Administration Pandering to Anti-Regulatory Business Leaders Gets Cold Shoulder

The Washington Post reports today on the White House’s latest failed effort to extract political gain from the President’s misguided “regulatory look-back,” led with disturbing enthusiasm by Cass Sunstein, administrator of the White House Office of Information and Regulatory Affairs. The story tells us a lot about the thinking of the man who controls access to the President, and also lays bare a failing of the way the media covers regulatory issues.

According to the Post, White House chief of staff William M. Daley appeared Thursday before a National Association of Manufacturers gathering hoping to “make nice with corporate America.” But instead, he endured a series of hostile questions from the audience of manufacturing executives eager for looser regulation of their industries.

Daley served up the President’s regulatory look-back as evidence of the Administration’s willingness to weaken regulation in order to please industry – and perhaps the occasional independent voter. But the titans of industry were having none of it. Quotes the Post:

“We think there’s a thin facade by the administration to say the right things, but they don’t come close to doing things,” said Barney T. Bishop III, chief executive of the business group Associated Industries of Florida. He called the efforts to streamline regulations “immaterial.” “We love the platitudes, but we want to see action,” Bishop said.

In a telling example that the Post story doesn’t bother to run down, a Massachusetts utility exec named Doug Starrett complained to Daley that the “Administration was blocking construction on one of his facilities to protect fish, saying government ‘throws sand into the gears of progress.’” If Daley offered any defense, or even allowed for the prospect that there might be more to the story, the Post doesn’t mention it. Instead, Daley is paraphrased as saying he “did not have many good answers, appearing to throw up his hands in frustration at what he called, ‘bureaucratic stuff that’s hard to defend.’ ‘Sometimes you can’t defend the indefensible,’ he said.”

Maybe so, but it might have been useful to gather a fact or two before pointing fingers at “bureaucrats.” Here’s a little background on Starrett’s facility, courtesy of the Worcester Business Journal. 

According to the Journal, Starrett has spent $1.5 million rehabilitating and expanding the capacity of a hydroelectric power turbine at his tool manufacturing plant, situated alongside Millers River in Athol, Massachusetts. The plant, it turns out, is just downstream from a federally supervised salmon spawning program. Local environmental groups pointed out the potential harm the turbine posed to salmon and other fish in the river: Fish would get swept up into the turbine along with the water and killed, and baby salmon would be particularly vulnerable. The opposition of the environmental groups drew the attention of the Federal Energy Regulatory Commission (FERC). Because Starrett’s upgrade of the turbine significantly increased its capacity, FERC told Starrett he’d need a new permit to fire up the turbine. And because of the likely harm to fish populations in the river, FERC consulted, as required by law, with the U.S. Fish & Wildlife Service (FWS).

FWS reviewed the circumstances and told Starrett he’d need to install something to protect the fish – netting to keep them out of the turbine, for example.

Starrett refused, and instead went to court, arguing that the FERC lacked jurisdiction. His original turbine installation is a century old, predating a 1935 ruling granting the Federal Energy Commission jurisdiction over construction of plants.  FERC begs to differ. The upgrades to the plant and the resulting increase in capacity trigger FERC jurisdiction. The case is with the courts.

So, Starrett’s assertion, as reported by the Post, that the Administration was blocking him from throwing the switch, isn’t quite right. FWS has offered up a solution that Starrett could put into place for less than $200,000, according to the Journal. And it’s not as if the problem was unforeseeable before Starrett started spending money to upgrade his – let’s call it “vintage”– hydroelectric turbine. People in the business of running turbines on public rivers have lawyers, or are fools not to, and those lawyers are paid to know or find out the relevant regulatory issues. You don’t upgrade a turbine without scoping that sort of thing out.

Neither do you operate in ignorance of what else is going on in the river whose water you’re borrowing. Here again, any competent lawyer or consultant would have told Starrett that an expanded hydroelectric facility would have an environmental impact, and that the upstream spawning area was an issue of concern. None of it should have been a surprise to Starrett.

Whether he knew or not before sinking $1.5 million into expanding his generating capacity, he’s now balking at doing things he should have planned on doing in the first place. And not only that, he’s going to court to assert that right, all but guaranteeing that it’ll take years to resolve the problem – time spent so that he can make the case in court that his century-old plant is immune from regulation by virtue of its original generating capacity, even though he’s just spent a bundle to increase that capacity.

So, it’s not quite as simple as he apparently described it to the Chief of Staff – that the Administration was blocking his plant for no good reason. In fact, he appears to have done his construction without doing his due diligence, and in apparent disregard for the environmental impact.

I doubt Daley knew any of the specifics of the case. (In fairness to Daley, neither did I until this morning, and I know what I know now because I have the benefit of Google at my fingertips, which Daley did not.) But that’s no excuse for Daley simply conceding all points and pandering his way through. When confronted with such tales, Daley ought to know better than to throw up his hands and bemoan the bureaucracy. Someone less eager to burnish his or the President’s business cred might have paused to think before throwing regulators and the environment under the bus.

Speaking of due diligence, the Post also had the luxury of being able to fact check Starrett’s tale of supposed regulatory overreach. At minimum, it might have taken note of the fact that FERC is an independent regulatory agency, and that “the Administration” doesn’t have control over its decisions, as the article suggests.

So how might Daley have responded? He might have said that he found the story, as presented, to be worrisome and then said that he’d look into the case. Simple, quick, free of pandering. Or he might have asked Starrett a few questions right there on the spot – what’s the dispute about, what’s the proposed solution from FWS, what would it cost, how many fewer fish would be killed, when did you first learn there were spawning salmon upstream, what does he think his obligation is to protect the environment, was there no alternative to litigation, and how many jobs and how much local business will be lost if his turbine kills off the local salmon population?

It’s so very easy to blame regulators and regulation for practically anything. And, indeed, congressional Republicans are blaming the recession on them, working hard to sell the preposterous line that President Obama’s environmental regulations are the cause of the nation’s economic turmoil, not their own anti-regulatory policies of the early and mid-2000s – the ones that gave us “too big to fail,” the proliferation of “credit default swaps,” and various other disastrous examples of lax regulation. The White House seems to think it can co-opt the argument over regulation by weakening or delaying much needed rules. Not only is it miserable policy, but as even Mr. Daley might now acknowledge, it’s turning out to be lousy politics.