How federal government can best support US manufacturing expansion

March 17, 2017

Trump administration asks sector to weigh in on ‘Streamlining Permitting and Reducing Regulatory Burdens for Domestic Manufacturing’

In his first week in office, President Trump signed several Presidential Memoranda and Executive Orders aimed at encouraging domestic infrastructure development. Many of these executive actions direct federal agencies to adhere to a pair of central tenets, i.e., expedited review for high priority infrastructure projects and the use of U.S. materials and equipment.  The “Presidential Memorandum Streamlining Permitting and Reducing Regulatory Burdens for Domestic Manufacturing” signed on Jan. 24, 2017, expands on these themes and directs federal agencies to undertake a notice and comment period, during which U.S. manufacturers can engage and share their thoughts on how the federal government can best support the expansion of domestic manufacturing.

The directive from President Trump is broad and covers all federal agencies that could impact the manufacturing sector. In response to President Trump’s directive, the U.S. Department of Commerce Office of Policy and Strategic Planning published a Request for Information regarding the Impact of Federal Regulations on Domestic Manufacturing ("the Commerce RFI"). See 82 Fed. Reg. 12,786 (Mar. 7, 2017). The Commerce RFI implements President Trump’s memo, laying out a series of questions for stakeholders to respond to in order for the federal government to better understand how various manufacturing industries can benefit from more efficient permitting and thoughtful regulation.  Companies in the manufacturing sector might consider developing a strategy for federal engagement and formulating comments on what they consider potentially burdensome federal regulatory programs, including, as just a few examples, the Clean Air Act’s New Source Review program, conservation programs administered by the Department of Energy, labeling requirements from the Food and Drug Administration, and Department of Labor programs.

Commerce Department takes the lead, setting short comment period

Section 2 of the Presidential Memo on Manufacturing directs the heads of all federal agencies to (1) expedite reviews and approvals for proposals to build new or expand existing manufacturing facilities; and (2) reduce regulatory burdens affecting domestic manufacturing.  To accomplish this, President Trump directed federal agencies to open a 60-day comment period, during which the manufacturing sector can offer thoughts on what federal actions can be undertaken to streamline permitting and reduce regulatory burdens for domestic manufacturers. It appears the Commerce Department roughly calculated the "60-day" timing from the date of President Trumps initial memo as the cut-off period for submission of comments was set to March 31, 2017.

Commerce outlines specific questions for the manufacturing sector

The Commerce RFI generally tracks the key points in the Presidential Memo on Manufacturing, offering up template questions that industry can respond to in order to describe specific aspects of their operations and the issues they face. First, the Commerce RFI requests general information from commenters, including (1) NAICS code(s); (2) what they manufacture; (3) the location of facilities; (4) number of employees; and (5) the approximate sales revenue.

Beyond the basics, the Commerce RFI also asks specific questions regarding federal permitting, including how many permits your industry requires, whether any are duplicative, how onerous the permits are to obtain and comply with and whether any federal or state permitting processes stand out as exemplary.  As for reducing regulatory burdens, the Commerce RFI asks stakeholders to specifically list the "top four regulations that you believe are most burdensome for your manufacturing business."  Additional questions posed in the Commerce RFI are how regulatory compliance could be simplified.

Report outlining a plan for streamlined permitting and regulatory burden reductions

The information collected via the Commerce RFI will be utilized to implement Section 3 of the Presidential Memo on Manufacturing, which directs the Secretary of Commerce to consider the comments received under Section 2 and submit a report to the President within 60 days of completion of the public comment period.  That report should:

  1. Set out a plan to streamline federal permitting processes for domestic manufacturing
  2. Set out a plan to reduce regulatory burdens that affect domestic manufacturers
  3. Identify priorities and recommended deadlines for completing actions
  4. Include recommendations for any necessary changes to existing regulations or statutes, as well as actions to change policies, practices, or procedures that can be taken immediately under existing authority

Recent past efforts at regulatory reform/permit streamlining

Regulatory reform is certainly not a new concept, although the success of past efforts is up for debate. Congress passed statutes in the 1980s (the Paperwork Reduction Act and the Regulatory Flexibility Act) and again in the 1990s (the Unfunded Mandates Reform Act and the Congressional Review Act) with the goal of putting in place structures to limit the pace of regulatory development. These statutes require additional coordination for certain information requests, cost-benefit analyses, and allow for the review (and potential disapproval) of major rules by Congress. However, these statutes are generally forward looking and currently baked into the federal rulemaking process. While they may augment consideration of new regulatory initiatives, they do nothing to address longstanding, burdensome regulatory programs.

More recent efforts at regulatory reform have been undertaken by Congress and focus on review (and potential repeal) of existing regulatory programs. For example, on Jan. 7, 2017, the House passed the Searching for and Cutting Regulations that are Unnecessarily Burdensome (SCRUB) Act, which would establish the Retrospective Regulatory Review Commission to conduct a review of all federal regulations to identify regulatory programs or individual rules that "implement a regulatory program that should be repealed to lower the cost of regulation." Former President Obama also previously issued an Executive Order focused on improving permitting and review of infrastructure projects.

During the Obama Administration, Congress also made attempts to pass legislation streamlining federal permitting, largely to no avail. Legislation either stalled or if passed, was limited to major infrastructure projects subject to National Environmental Policy Act ("NEPA") review. For example, the Responsibly and Professionally Invigorating Development (RAPID) Act passed the House, but never came to a vote in the Senate. The Federal Permitting Improvement Act of 2015, bipartisan legislation aimed at improving federal permitting, was passed as Title XLI of the "Fixing America’s Surface Transportation Act’’ or the ‘‘FAST Act" but focused on projects that were subject to NEPA and required a total investment of more than $200 million.

The current effort differs from previous attempts at reform in that it focuses on one specific sector of the economy the President seeks to bolster (manufacturing) and also sets up a formal process for that sector to share with the government its thoughts on how the federal regulatory knot can be unwound. The manufacturing sector covers a wide range of industries, e.g., chemical, products, oil-field equipment, pharmaceutical, textiles, just to name a few; each with unique regulatory challenges.

Subsector example: New chemical manufacturing facility

It currently takes between three to five years to obtain all of the necessary permits and other governmental approvals necessary to break ground on a major new chemical plant. Between 50 and 60 separate permits and other authorizations issued by dozens of federal, state and local agencies must be secured. Many of the required authorizations have overlapping purposes, and agency deadlines are often extended multiple times. Environmental authorizations alone typically make up half or more of the required approvals and can involve as many as 15 to 20 separate agencies commenting on each other’s redundant requirements, which can further cause delays. And while labor costs and other considerations also play a role, the inevitable result is that more and more projects end up being built overseas.

Next steps for manufacturers

President Trump and the Commerce RFI established a tight timeline for the public comment period, less than 30 days from the RFI’s release on March 7th to the comment cut-off period of March 31, 2017.. While it may be a significant effort to identify under that timeline the major federal regulatory burdens that impact a manufacturing business and articulate them to the government, the opportunity to share those concerns and potentially help craft a path forward is ripe.

Matt Paulson is a partner in Bracewell LLP’s Austin and Houston offices where he represents companies in the oil and gas, refining, power and chemical manufacturing industries on environmental matters, including strategic permitting, regulatory compliance, investigations, enforcement and civil and appellate litigation. His work includes advising clients on environmental issues arising under the Clean Air Act, the Clean Water Act, the Endangered Species Act, the National Environmental Policy Act, and other state and federal environmental laws. He can be reached at [email protected].

Based in Bracewell’s Washington, D.C. office, Michael Weller advises clients in the context of government investigations and enforcement actions, regulatory compliance and advocacy, litigation, permitting, and in quantifying and allocating liabilities during business transactions. He represents clients in the manufacturing and energy sector, including upstream oil and gas companies and pipelines, in a wide range of environmental law and business matters. He can be reached at [email protected].

Bracewell LLP

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