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Amid Regulations Debate, White House Seeks Cuts

Since the early 1990s, gas stations have had to equip pumps with nozzles to capture fuel vapors that escape from tanks as drivers fill up. The government mandated the vapor-recovery systems, which can cost station owners more than $100,000 dollars to install and $3,000 annually to run, to keep harmful pollutants out of the atmosphere. However, most new cars and trucks have tanks that also prevent fumes from leaking during refueling. So now federal regulators want to drop the requirement that gas stations maintain the redundant equipment. 

The change, expected to be finalized by the Environmental Protection Agency this summer and take effect next year, is one of roughly 500 old rules being reviewed as part of a year-old White House effort to cut red tape. President Barack Obama last January ordered agencies to revamp clunky or unneeded regulations to make it easier for businesses, particularly small ones, to comply. “When we find rules that put an unnecessary burden on businesses, we will fix them,” Obama said in his 2011 State of the Union address.

The White House’s “retrospective review” may begin to loosen some of the tangled bureaucracy that vexes entrepreneurs. Regulation is among the small business owners’ biggest complaints: An October Gallup poll ranked it as their top problem, though other surveys, such as one by the National Federation of Independent Business, place red tape below concerns such as weak sales.

Distracting Regulations

Small businesses advocates welcome the effort, but they say more needs to be done. “Looking at the list [of rules under review] does point out the difficulty that the regulatory regime creates for small companies,” says Todd McCracken, president of the National Small Business Assn., a Washington trade group. “It’s just the enormous number of relatively small things that a small business owner can’t keep track of.”

Both Republicans and Democrats, eager to be seen as champions of Main Street, pledge to get regulation out of the way of entrepreneurs. Politically, Obama’s focus on streamlining bureaucracy could counter Republican efforts to paint him as a heavy-handed opponent of free enterprise. “Our goal … is to change the regulatory culture of Washington,” Cass Sunstein, head of the White House Office of Information and Regulatory Affairs, said in a November speech. The White House estimates businesses will save $10 billion in the next five years from various rule changes in the works. Among the highlights: The Occupational Safety and Health Administration is cutting redundant reporting requirements; the Department of Health and Human Services says three rules changes will save doctors and hospitals $1 billion a year; and trade-related agencies are trying to make it easier for small businesses to export.

The NSBA’s McCracken says he’d like to see such a shift, along with mechanisms that encourage rule makers to keep regulations sensible. One idea he floats is a “regulatory budget” that tempers new rules based on how much they’re expected to cost affected businesses. “You’re basically giving agencies an incentive to make sure regulations they put forth are as streamlined and logical as possible,” he says.

Still “a Combative Process”

Tom Sullivan gives the White House regulatory project a grade of “incomplete.” Sullivan served as chief counsel for advocacy in the Small Business Administration under George W. Bush. He was the federal official charged with making sure regulators consider small businesses. “There’s a giant question mark on whether that process is generating real dollar savings for small business and real reduced paperwork burdens,” says Sullivan, now an attorney at Nelson Mullins in Washington. He also says agencies seem to consider small businesses adversaries, rather than stakeholders, when writing rules. “You can look at [regulation] as a constructive process or a combative process,” he says. “Unfortunately I’ve seen this administration look at it as a combative process.”

The rules for gas stations show how tricky it can be to simplify a regulation. While the EPA change will lift the federal mandate for vapor-recovery systems, states have requirements that need to be changed in turn, says John Eichberger, vice-president of government relations for NACS, a trade group for convenience stores and gas stations. And states in what’s known as the “ozone transport region,” which stretches from Virginia to Maine, won’t be able to remove the costly vapor-recovery systems without replacing them with additional measures to reduce emissions, the EPA says in a prepared statement. Eichberger’s group has asked the EPA to expedite the changes.

Winslow Sargeant, the SBA’s current chief counsel for advocacy, cites a few successes at repealing regulations in the past year, including one that classified milk as an “oil” akin to petroleum and put onerous requirements on companies shipping dairy to avoid spills. “We wrote a letter years ago in terms of why that didn’t make sense, so we’re pleased that that rule is no longer there,” he says. Sargeant also says he wants agencies to give small companies clearer guidance on how to follow the rules. “Small businesses do not want to spend thousands of dollars on working out how to comply and then be told, ‘I’m sorry, that’s nice, but not nice enough,’” he says.

Tozzi is a reporter for Bloomberg Businessweek in New York.

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