Regulation Without Representation

Michigan's economy is dragging, and the state is losing jobs. Some pundits have proposed reductions in Michigan's above-average state and local tax burden, but almost no one has called publicly for reducing the damage caused to our economic climate (and to effective regulatory practices) by Michigan's unnecessarily burdensome environmental regulations.

The Michigan Legislature can begin to correct the problem by passing a law that curtails the Michigan Department of Environmental Quality's ability to issue regulations that are more stringent than those of the federal government. Such a law wouldn't hurt the environment; in fact, a good argument can be made for the law on environmental grounds alone.

Specifically, a "no-more-stringent" law would prohibit the DEQ from exceeding a particular federal regulation unilaterally, although it would still allow the Legislature and the governor to pass a tougher regulation if the DEQ presented a compelling case for it. The principle of federalism would be retained; better yet, it would be exercised by elected officials, who are directly accountable to the people of Michigan.

Elected officials are unlikely to allow their constituents to be harmed if there is an imminent threat to public health or the environment - a point I'll return to below. Nor is there reason to assume federal regulations will be inadequate in the vast majority of cases. As I noted in a recent commentary, federal requirements are extremely stringent. They are consistently based on very conservative theoretical assumptions that are calculated to protect the environment from even the most unlikely threats.

Some of Michigan's environmentalists will nevertheless object to a law restraining the DEQ's regulatory pronouncements. Such activists point with pride to Michigan's history of adopting environmental protection laws that exceed those of other states or the federal government.

But it's worth noting that more stringent state environmental regulations increase the influence of environmental groups, even when the regulations themselves provide little added benefit in protecting the environment. In some cases, these more restrictive state standards even lead to less protection of the environment by precluding companies from using innovative and market-based approaches that are more effective in protecting the environment than command-and-control regulations.

A good example of such this type of perverse result is the 2000 ban in Michigan on directional drilling for oil and gas under the Great Lakes. The ban might have been justified if there had been any measurable danger of pollution of the Great Lakes.

But there was not, according to the Michigan Environmental Science Board, which studied the issue and published a report before the ban was instituted. The result was to prevent the use of an innovative technology that is often employed to tap known oil and gas reserves without destroying pristine environments. Thwarting the use of this technology merely increases the likelihood that more environmentally damaging oil and gas operations will enjoy a heightened demand for their product.

Ironically, the directional drilling ban was passed by the Michigan Legislature. This certainly helps demonstrate that there is little reason to fear that if the DEQ is reined in, elected officials will callously dismiss environmental concerns for the sake of helping businesses.

A law restraining the DEQ, however, would still benefit Michigan's economy. Early in her administration, Gov. Jennifer Granholm consulted with business leaders to learn what their biggest concerns were regarding business competitiveness. At the top of their list was the ease and certainty of obtaining environmental permits.

State environmental permitting is often the first gate that a business must pass through before it can operate. This difficult environmental permitting process would be eased in Michigan if businesses were able to comply with broadly understood federal standards, rather than the environmentally unnecessary requirements Michigan has tacked on. These extra permitting barriers add insult to injury given Michigan's onerous tax structure and labor relations issues.

About one-third of U.S. states have already adopted laws preventing state regulators from exceeding federal standards without some sort of additional review. One reason they have done so is precisely because lawmakers in these states have learned that environmental regulations exceeding federal standards are often unrealistic and unjustifiable, and that such regulations make it very difficult for their state to compete with other states in attracting new businesses.

Another reason they have been comfortable tying their state more firmly to federal regulations is that the U.S. Environmental Protection Agency, despite some initial delays, has recently done a better job than it used to of finalizing environmental standards and providing a uniform framework for large regions. Two examples of this are the Great Lakes Initiative, in which water quality standards have been made consistent throughout the Great Lakes Basin, and the establishment of federal technology standards for sources of toxic air emissions. In the vast majority of cases, these two sets of standards have now removed the need for states to create their own rules.

"No-more-stringent" laws passed by states vary in what they require. Some states, such as South Dakota and Idaho, have outright prohibitions on rules that go beyond federal requirements. An approach used by a number of states - Florida, Pennsylvania, Wisconsin, Ohio, Indiana, Maine and Utah - requires more extensive reviews and justification for proposed regulations that are more stringent than federal requirements. Montana's approach is similar, but also requires public hearings and a peer-reviewed scientific justification before more stringent environmental requirements can be considered. In New Jersey in 1994, then-Governor Christine Todd Whitman (later head of the EPA) did not wait for the state Legislature to act, but instead signed an executive order that prohibited state agencies from exceeding federal requirements.

Adoption of a "no-more-stringent" law would send the right message to current and prospective job providers about Michigan, telling them that the state is serious about creating a more predictable regulatory process and exploring more flexible arrangements for protecting the environment.

Russ Harding is former director of the Michigan Department of Environmental Quality and is director of the Property Rights Network for the Mackinac Center for Public Policy. He may be contacted a harding@mackinac.org. For additional information and an opportunity to comment on this legislation, please see www.mackinac.org/10529.