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cilities could make a showing that they pose no risk to the community. In that case, why would you require them to spend a lot of money" to reduce emissions?
Throughout his career, Holmstead has sought to scale back environmental regulation of business and represented corporate clients seeking to minimize the effect of air pollution laws.
As an associate White House counsel during the George H.W. Bush administration, he worked with Vice President Dan Quayle's Competitiveness Council, which pushed to reduce environmental and other regulation.
After leaving government, he joined Latham & Watkins, where he represented chemical, semiconductor and other clients on environmental policy issues.
In 1996, he worked with colleagues representing Georgia Pacific in a $35-million settlement with the EPA and Justice Department over alleged Clean Air Act violations. The firm later was among those backing the proposal to exempt low-risk timber-product plants from formaldehyde controls.
Federal conflict-of-interest rules bar appointees from working on particular matters, such as contracts, grants or claims, that will have a financial effect on the appointee or his family. This also applies to matters involving a former employer for one year from the appointee's departure date. But rule-making, which has a broad effect, is exempted from this prohibition
"I meet with hundreds of outside groups representing a wide variety of interests, and it hardly seems right to penalize" past associates "by not allowing them to meet with me," Holmstead said. "It would be very hard to get people who are knowledgeable and qualified to do these jobs if they are unable to talk to people with whom they had affiliations in the private sector."
Graham, too, had past connections to the industries seeking to limit the regulation of formaldehyde. His office at OMB reviews and approves all new federal regulations.
He had testified on behalf of an association of paper companies, including Georgia Pacific, before the Maine Board of Environmental Protection in a 1992 hearing on setting a risk level for carcinogenic pollutants. In addition, the timber company donated to Graham's Harvard Center for Risk Analysis in 1991, 1992, 1995 and 1998. A spokesman said Georgia Pacific's donations were each for no more than $5,000.
The chemical industry's trade association contributed annually to Graham's risk center from 1994 to 1997, and in 1999 and 2001. The center relies on government and foundations as well as a wide range of industry for its funding.
Graham's prior financial ties were reviewed by OMB's ethics counsel when Graham took office and he was not "required to recuse himself from any issues," a spokesman said.
As the proposed rule worked its way through the EPA, career attorneys advised Holmstead that the exemption ran counter to the 1990 Clean Air Act amendments. A confidential March 2003 memo from a lawyer in the general counsel's office highlighted its legal vulnerability.
The proposal "results in a regulatory approach equivalent to the one Congress specifically rejected" in 1990, said the memo, obtained from sources outside the agency. "EPA would have a difficult time articulating any rational basis to defend such a … scheme."
Holmstead acknowledged the issue was debated by EPA lawyers.
"At the end of the day, the agency determined it was something we did have the authority to do," he said.
That's not the way architects of the 1990 legislation see it.
"I don't have any doubt but that is a way to get around the policy which we worked hard to achieve," said former Sen. David F. Durenberger (R-Minn.). Rep. Henry A. Waxman (D-Los Angeles) declared the timber products exemption "directly contrary to our intent."
The rule has also prompted objections from state regulators.
"It's a serious concern," said Bill Becker, executive director of two national organizations of state and local air pollution control officials. "We learned between 1970 and 1990 that a risk-based approach is totally ineffective
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