Refinery Rule Returned to EPA for Additional 'Analysis': How Big Oil, OIRA, and the SBA Office of Advocacy Teamed Up to Delay Progress

by Rena Steinzor
Michael Patoka

March 19, 2013

On Friday, the White House Office of Information and Regulatory Affairs (OIRA) returned a proposed rule on air pollution standards for oil refineries to EPA, insisting that the agency complete “additional analysis” before moving forward. EPA’s efforts to reduce hazardous pollutants from these facilities will be delayed for months or likely years.  And that additional analysis?  OIRA won’t even say what it’s for.  “Trust us” is not the most reassuring government transparency.

EPA was proposing to revise the emissions standards for hazardous air pollutants from oil refineries, incorporating the results of a “risk and technology review,” which is used to determine whether additional reductions are warranted in light of the remaining risks to human health that the facilities present and the technology now available to lower their harmful emissions. The proposal would also amend new source performance standards (NSPS) for a number of other pollutants from these facilities. The various pollutants emitted from the nation’s 150 oil refineries can cause cancer, severe respiratory problems, and a range of cardiovascular, skin, blood, and neurological disorders. Because EPA’s proposal has been returned to the agency instead of released to the public, we do not know by how much EPA expected to reduce emissions of these harmful pollutants or how large the resulting health benefits would be.

The current emissions standards for hazardous air pollutants from oil refineries were issued in 1995 and 2002, each one covering different sources of pollution. Under the Clean Air Act, EPA is required to review these standards within eight years of setting them, so this rulemaking is actually many years overdue. The agency has been under a court-approved settlement to propose this rule by December 15, 2011, and it is more than a year past that deadline as well. After conducting an extensive survey of all the refineries in the nation, EPA submitted its proposal to OIRA on September 4, 2012, already nine months late but also during the election season. OIRA then held onto it for more than six months—much longer than the 90 days (with one 30-day extension) permitted by Executive Order 12866—only to tell the agency on Friday that it needs to provide even more information.

Lack of Transparency at OIRA

The saga of the refinery rule also illustrates how OIRA escapes accountability for its role in weakening regulation, by skirting even the most minimal transparency requirements. Although it’s clear to everyone involved that OIRA returned the rule—the EPA even said so—OIRA pretends that it was “withdrawn” by the agency. It’s much more than a semantic difference. Because the rule was “withdrawn,” OIRA gets to avoid having to explain its objections to the rule in a “return letter,” as required by section 6(b)(3) of Executive Order 12866. This tactic has become common practice for OIRA: in the last ten years (since March 19, 2003), OIRA has issued only nine return letters, while 399 rules were “withdrawn”—many of them likely pulled at OIRA’s request.

Even without a return letter, there should be other windows into OIRA’s process that would shed light on its decisions, but OIRA makes sure to keep all the curtains drawn. Section 6(b)(4)(d) of the same Executive Order requires OIRA to release all documents exchanged between it and the agency once the rule is either published or withdrawn, but OIRA has not done so here, just as it routinely ignores this and other disclosure requirements. We could perhaps gain some insight from reading the comments made by other agencies—after all, the interagency review ended just three days before the rule was returned—but OIRA allows the agencies to attack each other’s proposals in secret, on the pretext that they constitute internal “deliberations.”

In the absence of any more detailed information about why this rule needs “additional analysis,” we are skeptical of OIRA’s motivations. When agencies submit rules to OIRA that benefit regulated industries, by weakening standards or creating exemptions from a rule, they seem to slip through the review process at great speed and with minimal analysis. For example, OIRA completed its review of an EPA rule that exempted logging roads from Clean Water Act permitting requirements in a mere 22 days, well below the average review time. And the Department of Agriculture’s proposal to increase the line speeds at poultry plants and replace federal inspectors with company employees was allowed to be released without the normally rigorous interagency review and with virtually no meaningful analysis of the rule’s implications for worker safety. Yet when a regulation that protects public health, safety, or the environment comes across OIRA’s desk, the skids are no longer greased, and suddenly there is never enough analysis. These rules often languish at OIRA for years, or as in this case, are returned to the agency.

The Role of the SBA Office of Advocacy

OIRA wasn’t the only government office interfering in this rule. A recent CPR white paper by Sidney Shapiro and James Goodwin exposes how the Small Business Administration’s (SBA) Office of Advocacy works in tandem with big-business lobbyists to weaken and delay much-needed health, safety, and environmental regulations.  One of us (CPR President Rena Steinzor) testified at a congressional hearing last Thursday on the same subject, urging an investigation into the Office’s role by the Government Accountability Office (GAO). The Office of Advocacy’s conduct in this rulemaking exemplifies many of the tactics described in the report and the testimony.

The Office of Advocacy often sets a rulemaking back for months or even years by insisting that the relevant agency supply an unreasonable level of detail very early in the rule’s development, as the agency jumps through a complicated set of analytical and procedural hoops. Here, the Office objected that EPA didn’t provide enough information on the rule’s impacts to the business representatives on a “Small Business Advocacy Review” (SBAR) panel convened by the agency, concluding that EPA thus violated its statutory obligations. It’s a procedural complaint that the Office has made—in nearly identical terms—against a number of recent EPA efforts to enact critical, long-overdue pollution safeguards before judicial or other deadlines, including a rule to address greenhouse gas (GHG) emissions from new power plants and the “Utility MACT.”

It is difficult to say for certain whether the Office’s claims have any validity (note that EPA did in fact defend its SBAR process in the Utility MACT rulemaking) or whether they are just another tactic to use unrealistic information demands to block or delay rules disfavored by powerful industries—industries that, by the way, hardly conform to any ordinary understanding of a “small business.” At the very least, these claims merit a healthy dose of suspicion, especially given how eagerly anti-regulatory trade associations like the U.S. Chamber of Commerce and the American Petroleum Institute (API) have taken up the Office’s concerns.

And what of the “small” oil refineries whose interests the Office sought to protect? As it turns out, they’re not really small at all. Under the SBA’s size standards, a petroleum refinery can have 1,500 employees and still qualify as a “small business,” as far as the Office of Advocacy is concerned. Just three months after the SBAR panel was convened, CVR Energy, one of the “small” refineries represented on the panel announced it was buying another “small” refinery on the panel—for more than $525 million—and by May 2012, the company had earned its way into the Fortune 500. It raked in $379 million in profits in 2012, but ironically, it may still qualify as a small refinery for most purposes, as it has only 1,100 employees. (It has, however, surpassed the 125,000 barrels-per-day threshold to be considered small in government contracts.)

These “small” refineries are not innocent bystanders unfairly swept up in regulations aimed at larger companies; they produce considerable social harms themselves. This past September, a boiler explosion at a refinery owned by CVR Energy killed two workers, sparking investigations by state and federal agencies. And Wyoming Refining Co., another company on the SBAR panel, has a staggering track record of spills, soil contamination, and emissions violations, with nearby residents blaming the Newcastle refinery for numerous health problems and fatalities.

David Rostker, Assistant Chief Counsel for the Office of Advocacy, attended two OIRA meetings on this rule. At the first meeting, the Office lobbied against EPA’s rule alongside four representatives from Phillips 66, the self-described “third-largest refiner” in the United States, illustrating how the Office’s “small business” concerns coalesce with the demands of Big Oil. At the second meeting, the Office was accompanied by many of the “small” refineries that participated in EPA’s SBAR panel. (The largest oil companies also rallied against the rule at two earlier meetings with OIRA.)

Interestingly, a portion of the written material submitted to OIRA by the “small” refineries is remarkably similar to language submitted by the American Petroleum Institute (API) a year earlier, which suggests that the “small” refineries were being fed talking points by the large trade association. Here’s the language from the “small” refineries’ document

Small refineries spent considerable time and expense to fulfill the requirements of the ICR [Information Collection Request] to revise emission inventories and conduct direct measurements on numerous sources. Even with enhanced residual risk models and updated information, the result remains that the calculated risk is acceptable.

And from the API’s

Refineries spent more than $50 million on the ICR to revise the emission inventories and conduct extensive direct measurement of numerous sources

The residual risk models were enhanced, toxicological files updated and, yet, the result remains the calculated risk is acceptable.

(Emphasis in both originals.)

Perhaps the most important question to ask is why the SBA Office of Advocacy felt it wise to use its limited taxpayer-funded resources to attack regulations on behalf of the deep-pocketed oil refining industry—whose members (both big and “small”) were perfectly capable of mounting effective lobbying campaigns on their own behalf—instead of helping truly small businesses comply with regulations?

The upshot of all this lobbying and White House interference is that, on top of years of inaction and delay, EPA’s proposal—required by statute and court-approved settlement, and long overdue—has been sent back to the drawing board without even an explanation for public consumption, and likely won’t reappear anytime soon. Unlike the people who live around their refineries, oil companies can breathe a deep sigh of relief.

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Also from Rena Steinzor

Rena Steinzor is a Professor of Law at the University of Maryland Francis King Carey School of Law, and a past president of the Center for Progressive Reform. She is the author of Why Not Jail? Industrial Catastrophes, Corporate Malfeasance, and Government Inaction.

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