Playing the "regulatory uncertainty" card

Original Reporting | By James Lardner |

Formosa Plastics presents itself as a neutral bystander when it comes to the rights and wrongs of the EPA’s efforts to address the greenhouse-gas problem, efforts that would supplant Texas (and other states) as the chief pollution-permitting authority for a subset of large facilities. That’s “not our fight,” said Rice. “We’re on the sidelines, waiting for certainty.”

In the course of Remapping Debate’s conversation with Rice, however, it developed that Formosa Plastics is one of the companies lobbying on behalf of an effort in Congress to delay any EPA action until at least 2013. By calling for a two-year postponement, Rice was asked, isn’t Formosa Plastics contributing to the very uncertainty that it professes to be concerned about?

The company is seeking a delay, Rice replied, to allow the courts and the relevant state and federal authorities to work things out in an orderly fashion. Meanwhile, Formosa Plastics would be in a position to secure the necessary permits from Texas, he said, adding that with Texas “we know the rules, we know the requirements, we know the procedures.”

Even in conversations with business managers and owners who have publicly made this claim, it soon emerged that what truly concerns them, in most cases, is stronger regulation rather than uncertain regulation.

And with Texas, does the company know that it can expect looser emission standards? Is uncertainty a cover for an effort to get by with less regulation?

“For us, it’s not about emission limits,” Rice responded. “It’s about the uncertainties surrounding the permit program process and procedures — that’s what makes it so difficult to make sound long-term, significant capital investment decisions.”

David Arkush, director of Congress Watch, an arm of the Ralph Nader-founded consumer group Public Citizen, said the distinction sounded disingenuous to him. “When you’re trying to argue in a policy debate, you rarely want to say: we want this because it’s good for us and that’s the only reason,” Arkush said. “You try to stand on some sort of public-interest principle.”

“The principle they’re trying to evoke is that uncertainty is bad for business,” Arkush continued.  But the certainty that companies are generally after is a “certain kind of certainty,” he continued. “They want what they want. They wouldn’t necessarily be happy with lower emission limits.”

Remapping Debate asked Rice if his company had considered an entirely different way of dealing with the problem — an attempt to get out in front of the nation’s effort to control greenhouse gases by taking steps to lower its emissions to levels that would be sure to fall within the official limits, regardless of where and when they end up being set?

“The issue isn’t the emission levels,” Rice repeated. “It’s the process and the requirements. It’s not the amount. It’s the uncertainty.”

Uncertainty makes companies hoard cash?

In a corollary to the uncertainty hypothesis, many have suggested that a flurry of new regulation helps account for the “two trillion dollars worth of corporate profits sitting in banks today because employers are scared to death to invest it,” as House Speaker Boehner asserted in his Cincinnati radio interview, and on other occasions.

That idea, too, is hard to reconcile with the economic data. The capital buildup that, by the end of 2010, brought total cash and liquid assets of U.S. corporations to their highest level in half a century, is part of a trend that goes back several decades, according to the financial analyst and journalist Barry Ritholtz.

The trend, Ritholtz said, was first widely noted in the early 1980s, an era of deregulation. The periods of most striking increase, he continued, have coincided with bursts of corporate profitability more than with any other likely contributing factor. One reason why companies are holding onto more money, in other words, may be, in Ritholtz’s view, the simple fact that they are making more money.

Some of the biggest stock-pilers of corporate capital, moreover, have been the likes of General Electric, Apple, and Johnson & Johnson — hugely profitable, dynamic companies that have not been fretting much about regulatory or any other kind of uncertainty.

And an examination of annual reports of the five largest “cash-hoarding” corporations reveals not one that has pointed to a specific act of investment forbearance prompted by uncertainty about regulation.

And what would Formosa Plastics do, he was asked, if the EPA gained unambiguous permitting authority and went ahead with its plans for tighter emission standards? Would the company drop its project if that happened? Rice said he “really couldn’t speculate,” because the question contained “far too many ‘what ifs’?”

 “They won’t just go ahead with plans that they’re pretty sure would meet any standards, or plans that they could easily modify depending on the possible contingencies that they could imagine,” Arkush said. “It is exceedingly unlikely that the likely range of actions that the EPA would take is unknowable. There isn’t that much uncertainty here. There’s a range of possibilities for what happens, and they can plan accordingly.”


“If they just got out of our lives”

Many of the public laments over faltering investment have focused on small businesses. And small businesses have been the source of many of the complaints about regulatory “uncertainty.” Remapping Debate sought out a number of small-business owners who had submitted statements of that sort to the House Committee on Oversight and Government Reform at the time of a February hearing on “regulatory impediments to job creation.”

For Jack Buschur, an electrical contractor based in Minster, OH, uncertain regulation appeared to be synonymous with a lot of regulation. At the hearing, Buschur recalled a run-in with an OSHA inspector over a nursing-home renovation job. The inspector insisted on a $10,000 lead-paint survey that, according to Buschur, turned out to have been unnecessary. “OSHA came in and just shut the damn thing down,” Buschur said. “And yet, when it came up that it wasn’t a factor, it wasn’t a problem, we were out $10,000 — well, my general [contractor] was out $10,000, I was out $3,000.”

In a recent phone interview, Buschur blamed his OSHA travails partly on the EPA, which had developed the lead renovation and painting rule that caused him so much distress. “They’re just like God, they’re a level up,” he said. But Buschur went on to talk about an array of other forms of regulation that were making his business life difficult, including OSHA rules, health care reform, the Family and Medical Leave Act, and the prevailing-wage rules that bar non-union companies, like his, from bidding on many public projects. The Obama administration is “in bed with the unions,” he said.

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