufficient tim e f o r it to be of practical help to sm all entities in evaluating and im plem enting their

com p liance options before the com p liance deadline. You should m a ke every effort to issue the guide w i thin tw o months of the promulgation of the final rule

. The constraints on outside participation during the final rule phase in developm ent of the guide leave a relatively short tim e af ter prom ulgation to both take com m e nt f r om sm all entity stakeholders and issue the final guide. This m a kes advance planning and drafting essential.

Tip : Identify your sm all entity reviewers early in the process. You m a y want to consider using those sm all entity representatives who participated in the Panel process during the developm ent of the proposed rule.

If the issuance of your guide m a y be delayed beyond a m onth or two, you should issue a Fact Sheet or other brief description of the rule as an interim m easure. If your rule has a distant

com p liance date (e.g., two years or m o re), closer to the com p liance date you m a y want to ensure the inform ation in your com p liance guide is still current and re-issue the guide, if appropriate.

6.5 What Sorts of Questions Should I Ask My Small Entity Review ers?

Som e suggestions include:



### C Is the form at appropriate?



### C Is the guide clear and easy to read and understand? (use Plain Language–refer to http://intranet.epa.gov/plainlanguage)



### C Does the guide accurately describe the rule as published?



### C Is the guide useful in planning for compliance?

84 ~ Chapter 6: Small Entity Compliance Guides ~RFA Guidance for EPA Rulewriters

6.6 How Do I Document Development of the Guide?

If you are doing an Analytic Blueprint, it should include plans for developing a sm all entity com p liance guide, including a tim e line, and the resources needed. If there is no Blueprint, you should integrate developm ent of a com p liance guide into your action or work plan. Subm it a schedule for developm ent and com p letion of a com p liance guide when you subm it your final rule to the Adm i nistrator for signature. Include your distribution strategy for the guide in your Com m unications Plan. Inform ation related to the developm ent of the guide will be tracked in OPEI’s Rule and Policy Inf o rm ation and Developm ent System (RAPIDS). Lead offices are also encouraged to develop internal m e thods for tracking the developm ent of the guides.

6.7 Who Can Help Me w i th Distribution?

In addition to internal office distribution m echanism s , you should provide copies of your

com p leted guides to the staff of the Sm all Business Advocacy Chair, the Office of the Sm all Business Om budsm a n, the Office of Regional and State/Local Relations, and the Office of Public Affairs. These offices will distribute the guide to their sm all entity contacts. (You should ensure, to the extent it is feasible, that these offices do not have duplicate distribution lists.) Other sm all business assistance providers include:



### C State Technical Assistance Program s for Pollution Prevention;



### C State Sm all Business Assistance Program s;



### C Sm all Business Developm ent Centers;



### C Trade Associations;



### C Professional Organizations; and



### C the Sm all Business Adm i nistration, 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 EPA’s Action Development Process: Guidance for EPA Staff on Developing Quality Actions, 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.

85 ~ Chapter 6: Small Entity Compliance Guides ~RFA Guidance for EPA Rulewriters

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

As a statutory m a tter, com p liance guides m a y have evidentiary uses in litigation so it is im portant 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

com p liance guides are kept current.

Other circum stances that m a y cause you to revise the com p liance guide include:



### C Changes in the rule which affect com p liance.



### C Com m e nts from the public suggesting revisions, or from OECA based on their experience in enforcing the regulation.



### C Litigation citing a guide as a reason to challenge the appropriateness of proposed penalties.

You should include in every compliance gu ide the follow i ng disclaimer on the cover page of your guide.

NOTICE

This guide was prepared pursuant to secti on 212 of the Small Business Regulatory Enforcement Fairness Act of 1996 (“ SBREFA”), Pub. L. 104-121. THIS DOCUMENT IS NOT INTENDED, NOR CA N IT BE RELIED UPON, TO CREATE ANY RIGHTS ENFORCEABLE BY ANY PAR TY IN LITIGATION WITH THE UNITED STATES. The statements in this document are intended solely as guidance to aid you in complying with [insert name of y our rule and its CFR citation]

. EPA may decide to revise this guide without public notice to reflect changes in EPA's approach to implementing [insert the name of y our rule] or to clarify and update text. To determine whether EPA has revi sed this guide and/or to obtain copies, contact EPA’s [insert Small Business Ombudsman Office and phone number and name of program office that issued the rule and its main phone number and/or w e bsite address]

. The full text of the rule is available online at: [insert name of y our w e bsite]

.

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. 86 ~ Chapter 6: Small Entity Compliance Guides ~RFA Guidance for EPA Rulewriters
You also should send a copy of your com p liance guide to EPA’s Sm all Business Om budsm a n’s office and place the m o st current guide in the appropriate docket, on a special section in EPA’s internet page or other electronic bulletin boards.

6.9 Template for Compliance Guides

An Agency workgroup has developed the following tem p late to help you in structuring
your com p liance guide, and you should use it in accordance with the guidance given earlier in the chapter. W h ile SBREFA does not m a ndate a particular form at, we urge you to use this
tem p late so that we m a y have general consistency across the Agency and to assure that significant com p liance issues are adequately covered. If your rule does not, for som e reason, lend itself to this tem p late, you m a y use it as a checklist to ensure that all potentially relevant

com p liance issues are covered.

The template is organiz ed as follow s :



### C Non-italicized text indicates sections which should norm a lly be included in the

com p liance guide.



### C Italicized text indicates standard language which you m a y choose to use if it is appropriate to your rule. You should adapt this standard language to the specifics of your rule as necessary.



### C Program offices have lead responsibility unless otherwise designated in bold

.

Please m a ke your best effort to write your guide in plain language (see EPA’s intranet site http://intranet.epa.gov/plainlanguage)

87 ~ Chapter 6: Small Entity Compliance Guides ~RFA Guidance for EPA Rulewriters
[Insert standard publication header, including the date and appropriate publication number]

**SMALL ENTITY COMPLIANCE GUIDE [insert title of rule or program...]** 

NOTICE

This guide was prepared pursuant to section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996 (“SBREFA”),

Pub. L. 104-121. 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 **[insert name of your rule and its CFR citation]**

. EPA may

decide to revise this guide without public notice to reflect changes in EPA's approach to implementing **[insert the name of your rule]**  or to clarify and update text. To determine whether EPA has revised this guide and/or to obtain copies, contact EPA’s **[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]**

. The full text of the rule is available online at: **[insert name of your website]**

.

**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].

**Who Should Use this Guide?**

1. To the extent possible, the guide should identify all the types/categories of small entities that will be subject to

88 ~ Chapter 6: Small Entity Compliance Guides ~RFA Guidance for EPA Rulewriters
the rule’s requirements. Bear in mind that other entities may be indirectly affected but may not be required to comply. This section needs to make this distinction clear to the reader.

Tip: Use the compliance table from the “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 to point out any similarities or differences at this stage but you should not go into great detail on this subject.

**What does the Guide Cover?**

**How do I use the Guide?**

**How do I Obtain a Complete Copy of the Rule?** 

List an 800 number, Federal Register citation or the Government Information Locator Service.

**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**

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.

**Compliance Timetable**

89 ~ Chapter 6: Small Entity Compliance Guides ~RFA Guidance for EPA Rulewriters
Identify in easy-to-read format (e.g., flowchart, time line, timetable) compliance dates for notifications and other requirements.

**How Does this Regulation Relate to Other Federal, State, and Local Requirements?** 

1. Each Program should develop specific template language concerning program delegations and relationships to other requirements **generally** , or, where appropriate, referring back to general provisions applicable to all regulations in a subgroup to which the new regulation belongs (e.g., New Source Performance Standards under the Clean Air Act). Programs have the flexibility to expand this section as appropriate, to address this issue more **specifically**

.

2. Meanwhile, this suggested template language which may be appropriate in many cases:

This compliance guide explains your federal compliance obligations with respect to ______ rule. There may be other state or local requirements which apply to you which are different from, or more stringent than, the federal requirements. For example, some environmental statutes allow EPA to delegate environmental programs to
a state. The state may then promulgate its own rules which may supersede the federal requirements. For more information on the rules that apply in your State, please contact [INSERT CONTACT POINT].

**STEP-BY-STEP PROCEDURES FOR COMPLIANCE WITH THIS RULE**

This is where you break down the rule into discrete subject areas using a step-by-step, 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.

**How can I tell if I am subject to this rule?**

**What requirements am I subject to?**

90 ~ Chapter 6: Small Entity Compliance Guides ~RFA Guidance for EPA Rulewriters

**When do I need to comply ?** (elaborate on flowchart, as appropriate)

**What do I need to do to comply** ?

Be sure to address such questions as:



### C How does this rule affect my existing permit? 

### C How much will it cost to comply with this rule?

**What, when and how must I monitor or test?**

**What records do I need to keep and for how long?**

Include sample forms and calculations.

**What, when and to whom must I report?**

Include sample forms.

**How do I minimize harm if I think I am out of compliance? (Program lead/OECA support)** 

**Where do I go for help** ?

Give information on federal, State and local contacts, Agency hotlines, or State Small Business Assistance Program
contacts.

**What is pollution prevention and how can it affect my operations?**  **(OPPT lead)**

1. Discuss pollution prevention and its benefits, including how it may be used to help a facility/operation save money and/or possibly avoid regulation.

2. To the extent that there are other pollution prevention opportunities, including those which may make good business sense or could exempt a small entity from certain requirements, the program, with support from OPPT, has the option to expand this section and include this information.

**Are there opportunities for flexibility or waivers?**

91 ~ Chapter 6: Small Entity Compliance Guides ~RFA Guidance for EPA Rulewriters
**If this is applicable** in a given rule, these opportunities can be highlighted here. For example, there are circumstances in which the Safe Drinking Water Act allows temporary variances or exemptions from maximum contaminant levels.

**OPTIONAL QUESTIONS AND ANSWERS ABOUT FACILITY/ OPERATIONS/ PROCESSES** 

Here you want to anticipate questions of potential concern to the regulated community, including how the rule fits into the overall regulatory program. Questions will depend on the rule; the questions below are only EXAMPLES. [ Tip: A self-audit checklist can be very helpful to small entities and may be used alone or in conjunction with a question and answer format.]

**How do I conduct a self-audit of my facility/firm/operation to help me evaluate whether I am in compliance with this**  **rule?**

Provide Self-Audit Checklist **(Program/OECA)**

**What are the implications of this rule for my existing permits?** 

Adapt this to your particular rule or program.

**How Does this Rule Change How I Handle/ Store Wastes?** (if guide were written for RCRA rule)

**THE COMPLIANCE ASSURANCE PROCESS (OECA LEAD)** 

This section should describe in clear, non-threatening terms why compliance is important, the potential consequences of violating the law, and how the entity can work with us to identify and correct its compliance problems, often without the need for a formal enforcement action or penalty.

Draft this section to ensure that small entities understand:



### C how EPA determines compliance



### C what they must do if they discover a violation, and

92 ~ Chapter 6: Small Entity Compliance Guides ~RFA Guidance for EPA Rulewriters


### C 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.

**How Is My Operation’s Compliance With Environmental Requirements Determined?** 

Discuss compliance assistance, inspections, self-monitoring and the role of citizens.

**If I Discover a Violation, How Can I Work With The Agency** 
**to Correct It?**

Discuss compliance incentives policies: Small Communities Policy, Policy on Compliance Incentives for Small Businesses, Self-Disclosure Policy.

**If the Agency Discovers a Violation, What Might Be Its Response?** 

To maximize compliance, EPA implements a balanced program of compliance assistance, compliance incentives, and traditional law enforcement. EPA knows that small businesses which must comply with complicated new statutes or rules often want to do the right thing, but may lack the requisite knowledge, resources, or skills. Compliance assistance information and technical advice helps small businesses to understand and meet their environmental obligations. Compliance incentives , such as our Small Business Policy, encourage persons to voluntarily discover, disclose, and correct violations before they’re identified by the government. EPA’s strong law enforcement program protects all of us by targeting persons who neither comply nor cooperate to address their problems.

EPA uses a variety of methods to determine whether businesses are complying, including inspecting facilities, reviewing records and reports, and responding to citizen complaints. If we learn a person is violating the law, EPA (or a State, if the program is delegated) may file an enforcement action seeking penalties of up to $[INSERT STATUTORY MAXIMUM AMOUNT], per violation, per 93 ~ Chapter 6: Small Entity Compliance Guides ~RFA Guidance for EPA Rulewriters
day. The proposed penalty in a given case will depend on many factors, including the number, length, and severity of the violations, the economic benefit obtained by the violator, and its ability to pay. EPA has polices in place to ensure penalties are calculated fairly. These policies are available to the public. In addition, any company charged with a violation has the right to contest
EPA’s allegations and proposed penalty before an impartial judge or jury.

In summary, EPA recognizes that we can achieve the greatest possible protection by encouraging small businesses to work with us to discover, disclose, and correct violations. That’s why we’ve issued selfdisclosure, 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].

**What is the legal status of this guide?**

A judge can look at a compliance guide in determining what penalty is appropriate and reasonable, although the content of the guide cannot otherwise be reviewed by the court

**.**
In this Compliance Guide, we have tried to make clear what you must do to comply with the applicable law and regulation. This is the minimum required by SBREFA. You'll notice, however, that here and there we have also included suggestions for alternative approaches that may make compliance easier and possibly even reduce costs.
We hope you find this presentation of regulatory requirements useful and the additional information helpful in reaching and maintaining compliance

. (Continued on the next page)

**APPENDIX**

**Glossary of Environmental Terms**

94 ~ Chapter 6: Small Entity Compliance Guides ~RFA Guidance for EPA Rulewriters

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.”

**Where to Obtain More Information**

This section gives supplemental information. Examples might include other existing quality compliance guidance, pollution prevention guidance, pollution prevention case studies, other media contacts, trade associations, or university assistance programs.

**How Useful Was This Guide?**

Each guide should solicit feedback from users as to the usefulness, readability, and improvements needed for the guide.

95 ~ Chapter 6: Small Entity Compliance Guides ~[This page intentionally left blank]

### Chapter 7 Ongoing Informal Small Entity Guidance

This chapter provides a brief overview of Contents of Chapter 7 our inf o rm al sm all entity com p liance program and list of com p liance assistance tools. This Page No. information is provided here to help you 7.1 O verview of EPA’s Section 213 Program

.... 97 understand w h at resources are available to 7.2 L ist of Compliance Assistance Resources

. . . 98 assist you in your small entity compliance assistance efforts.

7.1 Overview of EPA’s Section 213 Program

Section 213 of the Sm all Business Regulatory Enforcem ent and Fairness Act (SBREFA) requires us to: 1) provide guidance to sm all entities “whenever appropriate in the interest of adm i nistering statutes and regulations”, 2) esta blish 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 sm all entities regarding com p liance with all Agency statutes and final regulations. In particular, we are required to provide advice based on the application of the law to specif i c sets of f

acts supplied by sm all entities. This advice and guidance can be considered as evidence of the reasonableness or appropriateness of penalties sought against a small entity.

EPA’s Inform al Guidance Program consists of four m a in com ponents:

• t he EPA Sm all Business Om budsm a n (SBO), located at EPA Headquarters;

• r egional sm all business liaisons, who serve as local resources to assist sm all entities who contact the EPA regional of f i ces;

• v arious hotlines and clearinghouses that serve entities of any size, including large percentages of sm all entities; and

• t echnical and program staff located th roughout Headquarters and the regions who are available to answer questions in their subject area or who ref er sm all entities to the appropriate State and local resources.

In designing this program , EPA’s guiding principles were to: 1) ensure the accessibility of the inform al guidance program to the sm all entity com m unity, 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 Sm all Business Om budsm a n (SBO) and other existing services into the core of the Agency’s Inform al Guidance Program , we have been able to achieve both goals.
97 ~ Chapter 7: Informal Small Entity Guidance ~RFA Guidance for EPA Rulewriters
The SBO is already well-known in the sm all entity com m unity, serving as a “first-stop shop” for m u lti-m e dia com p liance inform ation. The SBO adm i nisters a free hotline handling approxim a tely 1,100 to 1,500 calls per m onth, answering fact-specific com p liance questions, Informa l sma ll entity advice and guidance distributing supporting docum entation, and providing can be considered as evidence of the inform ation on additional sources of assistance. Callers m a y

rem a in anonym ous at their own discretion. In addition to these reasonableness or calls to the hotline, SBO staffers respond to another 1,000 or appropriateness of m o re calls annually that are m a de directly to their desks. penalties sought against a small ent i t y
. In addition to the SBO, EPA has num erous other
resources to answer com p liance questions f r om sm all entities, such as the sm all business liaisons, program -specif i c hotlines and clearinghouses, and technical and program m e dia st aff, som e of which are listed below. For

exam ple, we sponsor approxim a tely 89 hotlines and clearinghouses throughout Headquarters and the regions, which are available to custom ers of any size, including sm all entities.

W e have a long history of developing authoritative m a terials to aid the regulatory

com m unity in its com p liance efforts. These docum ents include such item s as Sector Notebooks, Plain English Guides, and Fact Sheets. Through the issuance of such docum ents, you can often preclude the need for a sm all entity to contact us with a related inquiry. In addition to these written m a terials, you can m a ke num erous resources easily accessible through the m a in EPA hom e page (www.epa.gov) or through your program office web site.

If you provide inform al guidance to sm all 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 Couns el has provided guidance that applies to all EPA personnel providing inform al guidance regarding the kinds of assurances EPA can m a ke about the confidentiality of inform ation provided by callers to EPA hotlines . As a m a tter of law, the Agency generally is unable to guarantee that any inform ation received by EPA personnel or hotline staff will rem a in “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 com p liance assistance m a y choose to rem a in anonym ous. Callers speaking with program or technical experts m a y sim ilarly choose to rem a in anonym ous. This m eans that the caller is not required to provide specific inform ation such as her/her nam e , phone num ber, or address, that could be used to identify the caller. The caller m a y sim p ly choose to provide whatever inform ation is necessary to describe his/her situation and to seek EPA’s assistance in answering their questions. Anonymity, however, is not the sam e as confidentiality

. For instance, EPA staff m a y not suggest or guarantee that (1) the inform ation provided woul d not be viewed by other parts of EPA; or (2) the inform ation would not be released by EPA to a third party if it were the subject of a Freedom of Inform ation Act request.

7.2 List of Compliance Assistance Resources 98 ~ Chapter 7: Informal Small Entity Guidance ~RFA Guidance for EPA Rulewriters

EPA offers sm all businesses a wide variety of com p liance assistance resources and tools designed to assist sm all businesses in com p lying with federal and state environm ental laws. These resources can help businesses understand their obligations, im prove com p liance and find cost-effective ways to com p ly through the use of pollution prevention and other innovative technologies. You and your m a nagem e nt should assess which of these venues would be the

m o st effective m eans to provide sm all entity com p liance assistance regarding your rule.

Websites

. EPA offers a great deal of com p liance assistance inform ation and m a terials f

o r sm all businesses on the f o llowing W e bsites:

EPA’s Home Page www.epa.gov EPA’s Enforcement Policy and Guidance www.epa.gov/com p liance
EPA’s Office of Enforcement and Compliance www.epa.gov/com p liance Home Page
EPA’s Small Business Assistance Programs http://www.epa.gov/sm allbusiness/
EPA’s Small Business Compliance Policy www.epa.gov/Com p liance/resources/policies /incentives/smallbusiness/sbcp2000.pdf

EPA’s Small Business Ombudsman www.epa.gov/sbo
Small Business Home Page www.smallbiz-enviroweb.org

Hotlines

. EPA sponsors approxim a tely 89 hotlines and clearinghouses that provide free and convenient avenues to obtain assistance with environm ental requirem e nts. The Sm all Business Om budsm a n Hotline can provide you with a list of all the hot lines and assist you with determ ining which hotline will best m eet your needs. Key hotlines that m a y be of interest to you include:

Clean Air Technical Center (919) 541-0800

RCRA/UST/CERCLA Hotline (800) 424-9346
Safe Drinking Water (800) 426-4791

Small Business Ombudsman (800) 368-5888
Stratospheric Ozone/CFC Information (800) 296-1996
Toxic Substances and Asbestos Information (202) 554-1404

Wetlands Hotline (800) 832-7828

99 ~ Chapter 7: Informal Small Entity Guidance ~RFA Guidance for EPA Rulewriters
Compliance Assistance Centers

. EPA has established national com p liance assistance centers, in partnership with industry, academ ic institutions, and other federal and state agencies, that provide on-line and fax back assistance services in several industry sectors heavily populated with sm all businesses. You can access each center directly at: http://www.epa.gov/com p liance/assistance/centers/index.htm l

.

Agriculture 1-888-633-2155 or http://www.epa.gov/com p liance/assistance/ sectors/agriculture.htm l

Automotive 1-888-GRN-LINK www.ccar-greenlink.org

Local Governments 1-877-TO-LGEAN www.lgean.org
Metal Finishing www.nm frc.org
Paints and Coatings www.paintcenter.org
Printing 1-888-USPNEAC
www.pneac.org Transportation 1–888-459-0656 www.transource.org

State Agencies

. Many state agencies have established com p liance assistance program s that provide on-site as well as other types of assistance. Please contact your local state environm ental agency for m o re inform ation. EPA’s Sm all Business Om budsm a n can provide you with state agency contacts by calling (800) 368-5888.

Compliance Policies Incentive

. EPA’s Sm all Business Policy and Sm all Com m unities Policy are intended to prom ote environm ental com p liance am ong sm all businesses by providing incentives such as penalty waivers and reductions for participation in com p liance assistance
program s, and encouraging voluntary disclosure and prom pt correction of violations. These policies can not be applied to enf o rcem ent actions that have already been initiated.

100 ~ Chapter 7: Informal Small Entity Guidance ~

### Chapter 8 Periodic Review of Final Rules as Required by RFA Section 610

8.1 Introduction

The Regulatory Flexibility Act (RFA) generally requires agencies to exam ine the im pact of their proposed and final regulations on sm all entities. 49 Under section 610, the RFA also requires that agencies review rules which have or will have a significant econom ic im pact on a substantial num ber of sm all entities (SISNOSE) within ten years of prom ulgation. The Sm all Business Regulatory Enforcem ent Fairness Act (SBREFA), enacted in 1996, added a judicial review provision to the RFA, which m eans the Agency can be challenged in court as to its

com p liance with the provisions of this section on a rule-by-rule basis.

This chapter provides inform ation on:

• identifying rules subject to review,

• perform i ng a section 610 review,

• ensuring your review m eets section 610 requirem ents, and

• publishing your results.

8.2 What’s a Section 610 Review ?

In general, a section 610 review involves: Contents of Chapter 8
Page No. 8.1 Introduction

......................... 1 0 1 8.2 W hat’s a Section 610 Review?

.......... 1 0 1 8.3 R ules not Certified by EPA that will not have a Section 610 Review?

............... 10 2 8.4 H ow Do We Identify and Track Rules for R e

v

i e

w

?

............................ 1 0 2 8.5 S cheduling Section 610 Reviews

......... 1 0 3 8.6 Must We Review a Rule More than Once?

........................ 1 0 3 8.7 W hat If a Rule has been Subsequently Amended?

.......................... 1 03 8.8 D o We Review a Rule or a CFR Part or Section?

........................... 1 0 4 8.9 C an a Section 610 Review Be Deferred?

. . 10 4 8.10 Conducting the Review

................ 1 0 4 8.11 Does the Line-by-line Review also Satisfy Section 610 Requirements?

............ 1 0 6 8.12 Announcing the Results of the Review

. . . 10 6 8.13 Follow-up to the Section 610 Review

...... 1 0 6 8.14 Example of “ P rerule” Regulatory Agenda Entry 10

6 8.15 Example Entry for Completed Section 610 R e

v

i e

w

............................. 1 08 8.16 Section 610 Judicial Review

............. 1 0 9

• i dentifying a prom ulgated rule that was not certified, (i.e. did not contain a finding that there was no SISNOSE); 50

49 Sm all entities are defined as sm all businesses, sm all governm e nts, and non-profits that are not dom inant in their field, see Chapter 2 for m ore inform ation.

50 "Certification” m eans that the Agency determ ined that th e rule had no SISNOSE, and stated this to be the case in the published rule, see Chapter 1 for m ore inform ation.

101 ~ Chapter 8: Section 610 Review ~RFA Guidance for EPA Rulewriters

• d eterm i ning if the rule should be am ende d, rescinded, or left unchanged, based on five statutorily prescribed factors; and

• docum enting the review and conclusions within 10 years of the date the rule was
prom ulgated.

8.3 Are there Some Rules that are not Certified by EPA that w ill not have a Section 610 Review ?

Yes. For EPA rules issued in 1992-1997, EPA went beyond the requirem e nts of the RFA by preparing regulatory f l exibility analyses f o r rules that would have any adverse im pact on any

num ber of sm all entities, regardless of the size of im pact or num ber of sm all entities. In ef f

ect,

m a ny rules that we would otherwise have certif ied as not having a SISNOSE were not form ally certified during this tim e period. After the RFA was am ended in 1996 by the Sm all Business Regulatory Enf o rcem ent Fairness Act (SBREFA), EPA returned to its earlier practice of form ally certifying rules with no SISNOSE under the RFA while continuing to offer outreach and accom m odation to regulated sm all entities for those rules. EPA has identified eight rules issued bef o re SBREFA was passed that were not f o rm ally certif ied yet do not and will not have a SISNOSE. EPA has determ ined that these eight rules are not subject to section 610 review, and, even if a section 610 review were conducted, revisi on of the rules would not be warranted. The rules were published in EPA’s Regulatory Pl an and sem i -annual Regulatory Agenda, Spring 2003 (Published May 19, 2003).

8.4 How Do We Identify and Track Rules for Review ?

Final rules that have or will have a significant econom ic im pact on a substantial num ber of sm all entities (SISNOSE) are subject to section 610 review. Following prom ulgation 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 Inform ation and Developm ent System (RAPIDS), as a rule that will require a Section 610 review.

EPA tracks rules that m a y be subject to section 610 reviews through the use of an electronic section 610 Tracking Report in EPA’s Rule and Policy Inform ation and Developm ent System (RAPIDS). The Report consists of three categories, as follows:

I. Rules for which EPA has announced section 610 reviews, either com p leted or under way. Rules are listed in this category once an entry has been published in the sem i -annual Regulatory Agenda announcing the section 610 review. This category tracks the rule title, date of final publication, initiation and com p letion dates of the section 610 review and the review decision, II. Rules that do not require section 610 reviews, and

102 ~ Chapter 8: Section 610 Review ~RFA Guidance for EPA Rulewriters

III. Rules that will need a section 610 review within ten years of prom ulgation. Rules are listed in this category if the rule is subject to notice-and-com m e nt and prom ulgated without being certified. This category tracks the rule title, date of final publication, and review due date.

EPA’s Office of Policy, Econom ics and Innovation (OPEI) m onitors the rules tracked in this database.

8.5 Scheduling Section 610 Review s

The RFA requires that we complete the review by the tenth year anniversary date of final publication. You m a y undertake a review any tim e w ithin ten years of publication of the original final rule. Conducting the review close to the ten-year anniversary, however, allows a m o re f

o cused perspective on any changed im pacts on sm all entities.

W e will use the sem i -annual Regulatory Agenda (published in the Federal Register ) to provide public notice of the review. You m u st com p lete the review within one year of that public notice. The RFA does not require that you initiate or com p lete any regulatory action to

am end or rescind the rule within that year, if it is determ ined that such action is necessary.

8.6 Must We Review a Rule More than Once?

There is no requirem e nt to review a rule m o re than once. After you com p lete a review, and decide to rescind the rule, am end the rule or leave the rule unchanged, that com p letes the obligation under section 610.

8.7 What If a Rule has been Subsequently Amended?

The original, final rule as published in the Federal Register is the basis for section 610 review. In som e cases, a subsequent am endm ent m a y elim inate im pacts on sm all entities so that there is no longer a SISNOSE. Under these circum stances, when the original rule com e s up for its section 610 review, you m u st be able to adequately docum ent the elim ination of the SISNOSE, and publish this finding in the “Com pleted Actions” section of the sem i -annual Regulatory Agenda.

If an am endm ent reduces, but does not elim inate, a SISNOSE, then you should evaluate the need for a section 610 review based on current guidelines for SISNOSE thresholds (see Chapter 2).

103 ~ Chapter 8: Section 610 Review ~RFA Guidance for EPA Rulewriters
If a subsequent am endm ent has created, rather than elim inated, a SISNOSE based on current guidelines for SISNOSE thresholds , then the rule m u st be reviewed within ten years of the date of the published am endm ent.

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

The RFA explicitly stipulates a review by rule, rather than by sections or parts in the Code of Federal Regulations (CFR). W h ile we recognize that rules subsequently becom e

am algam a ted into the CFR and m a y lose their individual identity, the final rule as published in the Federal Register rem a ins the basis for section 610 reviews. You will need to decide on a case-by-case basis if the rule can be sufficiently separated from its context in the CFR to do an adequate review. You m a y decide to include additional regulatory m a terial to conduct a coherent and m eaningful review.

8.9 Can a Section 610 Review Be Deferred?

The RFA allows the head of the Agency to certify in a statem ent published in the Federal Register that a review of an existing rule is not “f easible” by the 10 year anniversary of the rule’s
prom ulgation. In practice, however, the Adm i nistrator expects that program offices will initiate and com p lete the reviews within this tim e. Any extensions m u st be justified on a case-by-case basis and requested by the program AA. Your Regulatory Steering Com m ittee representative will m a nage the process for you if you request an extension.

8.10 Conducting the Review

Once you have determ ined that your rule:

(1) i s subject to the RFA, and (2) w as not certified, either at the tim e of prom ulgation or when am ended, you are ready to conduct the section 610 review. 51 Bear in m i nd that section 610 does not require that you initiate a regulatory action to rescind or am end a rule within the one-year review period. It only requires that you com p lete the review in that tim e fram e, publish your determ ination, and explain the basis for your decision.

To conduct a section 610 review follow the three steps described below:

51 Over tim e, EPA' s definition of SISNOSE has evolved to m eet new statutory and adm i nistrative requirem e nts, and therefore the threshold for perform ing a regulatory flex ibility analysis has changed as well. If your section 610 rule does not m eet current guidelines for SISNOSE, you should take this into account when conducting the section 610 review, e.g., if a final regulatory flexibility anal ysis was perform ed under a m o re expansive reading of SISNOSE, you should note this in a justification for letting a rule stand. For guidance on SISNOSE, see Chapter 2.

104 ~ Chapter 8: Section 610 Review ~RFA Guidance for EPA Rulewriters

1. Before you begin your review, develop an entry for each rule for the “Prerule” section of the Unified Agenda (also known as the sem i -annual Regulatory Agenda), indicating that you will be conducting this review over the next year, and requesting public com m e nt. You should also indicate in the abstract the length of the public com m e nt period. Norm ally, this is 60 to 90 days. Contact your Regulatory Steering Com m ittee representative for specific inform ation about the sem i -annual Regulatory Agenda exercise.

The “Prerule” entry m u st:



### C state your intent to review the rule under section 610;



### C give a brief description of the rule;



### C explain the need for and legal basis of the rule; and



### C invite public com m e nt on the factors listed below.

2. You m u st specifically address and ask the public for com m e nt on the following factors when perform i ng a review under section 610:



### C the continued need for the rule;



### C the nature of com p laints or com m e nts received concerning the rule from the public since prom ulgation;



### C the com p lexity of the rule (i.e., can you m a ke the rule less com p lex so that sm all entities can com p ly m o re easily?);



### C the extent to which the rule overlaps, duplicates or conflicts with other Federal rules, and, to the extent feasible, with State and local governm e ntal rules; and



### C the length of tim e since the rule has been evaluated or the degree to which technology, econom ic conditions, or other factors have changed in the area affected by the rule. (Evaluate these factor s to the extent that they affect sm all entities, not the entire regulated universe.)

See Section 8.14 for an exam ple of a “Prerule” section 610 entry in the sem i -annual Regulatory Agenda

.

3. You m u st explicitly consider all of these factors in your review, and docum ent the results, either positive or negative. The results of the review - either to rescind, am end or

105 ~ Chapter 8: Section 610 Review ~RFA Guidance for EPA Rulewriters
leave the rule unchanged - are published in the “Com pleted Actions”section of the sem i

annual Regulatory Agenda and are placed in your program office docket.

8.11 Does the Line-by-line Review also Satisfy Section 610 Requirements?

A line-by-line reinvention review qualifies as a section 610 review if you address the required factors stated above, request public com m e nts, and adequately docum ent the review. Contact your Regulatory Steering Com m ittee represen tative or OGC if you are not sure that the review m eets the section 610 requirem e nts. In m o st 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.

8.12 Announcing the Results of the Review

The results of this review--either to rescind, am end or leave the rule unchanged--will be published in the “Com pleted Actions” section of the sem i -annual Regulatory Agenda one year from the tim e it was identified in the “Prerule” section of the sem i -annual Regulatory Agenda. You should use the "long form ", i.e., the one that allows an abstract, so that you can explain your determ inations. Supporting docum ents should be placed in the public docket. (See Section 8.15 for an exam ple of a “Com pleted Action” entry in the sem i -annual Regulatory Agenda.)

8.13 Follow

- up to the Section 610 Review

You should follow any decision to am end or rescind the rule with an entry in the "Prerule" or “Proposed Rules” section of a subsequent sem i -annual Regulatory Agenda

.

8.14 Example of “Prerule” Semi-annual Regulatory Agenda Entry

To initiate a 610 Review, you m u st prepare a sem i -annual Regulatory Agenda entry by

com p leting an Action Initiation Form (AIF). Each of f i ce has dif f

e rent procedures f o r preparing and subm itting their AIF' s. Your Regulatory Steering Com m ittee representative can tell you what the procedure is for your office. Regulat ory Steering Com m ittee m e m b ers are listed in the “Contacts" section of the Action Developm ent Process Library. The address is: http://intranet.epa.gov/adplibrary

.

Title: ACCIDENTAL RELEASE PREVENTION REQUIREMENTS: RISK MANAGEMENT PROGRAMS UNDER THE CLEAN AIR ACT, SECTION 112(R)(7) (SECTION 610 REVIEW) Priority: Substantive, Nonsignificant Legal Authority: 42 USC 7412(r) CFR Citation: 40 CFR 68 Legal Deadline: None

106 ~ Chapter 8: Section 610 Review ~RFA Guidance for EPA Rulewriters

Abstract: The Agency prom ulgated the Accidental Rel ease Prevention Requirem e nts on June 20, 1996 (61 FR 31668). The regulations apply to all stationary sources with processes that contain m o re than a threshold quantity of a regulated substance. Processes are divi ded into three categories based on the potential for offsite consequences associated with a worst-case accide ntal release; accident history ; or com p liance with the prevention requirem e nts under OSHA' s Process Safety Managem e nt (PSM). Processes that have no potential im pact on the public in the case of an accidental release have m i nim a l requirem e nts. For other processes, sources m u st im plem ent a risk m a nagem e nt program that includes m o re detailed requirem e nts for hazard assessm ent, prevention, and em ergency r esponse. Processes in industry categories with a history of accidental releases and processes already com p ly ing with OSHA's PSM are subject to prevention program requirem e nts that are virtually id entical to parallel elem ents of the OSHA standard. All other processes are subject to stream lined preven tion requirem e nts. All sources m u st prepare a risk

m a nagem e nt plan based on the risk m a nagem e nt program s established at the source. The sources subm it the plan to EPA. The first subm ission was on June 20, 1999. Som e sources re-subm itted their plans or revised their plans after the first subm ission. Th e second subm ission was due on June 20, 2004. There are approxim a tely 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 com m e nts on the following factors: (1) The continued need for the rule; (2) the nature of com p laints or com m e nts received concerning the rule from the public since prom ulgation; (3) the com p lexity of the rule; (4) the extent to which the rule overlaps, duplicates or conflicts with other Federal ru le, and to the extent feasible, with State and local governm e ntal rules; and (5) the length of tim e since th e rule has been evaluated or the degree to which technology , econom ic conditions, or othe r 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 s ubstances that have the potential to cause im m e diate harm to public health and the environm ent, and stim ulates dialogue between industry and the public to im prove accident prevention and em ergency response practices. The Agency has received few com p laints about this rule from sm all businesses. The Agency has developed m a ny guidance docum ents to help sm all entities com p ly with the rule. Efforts were m a de to m i nim i ze the burden and com p lexity of the rule by taking a tiered approach. In other words, entities with com p lex processes have to follow m o re rigorous requirem e nts and those with sim p le processes follow only som e of the requirem e nts. 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 tim e the rule has been evaluated under the RFA section 610. EPA has established a public docket for this effort, Dock et No. OAR-2005- 0166 at http://www.epa.gov/edocket.

Timetable: Action Date Begin Review 10/00/05 Co mment Perio d End 01/00/06 End Review 04/00/06 Regulatory Flexibility Analysis Required : No Small Entities Affected : No Government Levels Affected : None Additional Inform ation : SAN No. 5018

Agency Contact: Sicy Jacob, Environmental Protection Agency, Solid Waste and Emergency Response, 5104A, Washington, DC 20004 Phone: 202 564-8019 Fa x: 202 564-2625 Em ail: jacob.sicy @epa.gov

107 ~ Chapter 8: Section 610 Review ~RFA Guidance for EPA Rulewriters
Vanessa Rodriguez, Environm ental Protection Agency , Solid Waste and Em ergency Response, 5104A, Washington, DC 20460 Phone: 202 564-7913 Fax: 202 564-2625 Em ail: rodriquez.vanessa@epa.gov RIN: 2050-AG26

_______________________________________________________________________
8.15 Example Entry for Completed Section 610 Review

All of EPA' s sem i -annual Regulatory Agenda entries are subm itted to OMB via EPA’s Rule and Policy Inform ation and Developm ent 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 either "Rule will rem a in in effect without m odification" , or "New rulem a king started, see SAN # ( insert SAN# of newly started rulem a king )". Each office has a different system for updating and subm itting Agenda entries. Your Regulatory Steering Com m ittee representative will give you appropriate instructions when it is tim e to prepare your sem i -annual Regulatory Agenda entry.

Title: LEAD; REQUIREMENTS FOR LEAD-BASED PAINT ACTIVITIES IN TARGET HOUSING AND CHILD-OCCUPIED FACILITIES (Com pletion of a SECTION 610 REVIEW )

Priority: Info./Admin./Other Legal Authority: TSCA 402 and 404; 15 USC 2682; 15 USC 2684 CFR Citation: 40 CFR 745 subpart L; 40 CFR 745 subpart Q Legal Deadline: None Abstract: Abstract: In August, 1996, the Environm ental Protection Agency (EPA) prom ulgated 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 certif ied, that training program s 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 author ization to adm i nister and enforce the regulations developed under section 402 for the training a nd certification of individuals conducting LBP activities and the accreditation of training program s for LBP activities in 1996 (August 29, 1996, 61 FR 45778). EPA perform e d an analysis of the potential im pacts on sm all entities and determ ined that this action is likely to have a m odest adverse econom ic im pact on a substantial

num ber of sm all entities. The TSCA section 404 regulations becam e effective August 29, 1998. The final rule then provided for an additional phase- in period for the requirem e nts for training
program accreditation, individual and firm certification, and work practice standards. Regulations for accreditation of training program s becam e effective on March 1, 1999. Regulations for certification of individuals and firm s becam e 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 determ ine whether the rule should be continued without change, or should be am ended or rescinded, to m i nim i ze econom ic im pacts on sm all

108 ~ Chapter 8: Section 610 Review ~RFA Guidance for EPA Rulewriters

entities while still com p lying with the provisions of the Toxic Substances Control Act (TSCA). EPA has already solicited com m e nt on the continued need for the rule; the com p lexity of the rule; the extent to which it overlaps, duplicates, or conflicts with other Federal, State, or local
governm e nt rules; and the degree to which technology, econom ic conditions or other relevant factors have changed since the rule was prom ul gated. No com m e nts were received, and EPA has concluded that the rule needs no revisions at this tim e to m i nim i ze im pacts on sm all entities. See EPA Docket ID num ber OPPT-2003-0015 at www.epa.gov/edocket.

Timetable: Action Date FR Cite Final Action 1 08/29/96 61 FR 45778 Begin Review 05/27/03 68 FR 30942 Co mment Perio d End 12/22/03 68 FR 73543 End Review 12/13/04 69 FR 73889 Regulatory Flexibility Analysis Required : No Small Entities Affected : No Government Levels Affected : None Additional Inform ation : SAN No. 4788, EDocket No. OPPT-2003-0015; Agency Contact: Cindy Wheeler, Environm ental Protection Agency , Office of Prevention, Pesticides and Toxic Substances, 7404T, Washington, DC 20460 Phone: 202-566-0484 Fax: 202 566-0470 Em ail: wheeler.cindy @epam a il.epa.gov Julie Sim p son, Envir onm ental Protection Agency , Office of Prevention, Pesticides and Toxic Substances, 7404T, W ashington, DC 20460 Phone: 202-566-1980 Fax: 202 566

- 0471 Em ail: sim p son.julie@epam a il.epa.gov RIN: 2070-AD65

8.16 Section 610 Judicial Review

The 1996 SBREFA am endm ents to the RFA gave sm all entities adversely affected by a rule the right to seek judicial review of our com p liance with the requirem e nts of section 610. A reviewing court has wide discretion in decidi ng what the appropriate rem e dy should be for an Agency’s failure to comp ly with section 610, including rem a nding the rule or deferring enf o rcem ent of the rule against sm all entities, unless the court f i nds that continued enf o rcem ent of

the rule is in the public’s interest.

109 ~ Chapter 8: Section 610 Review ~