Office of Management and Budget

Testimony of Steven D. Aitken

STATEMENT OF
STEVEN D. AITKEN
ACTING ADMINISTRATOR,
OFFICE OF INFORMATION AND REGULATORY AFFAIRS
BEFORE THE
SUBCOMMITTEE ON REGULATORY REFORM AND OVERSIGHT
OF THE
COMMITTEE ON SMALL BUSINESS,
UNITED STATES HOUSE OF REPRESENTATIVES

July 13, 2006

Chairman Akin, Ranking Member Bordallo, and distinguished Members of this Subcommittee, I am Steven D. Aitken, Acting Administrator, Office of Information and Regulatory Affairs (OIRA), U.S. Office of Management and Budget (OMB).  I have worked at OMB for 17 years, most recently serving as Deputy General Counsel.  This is my first appearance before this Committee.  Thank you for inviting me to this hearing and for giving me the opportunity to testify today on the reform of regulations that impact the United States manufacturing sector. 

As you know, two keys roles of OIRA are to review new rulemakings and stimulate modernization of existing rules.  In my testimony today, I will discuss the process OIRA has used to receive public input on reforming existing rules and how OIRA ensures that agencies consider the impact of new rules on small businesses.

The 2004 Manufacturing Initiative

A major tool that OIRA uses to improve existing rules is our call for public reform nominations pursuant to the Regulatory Right to Know Act.1  Pursuant to this Act, OIRA has initiated three public nomination processes to undertake reform of existing regulations.  In 2001, OMB requested public nominations of rules that should be rescinded or modified.  We received 71 nominations from 33 commenters.  In 2002, OMB again requested public nominations of reforms of rules and also sought nominations for reform of guidance documents and paperwork requirements.  We received 316 distinct reform nominations from more than 1,700 commenters.  

Our most recent request for public nominations was in February of 2004 - in our draft Report to Congress on the Costs and Benefits of Federal Regulations.2  In that request, OIRA focused on the manufacturing sector because it continues to be one of the most heavily regulated sectors of our economy. We asked nominators to suggest specific reforms to regulations, guidance documents or paperwork requirements that would improve manufacturing regulation by reducing unnecessary costs, increasing effectiveness, enhancing competitiveness, reducing uncertainty and increasing flexibility. We also mentioned that OIRA is particularly interested in reforms that address burdens on small and medium-sized manufacturers, where burdens tend to be relatively large.  Finally, since any proposed reforms would need to be evaluated as any other regulatory action under Executive Order 12866, we suggested that commenters consider the extent to which a benefit-cost case (quantitative and/or qualitative) can be made for the reform. 

In response to the solicitation, OMB received 189 distinct reform nominations from 41 commenters.  The materials submitted by the 41 commenters are available on OMB's web site, and the 189 reform nominations are summarized in OMB's Final 2004 Report to Congress on the Costs and Benefits of Federal Regulations, which was issued on December 17, 2004.3 OMB evaluated the reform nominations and collaborated with federal agencies in the development of response plans. OMB also sought evaluations of the recommendations by the Office of Advocacy of the US Small Business Administration and the US Department of Commerce's Office of the Assistant Secretary for Manufacturing and Services.  As a result of this process, on March 4, 2005, OMB issued the Regulatory Reform of the U.S. Manufacturing Sector Report.  In this report, Federal agencies and OMB determined that 76 of the 189 nominations have potential merit and justify further action.4   For all future actions on these reforms, the report also identified milestones and deadlines, which range from performing a priority investigation and reporting to OMB in order to determine appropriate next steps, to issuing modernized regulations.

Status of the 2004 Manufacturing Reform Initiative

The U.S. Manufacturing Sector Report identified 46 milestones that agencies were due to complete (i.e., by publishing a proposed rule or submitting a report to OMB) by the end of FY 2005.  Agencies reached 33 of these 46 reform milestones.  We report on each of the reform nominations in the final 2005 Report to Congress on the Costs and Benefits of Federal Regulations.5

According to the most recent information provided to OMB, the agencies have now completed 36 of the 76 priority reforms.  Please note that these numbers are preliminary; we will continue to work with the agencies to verify and update the status of the priority reforms in preparation for our 2006 final report to Congress.  Several of these reforms successfully improved existing regulations, in that the reforms increase the net benefits of regulation while maintaining important environmental, health, and safety protections.  The first two reforms listed below were also identified as high priorities by SBA’s Office of Advocacy.

  • In December 2005, EPA issued a final rule permanently exempting certain categories of “non-major” industrial sources that are subject to national emission standards for hazardous air pollutants (NESHAP) from the requirement to obtain an operating permit under title V of the Clean Air Act.  The five exempted source categories are dry cleaners, halogenated solvent degreasers, chromium electroplaters, ethylene oxide sterilizers and secondary aluminum smelters.  The sources affected by this rule are primarily smaller businesses and EPA estimates that this final rule will provide regulatory relief for over 38,000 sources, many of which are small entities.  This reform was in response to nomination number 1086, which requested that EPA develop a rule that permanently exempts metal finishing facilities from federal permitting requirements.  EPA studied this issue and found that it had merit. 

  • In October 2005, EPA published the final rule, which included about a dozen targeted revisions to EPA's industrial pretreatment program, which streamlined the monitoring and oversight requirements for industrial facilities discharging into wastewater treatment plans.  One provision allowed treatment plant operators to waive sampling for regulated ("categorical") pollutants upon a showing by the discharger that the pollutant is not expected to be present in its wastewater.  Another allowed treatment plant operators to reduce oversight of facilities with small volume discharges in order to allow greater focus on dischargers with the greatest potential for adverse environmental impact.  The rule was estimated to reduce burden on dischargers and treatment plant operators by about 240,000 hours.   This reform was in response to nomination number 47, which asked the EPA to finalize a rule they had already proposed that streamlined the general Pretreatment Regulations for Existing and New Sources of Pollution. 

  • On April 2006, EPA published a final rule streamlining requirements under the Resource Conservation and Recovery Act (RCRA).  This rule was a result of a multi-year effort that was designed to systematically reduce burden while ensuring protection of human health and the environment.  Numerous changes were made to provide greater flexibility (e.g., allow in-house professional engineers to make required certifications) and reduce paperwork requirements (e.g., lessen the frequency of required self-inspections for facilities with exemplary environmental performance, eliminate duplicative recordkeeping and reporting requirements).  Overall, this final rule is expected to reduce compliance costs by $2 million to $3 million annually, without lessening environmental protections.  The annual burden hour savings range from 22,000 hours to 37,500 hours per year.  This reform was in response to nomination number 92, which requested that EPA should reduce the frequency of inspections of large quantity generator accumulation areas regulated under RCRA.   EPA had already begun a rulemaking to streamline these requirements before this round of reform nominations. 

OMB remains dedicated to these reform initiatives; we will continue to oversee the reform process to make sure that agencies make adequate progress so that these nominations can be closed out by the end of 2008. 

OIRA undertakes many other activities, in addition to the manufacturing regulatory reform process, to ensure that agencies consider the impact of their regulatory actions on small business.  We work closely with the Office of Advocacy of the Small Business Administration to ensure that agencies meet their obligations to analyze the impact of regulations and to consider less burdensome regulatory alternatives for small businesses.  For example, OIRA, along with Advocacy, sits on Small Business Advocacy Review Panels, pursuant to Small Business Regulatory Enforcement Fairness Act (SBREFA).  These panels ensure meaningful small business input in the early stages of rule development for all EPA and OSHA rules that may have significant small business impacts.  To date, OIRA has participated in 30 EPA and 7 OSHA SBREFA panels.  While not legally binding, the recommendations of these panels are taken seriously by the agencies and have frequently resulted in significant improvements to the proposed regulations. 

In addition, Executive Order 13272, issued in August 2002, strengthens agency compliance with the Regulatory Flexibility Act (RFA) and Advocacy's role in ensuring that agencies make minimization of small business impacts a central consideration in the rule development process. The Executive Order states that agencies must thoroughly review draft rules to assess and take appropriate account of the potential impact on small businesses, small governmental jurisdictions, and small organizations, as provided by the RFA.  

Thank you very much for the opportunity to participate today in this important hearing.  I would be happy to answer any questions you may have.

1 Section 624 of the Treasury and General Government Appropriations Act of 2001 (31 U.S.C. § 1105 note, Pub. L. 106-554)

2 Available at http://obamawhitehouse.archives.gov/omb/inforeg/draft_2004_cbreport.pdf

3 Available at http://obamawhitehouse.archives.gov/omb/inforeg/2004_cb_final.pdf

4 A detailed explanation of each priority reform, along with milestones, can be found in OMB’s report on Regulatory Reform of the U.S. Manufacturing Sector, available at http://obamawhitehouse.archives.gov/omb/inforeg/reports/manufacturing_initiative.pdf

5 Available at http://obamawhitehouse.archives.gov/omb/inforeg/2005_cb/final_2005_cb_report.pdf

6 The reforms were numbered for tracking purposes in OMB’s final 2004 Report to Congress on the Costs and Benefits of Federal Regulations.