Never ending web of red tape

0714red-tape

Experts say rules to keep business in check also hinder growth

Story by Larry Avila, New North B2B Editor

Unraveling the complex web of rules and regulations that do everything from keeping people and the environment safe to ensuring businesses operate within their bounds is a seemingly never-ending task.

Ed Lump, president of the Wisconsin Restaurant Association, has encountered and maneuvered his industry through many issues – including recently convincing state lawmakers not to regulate portion sizes restaurants serve to patrons – over the years. He said maintaining a competitive business environment while also ensuring his members understand what is needed to comply with municipal, county, state and federal laws always is an uncertain journey.

“If we tell members how to do something today, tomorrow they either don’t have to do it or it’s changed,” Lump said. “In our industry, we require certainty.”

Regulations vary by industry but one consistency regardless of the sector is new laws are passed, existing ones sometimes are modified, and those that are dated become irrelevant.

It’s always those under consideration which affect the business climate that get attention.

A study released last year by the Washington, D.C.-based Competitive Enterprise Institute estimated compliance costs just for federal rules in 2012 was $1.8 trillion.

Among the major issues on the minds of members of Wisconsin Manufacturers and Commerce include the Environmental Protection Agency’s latest proposal to reduce carbon dioxide emissions from the power generating industry, specifically coal-fired power plants between 10 and 72 percent – in Wisconsin’s case 34.2 percent – by 2030 and the Patient Protection and Affordable Care Act, more commonly referred to as Obamacare.

“We have been very outspoken on the EPA issues,” said Kurt Bauer, WMC president and CEO, in an interview with B2B.

His association joined forces with the U.S. Chamber of Commerce and the National Association of Manufacturers in what is expected to be a long battle over the EPA’s latest emissions reduction plan.

Any proposals to change air emissions rules is under constant watch by the state’s paper industry, said Jeff Landin, president of the Wisconsin Paper Council, which represents businesses employing about 31,000 around the state.

How the EPA changes will affect boiler MACT – maximum achievable control technology – restrictions for manufacturers is a concern. Landin said many paper companies operate their own boilers and the proposed rules could alter emissions limits for mercury, particulate matter and other pollutants.

“There already are significant compliance costs to these rules to the tune of several millions of dollars per company,” he said.

Landin said paper company executives – which includes firms who operate mills outside the U.S. – routinely weigh whether they should invest in equipment to keep facilities in compliance with new rules or move production overseas. The state’s paper industry already has seen many mills close or consolidate production elsewhere, translating to lost jobs, many paying $60,000 or more annually, he said.

“It’s a tough (decision) for mills to face, especially in a not-so-great growing economy,” Landin said. “They ask themselves, ‘do we spend all of this money just to comply with one rule?”

Rolling with it

As far as the state’s power utilities are concerned, there’s nothing to do but wait and see what happens with the EPA’s proposed emissions changes.

However, if more stringent rules translate to higher compliance costs, it is possible customers will see higher electricity rates, said Kerry Spees, spokesperson for Integrys Energy Group, owners of Green Bay-based Wisconsin Public Service Corp., which has 445,000 electric customers and more than 323,000 natural gas customers in northeast and central Wisconsin and portions of Upper Michigan.

“The new rules were issued but won’t become final until sometime in 2015,” Spees said.

States have until 2016 to formulate compliance plans, which may be extended to 2017 or 2018 if states form joint plans with other states.

Updated rules came as no surprise.

“We were expecting the new regulations,” Spees said. “We will not be surprised if there are more stringent rules somewhere down the road.”

Milwaukee-based We Energies, which has about 1.1 million electrical customers statewide, was uncertain about potential rate increases because of new EPA rules.

“As for the EPA draft rule, we wouldn’t be able to estimate the impact of the new rule on any of our plants and what it may mean to customer rates until the details of the rule are fully developed,” said Brian Manthey, spokesperson for We Energies.

He said We Energies’ believes the final version of the rule should be based on commercially available, cost-effective technologies, while also taking into account the impact the rule’s implementation would have on customer rates.

“At this point there is no technology available to capture carbon from power plants nor is there a system for store of the carbon even if it is captured,” Matheny said.

Right to choose

In 2012, New York City approved a rule prohibiting the sale of sweetened beverages larger than 16 ounces at all restaurants, fast-food eateries, delis, movie theaters, sports stadiums and food carts. The rule was supposed to take effect in March 2013 but was challenged in that state’s Supreme Court and its enforcement delayed until a ruling is made.

Proponents of New York’s rule say it was done to combat obesity and was based on scientific facts that consuming smaller portions of sweetened drinks would aid in the battle of the bulge.

New York’s effort sparked a national movement.

Ed Lump with the state restaurant association said a victory for his organization came through lobbying efforts with Wisconsin lawmakers, which passed a law last year preventing villages, towns, cities and counties from adopting rules restricting portion sizes.

“We just prevented it from happening … to regulate what (someone) eats to improve their health because they don’t pay attention to what they’re eating if left to their own devices,” Lump said. “It’s a freedom of choice thing.”

Steve Davis, owner of Ardy & Ed’s Drive-In in Oshkosh, appreciates the industry group’s efforts.

“Customers should have the choice (to eat what they want),” he said.

But rising obesity rates and the ripple effect it has created with escalating health care costs to treat people dealing with diabetes, heart disease and high cholesterol has led to some changes in the food industry, specifically when it comes to making nutritional information easier to understand and locate on food purchased.

Many restaurant chains, including global giants such as McDonald’s and regional operators including Prairie du Sac-based Culver’s, provide nutritional and calorie information to customers on their menu items.

Davis said for now, independent operators like himself do not have to provide nutritional information, however, it is an issue always on his mind.

“Culver’s spent thousands of dollars per menu item to have their things analyzed,” Davis said. “As a small independent business, I couldn’t afford to put those kinds of resources to have a company analyze my menu. Would it be nice if we could do it, ‘yes,’ but is it something we can afford to do and stay open? ‘No.’”

Larger operations such as Culver’s can share the cost of analyzing menu items across the chain.

It may get to a point where Davis and other independent restaurants will have to provide nutritional information on the food they serve.

This is where the food industry and collaboration between food producers and associations can help.

Davis said since nutritional information has become more readily available on the ingredients used to make the food served, it may be possible to develop a limited nutritional guide.

“These kinds of issues are why industries have associations, because small businesses particularly just don’t have the resources to stand up for themselves,” Davis said.

Protecting the little guy

As a restaurant operator, complying with rules and regulations – especially health codes for serving food to the public – is very familiar to Davis.

Through the years, Davis has been active with many business groups including the state restaurant association and the state’s chapter of the National Federation of Independent Businesses. His involvement with these organizations led to his appointment to the state’s Small Business Regulatory Review Board by Gov. Scott Walker in 2011.

The board formed in 2004 after a state-appointed task force determined the state’s regulatory processes and its effect on small businesses needed review. Davis said at that time, small business owners felt overwhelmed with the regulatory climate but wanted to comply, however, felt sorting through the rules to be an expensive and daunting task.

“What the state thought then, laws passed often were difficult to enforce or they were financially hard on small businesses,” he said. “Sometimes laws were just passed without input from people or businesses who would be directly affected.”

The board operated for a short time but was eliminated by state budget cuts, Davis said. Gov. Scott Walker revived the board after he took office.

Davis said the board’s purpose is not to eliminate laws but to review proposed legislation that could affect businesses and make recommendations to create better balance and develop easy-to-understand verbiage.

“Businesses do want to comply and be a good business,” Davis said.

The board has had some successes, Davis said.

He referenced a national building code, which was adopted across the country, requiring buildings to have reinforcements to sustain hurricane-force winds.

Davis said states, including Wisconsin, not prone to hurricanes raised concerns that incorporating those kinds of reinforcements would raise building costs.

“So we were able to identify that something like that may not be needed in Wisconsin,” he said. “It’s these kinds of things (the board) looks at. Sometimes when laws are passed, it looks good but sometimes the effect may not be looked at.”

A seat at the table

Being proactive is the best way to be heard and to ensure the regulatory climate remains fair, professionals say.

David Borsuk, manager of industrial marketing and quality control for Fond du Lac-based Sadoff Iron & Metal, a division of Sadoff & Rudoy Industries, said his sector is heavy regulated, particularly on environmental issues including storm water.

He said the federal Clean Water Act created levels of state and federal compliance. Working with state and federal regulators, the scrap industry was able to streamline the process, creating a set of state rules that also met federal requirements.

To ensure fairness and compliance with the Clean Water Act, a third-party is brought in to assess whether scrap companies are in compliance, Borsuk said.

“By having a seat at the table, we had the ability to achieve what the DNR wants – that’s environmental compliance – and what we were able to do was get a workable storm water permit that’s cost effective, and through a third party auditing process, we have assured compliance.”

Rising incidents of scrap theft moved state lawmakers several years ago to pass legislation to combat the crime.

“We started with the premise that our industry wanted to be part of the solution,” Borsuk said.

That meant bringing together representatives from law enforcement and sectors who reported incidents of material theft, including utilities and the railroad industry.

“Rules had to be established that discouraged scrap theft,” he said.

This included items such as government-issued identification and creating a standard set of rules that specific types of metals could not be purchased without authorization. Law enforcement also is aware of how scrap should be packaged, purchased and sold to help them crack down on theft.

Borsuk said a national theft alert network has also been established, which warns businesses about material thefts in specific locations.

The looming conversion of U.S. Highway 41 to an interstate is another issue being watched by manufacturers. Should the designation move forward, U.S. 41 would have new weight limits for truck traffic.

Federal rules restrict maximum weight for tractor trailers on interstate highways at 80,000 pounds. Currently in Wisconsin, state permitted trucks – those hauling scrap metal, agricultural products, raw forest products, coal and iron ore – can exceed the 80,000 pound weight limit.

In early June, the U.S. House of Representatives passed legislation which would grandfather the permits after U.S. 41 becomes part of the interstate network. The Senate is considering similar legislation.

A similar designation was approved when I-39 in central Wisconsin was converted into an interstate highway.

State officials say U.S. 41 is designed to handle truck traffic hauling loads exceeding 80,000 pounds. If the clause was not passed, state-permitted overweight tractor trailers would have to use state highways, many of which pass through heavily populated areas.The state estimates between 10 percent and 20 percent of the trucks operating on U.S. 41 are hauling overweight or oversize loads by permit or allowed by state statute.

Borsuk said scrap haulers under state permit can transport up to 120,000 pounds.

“If the provision isn’t passed, it would mean up to 50 percent more truck traffic on the roads,” he said.

Playing by the rules

Regulations already in place required utilities to reduce emissions.

Manthey of We Energies said his company has worked to reduce its own carbon footprint by converting a power generating plant in Port Washington from coal to natural gas, which will be followed by converting another coal-fired facility in Milwaukee to use natural gas to produce electricity.

Manthey said We Energies also has made significant investment in wind power generation and its new biomass plant near Wausau.

“Since 2000, we have increased our generation capacity by 50 percent while cutting emissions (nitrogen oxide, sulfur dioxide, mercury and particulate matter) by more than 80 percent,” he said.

Manthey said state law requires by 2015 that 10 percent of the electricity sold in Wisconsin must come from renewable sources.

Spees said about 6 percent of the energy generated by WPS comes from renewable resources. About 1.5 percent of the power generated by We Energies comes from renewable resources.

How this will change following the late June announcement of Wisconsin Energy Corp.’s $9.1 billion acquisition of WPS parent Integrys still is to be determined.

Spees said WPS expects carbon emissions from its fossil-fired generation facilities to be about 18 percent lower in 2014 compared to 2005 levels.

“This decrease can be attributed to increased use of renewables, more efficient generating units, and increased use of natural gas,” he said.

To increase operational efficiencies and comply with new rules, WPS plans to close three of its older coal-fired power plants, which includes two units in Green Bay. An older coal-burning unit at the company’s power plant in Weston will begin using natural gas to generate electricity in 2015.

Spees said WPS owns a portion of a power plant in Sheboygan, which will require significant upgrades to make it compliant with current regulations. He said it hasn’t been decided whether to make the investment or retire the facility.

WPS recently inked a deal to purchase 100 megawatts of additional hydropower through 2021, with the potential for an extension and raise the amount of electricity purchased, Spees said. The company also is considering building another natural gas-fueled power plant.

“While these planned improvements will help us achieve greater reductions, the goals proposed for Wisconsin in the (EPA’s) draft rule are very aggressive,” he said.

Constantly changing environment

Lump with the Wisconsin Restaurant Association said complying with the Affordable Care Act has been a struggle for his group’s members.

“It’s complicated to have to figure it all out, particularly among members who operate more than one location,” he said. “We’re trying to help (restaurant) operators as much as possible to get their questions answered.”

Rules defining eligibility and what is considered a fulltime or part-time worker have had numerous interpretations, Lump said. What needs to be done to comply also is affected by the number of workers employed considered full- or part-time.

Restaurant owners also fear the cost to provide health benefits.

Different tiers for businesses exist regarding compliance with the Affordable Care Act.

Lump said if a small business exceeds 50 workers, which likely is the case for restaurants with multiple locations, it puts the business into a different classification.

This aspect of the Affordable Care Act could influence whether a restaurant operator expands or reduces its employee count.

“It’s just creating a lot of anxiety,” Lump said. “Some operators have just decided not to expand so they don’t have to bring on more employees.”

Different experts and groups offer their own interpretations of the Affordable Care Act regularly, which tends to add to the confusion, he said.

The Wisconsin Restaurant Association works with the National Restaurant Association to develop uniform messages and answers to questions to help restaurant operators comply.

“We try as much as possible to keep everything up to date so (our members) can weave their way through it,” Lump said. “(The Affordable Care Act) has been a topic of conversation and it changes all the time.”