Definition of "major rule”

• The requirements of subchapter II of S. 343 (i.e., the cost/benefit analysis provisions generally) apply to any "major rule" issued by an agency. The underlying term "rule" is defined as having the same meaning as in the APA, 5 U.S.C. § 551(4). Section 621(3). The APA defines "rule" to mean:

the whole or a part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of an agency and includes the approval or prescription for the future of rates, wages, corporate or financial structures or reorganizations thereof, prices, facilities, appliances, services or allowances therefor or of valuations, costs, or accounting, or practices bearing on any of the foregoing.

A "major rule" under S. 343 is a "rule or group of closely related rules" that (1) is determined by the proposing agency or the President to "likely" have a "gross annual effect on the economy of $50,000,000 or more" in "reasonably quantifiable increased direct and indirect costs," or which has a "significant impact on a sector of the economy," or (2) is designated as "major" by the proposing agency or the President on the ground that it is "likely to result in" a "substantial increase in costs or prices for wage earners, consumers, individual industries, nonprofit organizations, Federal, State, or local government agencies, or geographic regions," or on the ground that it is likely to result in "significant adverse effects on competition, employment, investment, productivity, innovation, the environment, public health or safety, or the ability of enterprises whose principal places of business are in the United States to compete in domestic or export markets." Section 621(4)(A) (i)–(ii). Excluded specifically from the definition of major rule are rules that "involve the internal revenue laws of the United States," or that "authorize the introduction into commerce, or recognize the marketable status, of a product." Section 621(4)(B).

Under S. 343, the determination whether a rule is "major," or the designation of a rule as "major," is normally to be made prior to the agency's having published notice of the proposed rulemaking. Section 622(a)(1). In those cases where a notice of proposed rulemaking has already been published at the time of enactment of S. 343, the bill provides that the determination/designation of "major" status be made within 30 days of enactment. Id. As for those cases where the agency has determined that a rule is not major and has declined to designate it as "major," S. 343 provides that the President may make such a determination or designation not later than 30 days after publication of a notice of proposed rulemaking (or, within sixty days of enactment of the bill, where the notice of proposed rulemaking has already been published at the time of enactment). Section 622(b)(1).

S. 291 generally tracks the definitions of "rule" and "major rule" found in S. 343, with certain important differences. First, like S. 343, S. 291 defines "rule" as having the same meaning as in §551(4) of the APA except that, as used in S. 291, the term does not include (1) a rule of "particular applicability that approves or prescribes for the future rates, wages, prices, services, or allowances therefor, corporate or financial structures, reorganizations, mergers or acquisitions, or accounting practices or disclosures bearing on any of the foregoing," (2) a rule "relating to monetary policy proposed or promulgated by the Board of Governors of the Federal Reserve System," and (3) a rule "issued by the Federal Election Commission or a rule issued by the Federal Communications Commission pursuant to section 315 and 312(a)(7) of the Communications Act of 1934." Section 621(3) (A)(B).

As for defining major rule, S. 291 largely follows the "determination/designation" structure of S. 343 except that (1) in addition to the proposing agency and the President, the determination or designation of "major rule" status may be made by a "officer" who is delegated such authority, (2) the threshold dollar amount for "major" is $100,000,000 (as opposed to the $50,000,000 threshold in S. 343), and (3) S. 291 speaks of a "major rule" as having a "significant impact" on a "subsector" of the economy, as opposed to S. 343's reference to "sector" of the economy. Section 621(4) (A) (B).

In addition, S. 291 includes among those rules expressly excluded from the definition of major rule not only those listed in S. 343, but also (1) rules "exempt from notice and public procedure" pursuant to §553(a) of the APA, and (2) rules "relating to the viability, stability, asset powers, or categories of accounts of, or permissible interest rate ceilings applicable to, depository institutions the deposits or accounts of which are insured by the Federal Deposit Insurance Corporation, or the_Share Insurance Fund of the National Credit Union Administration Board." Section 621(4)(B)(ii) (III)–(IV). S. 291 also specifies, in contrast to S. 343, that the exclusion for a rule that “authorizes the introduction into commerce or recognizes the market

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able status of a product" applies to products introduced pursuant to "sections 408, 409(c), and 706 of the Federal Food, Drug, and Cosmetic Act." Cf. Section 621(4)(B)(ii)(II) of S. 291 with Section 621(4)(B)(ii) of S. 343.

As with S. 343, under S. 291, the determination whether a rule is "major," or the designation of a rule as "major," is normally to be made prior to the agency's having published notice of the proposed rulemaking. Section 622(a). However, unlike S. 343, S. 291 does not appear to account for those situations where a notice of proposed rulemaking has already been published at the time of enactment.

A further distinction between S. 343 and S. 291 is that S. 291 does not appear clearly to specify the procedures by which the President (or, as provided under S. 291, an "officer" delegated that authority) may determine a rule to be "major" or designate it as such. As written, Section 622(b) of S. 291 would literally appear to give the President (or the designated "officer ") authority to make the determination or designation even where the agency proposing the rule has already made such a determination or designation, not simply when the agency has not done so (as is the case under S. 343). Specifically, S. 291 provides that the "President or the officer selected by the President under section 624 of this title may determine that a rule is a major rule *** or may designate a rule as a major rule *** not later than thirty days after the publication of the notice of proposed rulemaking for that rule." Section 622(b). It is not clear that this is the actual intention of the bill.

• Commentary: If regulatory reform is to be extended beyond the scope already covered by Executive Order, as it should be, the provisions of S. 343 should be adopted, although certain of the exceptions provided for in S. 291 (not including the exception for rules "exempt from notice and public procedure") should also be considered.

Cost/benefit analysis

• Under S. 343, the procedural requirement that agencies prepare a cost/benefit analysis for a major rule is provided in Section 622, "Rulemaking cost-benefit analysis." This section establishes a step-wise process that requires agencies to prepare a draft cost/benefit analysis in conjunction with the development of a proposed major rule. The draft cost/benefit analysis is to be placed in the rulemaking record for the proposed rule and shall contain:

(1) an "analysis of the benefits of the proposed rule" and an explanation as to how "each benefit will be achieved" by the rule,

(2) an "analysis of the costs of the proposed rule,” and an explanation of how "each such cost will result" from the rule,

(3) an “identification” (along with an “analysis of the costs and benefits ") of “reasonable alternatives for achieving the identified benefits" of the rule,

(4) an "assessment of the feasibility of establishing a regulatory program that operates through the application of market-based mechanisms,"

(5) where the proposed rule is based on one or more scientific evaluations or information, or is subject to the risk assessment provisions in sub-chapter III of S. 343, a description of the agency's actions to "verify the quality, reliability, and relevance" of such evaluations or information,

(6) an "assessment of the aggregate affect of the rule on small businesses" (i.e., with fewer than 100 employees), “including an assessment of the net employment effect of the rule," and

(7) an "analysis of whether the identified benefits of the proposed rule are likely to exceed the identified costs of the proposed rule, and analysis of whether the proposed rule will provide greater net benefits to society than any of the alternatives to the proposed rule," including the identified alternatives.

Section 622(c)(2) (A)–(G).

S. 343 further provides that, upon promulgation of the final rule, the agency must issue and place in the rulemaking docket a final cost/benefit analysis. Section 622(d)(1). This final cost/benefit analysis must contain:

(1) a "description and comparison of the benefits and costs of the rule and of the reasonable alternatives to the rule," including the market-based mechanisms the agency is required to consider, and

(2) an "analysis, based upon the rulemaking record considered as a whole, as to "whether the benefits of the rule outweigh the costs of the rule," and "whether the rule will provide greater net benefits to society than any of the alternatives described in the rulemaking," including the market-based mechanisms the agency is required to consider.

See Section 622(d)(2) (A)(B).

In addition, S. 343 specifies that the "description of the benefits and costs of a proposed and a final rule" shall include a "quantification or numerical estimate of the quantifiable benefits and costs," but only to the "extent feasible." Section 622(e)(1)(A). Also, the bill provides that, in "evaluating and comparing costs and benefits and in evaluating risk assessment information," the agency "shall not rely on cost, benefit, or risk assessment information that is not accompanied by data, analysis, or other supporting materials that would enable the agency and other persons interested in the rulemaking to assess the accuracy, reliability, and uncertainty factors applicable to such information." Section 622(e)(2)(A).

• S. 291 contains a cost/benefit procedural analysis requirement that is roughly analogous, if only structurally, to that contained in S. 343. As with S. 343, under S. 291 agencies are required to place in the rulemaking record in conjunction with the publication of a proposed "major rule" a "preliminary regulatory analysis" that contains the following:

(1) a "succinct description of the benefit of the proposed rule," including any beneficial effects that cannot be quantified," along with an explanation of how "each benefit will be achieved by the proposed rule," and a "description of the persons, classes of persons, or particular levels of Government likely to receive" such benefits,

(2) a "succinct description of the costs of the proposed rule," including "any costs that cannot be quantified," along with an explanation of how "each such cost will result from the proposed rule," and a "description of the persons, classes of persons, or particular levels of Government likely to incur" such costs, (3) a "succinct description of reasonable alternatives for achieving the identified benefits" of the proposed rule,

(4) where the proposed rule is based on one or more scientific evaluations or information, or is subject to the risk assessment provisions in sub-chapter III of S. 291, a description of the agency's actions to "verify the quality, reliability, and relevance" of such evaluations or information, and

(5) where it is not "expressly or by necessary implication inconsistent with the provisions of the enabling statute pursuant to which the agency is proposing the rule," an "explanation of how the identified benefits of the proposed rule are likely to justify the identified costs of the proposed rule," along with an "explanation of how the proposed rule is likely to substantially achieve the rulemaking objectives in a more cost effective manner than the alternatives to the proposed rule."

See Section 622(c)(2) (A)—(E).

Like S. 343, S. 291 also provides that, upon promulgation of the rule in final form, the agency must issue and place in the rulemaking docket a "final regulatory analysis." Section 622(d)(1). This final regulatory analysis must contain the following:

(1) a "description and comparison of the benefits and costs of the rule" and of the "reasonable alternatives to the rule described in the rulemaking," including market-based mechanisms identified pursuant to title IV of S. 291, and (2) where it is "not expressly or by necessary implication inconsistent with the provisions of the enabling statute pursuant to which the agency is acting," a "reasonable determination," based upon the "rulemaking file considered as a whole," that the "benefits of the rule justify the costs of the rule," and that the rule will "substantially achieve the rulemaking objectives in a more cost-effective manner than the alternatives described in the rulemaking," including the market-based incentives identified pursuant to title IV of S. 291.

See Section 622(d)(2) (A)–(B).

S. 291 further provides that an agency shall "describe the nature and extent of the non-qualifiable [sic] benefits and costs of a proposed and a final rule" in as "precise and succinct a manner as possible," while the description of the benefits and costs of a proposed and final rule shall "include a quantification or numerical estimate of the quantifiable benefits and costs." Section 622(e)(1). Also, similar to S. 343, S. 291 provides that in "evaluating and comparing costs and benefits," the agency "shall not rely on cost or benefit information submitted by any person that is not accompanied by data, analysis, or other supporting materials that would enable the agency and other persons interested in the rulemaking to assess the accuracy and reliability of such information." Section 622(e)(2). The bill adds that an

agency "is not required to make such evaluation primarily on a mathematical or numerical basis." Id.

In contrast to S. 343, S. 291 also contains a subsection that provides that the preparation of a preliminary or final regulatory analysis "shall only be performed by an officer or employee of the agency." Section 622(f). However, this provision does not "preclude a person outside the agency from gathering data or information to be used by the agency in preparing" a regulatory analysis, or from "providing an explanation sufficient to permit the agency to analyze such data or information.” Id. If any data or information is gathered or explained by a person outside the agency, the agency is required to so identify that person in the regulatory analysis and specify the data or information that person gathered or explained. Id.

• Commentary: S. 343 contains much stronger cost/benefit procedural requirements and its provisions should be used. S. 291's provisions are qualified in many cases by statements that they only apply where they are not "expressly or by necessary implication inconsistent" with other applicable legislation.

Alternatives analysis

• As was noted above, S. 343 requires agencies, in conjunction with the issuance of proposed major rules, to prepare and place in the rulemaking record a draft cost/benefit analysis. Among the elements this draft analysis must include is an identification of "reasonable alternatives" for achieving the identified benefits of the proposed rule. Specifically, S. 343 provides that this identification of alternatives must include alternatives that (1) “require no Government action,” (2) will "accommodate differences among geographic regions and among persons with differing levels of resources with which to comply," and (3) “employ performance or other market-based standards that permit the greatest flexibility in achieving the identified benefits of the proposed rule." Section 622(c)(2)(C) (i)—(iii).

Not only must agencies identify such "reasonable alternatives," they are also required to include an "analysis of the costs and benefits" of each alternative identified. Section 622(c)(2)(C). This second step-the cost/benefit analysis of each alternative is crucial, because when the agency prepares its final cost/benefit analysis, it is required to provide an analysis of whether the rule will "provide greater net benefits to society" than any of the identified alternatives. Section 622(d)(2)(B)(ii). The net benefits of all of the "reasonable alternatives" must be established before this comparison can be made.

• As was noted above, S. 291 also requires agencies to identify "reasonable alternatives" as part of their preliminary regulatory analysis. See Section 622(c)(2)(C). The types of alternatives that must be considered include the same ones required by S. 343 (e.g., alternatives that "require no Government action," "accommodate differences among geographic regions," and "employ marketbased standards").

But unlike S. 343, S. 291 does not require agencies, in their final regulatory analysis, to provide an analysis of whether the rule will provide "greater net benefits to society" than any of the identified alternatives. Rather, under S. 291, the agency must provide "where it is not expressly or by necessary implication inconsistent with the provisions of the enabling statute pursuant to which the agency is acting"-a "reasonable determination" that the rule will "substantially achieve the rulemaking objectives" in a "more cost-effective manner than the alternatives described in the rulemaking." Section 622(d)(2)(B). In other words, not only does S. 291 limit the alternatives analysis to only those cases where such analysis is not "inconsistent with" the enabling statute, but the agency is directed to ascertain only whether the rule offers the most "cost-effective" approach, not whether the rule provides "greater net benefits" than any of the identified alternatives.

• Commentary: Once again, the provisions of S. 291 are weaker and those of S. 343 should be adopted.

Decisional criteria

• The heart of any truly effective cost/benefit analysis is the requirement that the analysis be an integral part of agency decisionmaking, i.e., that it provide decisional criteria that, at a minimum, supplement existing statutory criteria. S. 343 has such a requirement. Section 623, entitled "Decisional criteria," expressly provides that "Inlo final rule subject to this subchapter shall be promulgated" unless the agency finds that:

(1) the "potential benefits to society from the rule outweigh the potential costs of the rule to society," as determined by the final cost/benefit analysis,

and

(2) the rule "will provide greater net benefits to society than any of the reasonable alternatives" identified in the draft cost/benefit analysis.

See Section 623(a) (1)–(2).

Importantly, S. 343 goes on to provide that the requirements of Section 623 "shall supplement the decisional criteria for rulemaking otherwise applicable under the statute granting the rulemaking authority," except when such statute "contains explicit textual language prohibiting the consideration of the criteria" of Section 623. See Section 623(b) (emphasis added). Finally, Section 623 states that "[w]here the agency finds that consideration of the criteria" in Section 623 is "prohibited by explicit statutory language," the agency shall "transmit its finding to Congress," along with the final cost/benefit analysis it has prepared in connection with the rulemaking. Id.

• S. 291 has no express decisional criteria equivalent to those established in Section 623 of S. 343, using instead a requirement for a "reasonable determination" where "not expressly or by necessary implication inconsistent" with the enabling legislation. Further, S. 291 contains a provision that states that the requirements relating to the preparation of cost/benefit regulatory analyses under Section 622 "do not alter the criteria for rulemaking otherwise applicable under other statutes." See Section 622(g). In light of such language, it remains uncertain just what substantive effect, if any, the requirements of Section 622 would have on agency decisionmaking.

Commentary: S. 343 accomplishes the regulatory reform objective by establishing clear cost benefit and alternative analysis decisional criteria. It also extends these decisional criteria as far as practicable in the face of contrary decisional criteria in other applicable legislation, thus succeeding in its aim of properly structuring the exercise of agency discretion while respecting explicit Congressional statutory instructions in other legislation. In short, it operates much as NEPA does, by supplementing agency authority. Section 623 could be revised, however, to clarify that, in the face of a conflict of decision criteria, as defined in the bill (that is, where another "statute contains explicit textual language prohibiting the consideration of the [new cost/benefit criteria]"), an agency is to act as Congress has instructed it to do in the statute under which it is taking the rulemaking action, but is to send a report to Congress with a copy of its cost/ benefit analysis. In contrast, S. 291 is weaker, because (1) it uses the 'reasonable determination mechanism that operates only where not expressly or by necessary implication inconsistent" with enabling legislation, and contains no clear decisional criteria stated as such, and (2) it states expressly that it does "not alter the criteria for rulemaking otherwise applicable under other statutes.'

Statutory and court deadline extensions

• S. 343 provides that, beginning on the date of enactment, "all deadlines in statutes that require agencies to propose or promulgate any rule" subject to subchapter II (ie., the cost/benefit provisions) are "suspended until such time as the requirements of [subchapter II] are satisfied." Section 626(a)(1). The bill also provides for a similar extension of court-ordered deadlines, stating that, beginning on the date of enactment, the "jurisdiction of any court of the United States to enforce any deadline that would require an agency to propose or promulgate a rule subject to subchapter II *** is suspended until such time as the requirements of [subchapter II] are satisfied." Section 626(a)(2).

Finally, to avoid application of any so-called statutory "hammer" requirements that might otherwise require an agency to undertake case-by-case rulemakings that would escape being subject to subchapter II, S. 343 contains a provision that specifies that "[i]n any case in which the failure to promulgate a rule by a deadline would create an obligation to regulate through individual adjudications," any such obligation to "conduct individual adjudications shall be suspended to allow the requirements of this subchapter to be satisfied." Section 626(a)(3).

• S. 291 contains no comparable provision.

• Commentary: The S. 343 provisions are essential if any meaningful application of the new principles to pending rule-makings is to be achieved, and should be enacted.

Judicial review

• S. 343 contains a strong, clear-cut provision providing normal judicial review of all aspects of the process of performing cost/benefit analyses (which would likely