Time for Federal Agencies to Take Small Business Concerns Seriously

Date: October 26, 2015

For years the National Federation of Independent Business (NFIB) has voiced concerns over the burdensome impact of regulations coming from the federal government. The bureaucratic industrial complex in Washington is all too good at churning out new regulatory mandates. But apparently Washington bureaucrats are not so good at considering the economic consequences of their regulations, or for that matter following laws that require agencies to consider small business impacts.

Unfortunately small businesses are hit hardest when federal agencies impose new regulatory burdens. This is true for a number of reasons. For one, they typically lack in-house counsel, and are usually left to try and navigate the regulatory seas alone. Perhaps even more critically, they lack the financial resources to absorb regulatory costs that larger corporations can withstand. For example, the Environmental Protection Agency and Army Corps of Engineers recently promulgated a rule that radically expands their jurisdiction under the Clean Water Act (WOTUS Rule)—which means that affected landowners must now spend over $250,000 to obtain federal permits to make any use of affected portions of their land. That means that it’s economically unfeasible for affected small businesses to do anything with their land.

But if federal agencies were seriously considering small business impacts—as is required by the Regulatory Flexibility Act (RFA)—they would not bullishly push forward on new regulation. For that matter, we would see far more limited regulatory changes. Yet despite repeatedly objecting to new regulatory impositions, federal agencies have routinely ignored the RFA. And finally NFIB has thrown down the gauntlet.

In July we filed suit against EPA and Army Corps to block enforcement of the WOTUS Rule until the agencies go back to the drawing board to consider alternatives that may be less burdensome for small business. As explained previously, we think EPA and Army Corps decision to certify that the Rule would have no significant impacts on small business amounts to a contemptuous disregard for the rule of law. And in striking down the WOTUS Rule on RFA grounds, we hope to send a warning shot to other federal agencies.

The good news is that we’re not alone in raising RFA concerns. In fact, we recently caught wind of a lawsuit, in which small business mining companies and small governmental entities are suing the Department of Interior for what appears to be a blatant violation of the RFA. (It’s worth noting that the RFA not only requires federal agencies to consider small business impacts, but also requires agencies to consider burdens imposed on small governmental entities, like municipalities and counties). The lawsuit, Western Exploration LLC v. U.S. Department of Interior, challenges the Department of Interior’s recent decision to impose restrictions on access to public lands.

The backstory is that the U.S. Department of Fish & Wildlife Services (FWS) had been asked to list the western sage grouse as a protected species under the Endangered Species Act (ESA). In the end FWS decided that the species did not qualify for protection under the ESA. But, the Department of Interior decided to take alternative actions to protect the sage grouse—which may be found through vast swaths of the American west. Ultimately the Department decided the best course would be to further restrict access to federal lands in places where the bird may be found. But they didn’t bother to consider whether this would be harmful to small business; the Department issued the new restrictions without even considering whether they would impact small business, or whether there were less burdensome alternatives.

Of course, access restrictions do adversely impact miners, ranchers and other small businesses that depend on access to federal lands. And this is a pretty big deal out west. Accordingly, we must applaud the small businesses and counties that have banded together to seek enforcement of the RFA. In the meantime, we’ll continue to monitor this case, and we may consider filing an amicus brief at an appropriate juncture.

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