be available in any case). First, with respect to the determination or designation of a rule as "major," the bill provides that each of the following shall be subject to judicial review: (1) A "determination by an agency or by the President that a rule is or is not a major rule," (2) A "designation by an agency or by the President of a rule as a major rule," (3) A "decision by an agency or by the President not to designate a rule a major rule." See Section 624(b)(1) (A)–(C). S. 343 goes to provide that a "determination by an agency or by the President that a rule is not a major rule," or the "decision by an agency or by the President not to designate a rule a major rule," shall be set aside by a reviewing court "only upon a showing of clear and convincing evidence that the determination is erroneous in light of the information available to the agency" at the time the determination or decision not to designate was made. Section 622(b)(2). Actions to review a determination that a rule is not a major, or to review a decision not to designate "shall be filed not later than 30 days after the date of publication" of the determination or failure to designate. Section 622(b)(3). If a court finds that a rule should have been reviewed pursuant to subchapter II, "such rule shall have no force or effect until such time as the requirements" of subchapter II are met. Section 622(c). As for judicial review of an agency's findings on the costs and benefits of its rule, S. 343 provides that "[elach court with jurisdiction to review final agency action under the statute granting the agency authority to conduct the rulemaking" shall have jurisdiction to "review findings by any agency under this subchapter and shall set aside agency action that fails to satisfy the decisional criteria of section 623." Section 622(d). This section also makes clear that the reviewing court shall apply the "same standards of judicial review that apply to the review of agency findings under the standards granting the agency authority to conduct the rulemaking." With respect to a matter related to judicial review, S. 343 contains a section that would essentially codify the Chevron doctrine regarding the proper limits of court deference to agency interpretations of enabling statutes, while at the same time conforming that doctrine to sound principles of regulatory reform. Specifically, Section 628 provides that, in reviewing final agency action under Section 706 of the APA, or under any other statute providing for review of final agency action, the reviewing court "shall affirm the agency's interpretation of the statute granting authority to promulgate the rule if, applying traditional principles of statutory construction," the court finds that the interpretation is "clearly the interpretation of the statute intended by Congress." Section 628(a). Conversely, the bill states that, if the reviewing court finds that an interpretation other than the interpretation applied by the agency "is clearly the interpretation of the statute intended by Congress," the court shall "find that the agency's interpretation is erroneous and contrary to law." Section 628(b). On the other hand, if the reviewing court finds that the statute "gives the agency discretion to choose from among a range of permissible statutory constructions," the court shall "affirm the agency's interpretation" only where the "record on review" establishes the following: (1) The agency has "correctly identified the range of permissible statutory constructions," (2) The agency's interpretation is "one that is within that range," and (3) The agency has "engaged in reasoned decisionmaking in determining that the interpretation, rather than other permissible constructions of the statue, is the one that maximizes net benefits to society." Section 628(c)(1) (A)-(C). If the agency's interpretation cannot be affirmed under these criteria, the provision concludes, the court "shall find that the agency's interpretation is arbitrary and capricious." Section 628(c)(2). The criterion in Section 628(c)(1)(C), requiring the agency to explain why the interpretation chosen “maximizes net benefits" to society, is the one "twist" this section puts on the traditional Chevron doctrine. It conforms the principles underlying Chevron to the decisional criteria contained in Section 623 of the bill by specifying that the agency must choose the most reasonable alternative. • S. 291 contains a much different provision relating to judicial review. Specifically, Section 623 provides that any determination that a rule is or is not a "major rule," and any designation or failure to designate to that effect, made by the President (or by the "officer" delegated the authority to determine/designate) "shall not be subject to judicial review in any manner." Section 623(b). As for determinations and designations made by agencies, S. 291 states that an agency's determination that a rule is or is not a major rule is subject to judicial review (like in S. 343), upon a "clear and convincing showing that the determination is erroneous" in light of the information available to the agency at the time. Section 623(c). In contrast to S. 343, however, S. 291 provides that the designation by an agency of a rule as a major rule, or the failure by an agency to designate, "shall not be subject to judicial review.” Id. As for review of an agency's compliance with the regulatory analysis requirements of Section 622, S. 291 goes on to say that any such analysis "shall not be subject to judicial consideration separate or apart from review of the rule to which it relates." Section 623(d). This subsection continues that when an "action for judicial review of a rule is instituted," any regulatory analysis for such rule "shall constitute part of the whole rulemaking record of agency action for the purpose of judicial review of the rule," and shall, "to the extent relevant," be considered by the court "in determining the legality of the rule." Id. • Commentary: The judicial review provisions of S. 343, while simply providing for normal judicial review, are clearer and more conducive to truly meaningful regulatory reform than the provisions in S. 291, and should be adopted. Since judicial review is available as a matter of course under existing law, the most important function of judicial review language in the final legislation is to plainly specify as Section 624 of S. 343 does and S. 291 does as well that judicial review of an agency's compliance with the cost/benefit decisional criteria is available, in the same court, and at the same time, as judicial review of the underlying agency rule to which the cost/benefit decisional criteria apply. The Chevron provision in S. 343 which is not present in S. 291, should help eliminate the unwarranted, “knee-jerk” deference given to agency interpretations by some courts in recent years, when applying the Chevron doctrine lazily. Reopener provisions • S. 343 includes a mechanism that allows interested persons to petition agencies to apply cost/benefit requirements to existing regulations. Section 625 provides that "[alny person subject to a major rule may petition the relevant agency or the President to perform a cost-benefit analysis" for the major rule, "including a major rule in effect on the date of enactment" for which a cost/benefit analysis under subchapter II has not been performed, "regardless of whether a cost/benefit analysis was previously performed" to meet any requirements that may have been imposed before the date of enactment." Section 625(a)(1). The petition under Section 625 must "identify with reasonable specificity" the major rule to be reviewed. Section 625(a)(2). The agency, or the President, as applicable, shall grant the petition if it shows that there is a "reasonable likelihood that the costs of the major rule outweigh the benefits," or that "reasonable questions exist as to whether the rule provides greater net benefits to society than any reasonable alternative to the rule," and such questions "may be more clearly resolved through examination" under the cost/benefit requirements of subchapter II and risk assessment requirements of subchapter III. Section 625(a)(3). The decision to grant or deny a petition must be made "not later than 180 days" after it is submitted, and a decision to deny the petition is "subject to judicial review immediately upon denial as final agency action under the statute granting the agency authority to conduct the rulemaking." Section 625(a)(4). In those situations where a petition has been granted, the agency must conduct a cost/benefit analysis in accordance with subchapter II "and shall determine whether the rule satisfies the decisional criteria of section 623." Section 625(b). If the agency determines that the rule does not satisfy those criteria, the agency must take "immediate action to either revoke or amend the rule to conform to the requirements" of subchapter II, including the decisional criteria of Section 623. Id. For purposes of the petition process under Section 625, "major rule" is defined as any major rule "or portion thereof." Section 625(c). In other words, the petition mechanism may be applied to discrete elements of a complex regulatory structure; a petitioner need not challenge the rule in its entirety. • S. 291 has no comparable provision. • Commentary: Regulatory reform that extends only to new agency rulemaking is a step forward, but much damage has already been done by regulations whose costs to society are out of all proportion to the true benefits they impart. The Section 625 petition mechanism in S. 343 is a very good idea and should be a fea ture of any final legislation. Rather than impose an additional burden on agencies to reexamine all of their existing rules, the petition mechanism uses an efficient "management by exception" process that ensures that only those rules that the affected public views as imposing disproportionate costs need be reviewed. And with the burden of proof being on petitioners to put forward their case at the outset, few frivolous or meritless petitions are likely and any that are filed can be summarily dealt with. Anti-Evasion provisions S. 343 recognizes that it is critically important that agencies not be allowed to evade having to perform cost/benefit analyses through the use of "guidance" or "policy" documents, rather than promulgating major rules. It is well-known that many federal agencies skirt the requirements of notice-and-comment rulemaking by issuing informal "guidance" that, while it purports to have no "binding" effect, as a practical matter, imposes as many practical restraints on the regulated community as an agency rule would have done. If anything, unless restrictions on this practice are put into place, the cost/benefit requirements of regulatory reform legislation such as S. 343 will provide an even greater incentive for agencies to conduct their business through the use of "guidance" and "policy." S. 343 deals with this problem. Specifically, the bill contains an "anti-evasion" provision that allows any person to "petition the relevant agency to withdraw, as contrary to" subchapter II, any agency guidance or general statement of policy "that would be a major rule if the guidance or general statement of policy had been adopted as a rule." Section 625(d)(1). The underlying concept is quite simple: if an agency "guidance" document is of such significant reach and effect that it would have been determined to be (or designated as) a "major rule" had it been adopted as a rule pursuant to notice-and-comment rulemaking, then it is only fair that the guidance be withdrawn until such time as it has been subject to the cost/benefit requirements of subchapter II that apply to major rules. S. 343 accomplishes this through a petition process. It requires that the petition "identify with reasonable specificity why the guidance or general statement of policy would be major if adopted as a rule." Section 625(d)(2). The petition shall be granted if it shows that there is a "reasonable likelihood that the guidance or general statement of policy would be major if adopted as a rule." Section 625(d)(3). The decision to grant or deny the petition must be made "not later than 180 days after the petition is submitted," and if the agency fails to act by such date, "the petition shall be deemed to have been granted." Section 625(d)(4). If the agency denies the petition, that decision "shall be subject to judicial review immediately upon denial as final agency action under the statute under which the agency has issued the guidance or general statement of policy." Id. Finally, S. 343 makes clear that, where a petition has been granted, the agency is prohibited from "enforcing against any person the regulatory standards or criteria contained in such guidance or policy unless included in a rule proposed and promulgated" in accordance with subchapter II. Section 625(e). • S. 291 has no comparable provision. • Commentary: It is critically important that any final legislation contain the antievasion provisions outlined above. As explained above, failure to include such a provision would only encourage agencies to avoid the rulemaking process altogether in favor of further reliance on informal "guidance." We strongly urge the adoption of S. 343's anti-evasion provisions. Executive oversight • S. 343 contains provisions on Executive oversight of agency compliance with the requirements of the new legislation. For instance, the bill provides generally that the President shall: (1) Establish procedures for agency compliance with subchapters II and III, and (2) Monitor, review, and ensure agency implementation of such procedures. • Section 651. S. 343 also specifies that the President may delegate his authority under the executive oversight provisions of the bill to the Vice-President, or to some other Executive Branch officer whose appointment has been subject to the advice and consent of the Senate. Section 653(a). • S. 291 also contains provisions related to Executive oversight. See Section 624. Those provisions are essentially identical to those in S. 343. • Commentary: We support the need for Executive oversight. Legislative "veto" • S. 343 contains a lengthy procedure that permits the Congress to review and disapprove major rules before they take effect. See Section 626 (b)–(h). . S. 291 has no comparable provision. • Commnetary: We take no position on this issue. Risk assessment • Subchapter III of S. 343 establishes a number of requirements related to agencies' preparation and use of risk assessments, and to agencies' communication of the results of risk assessments to the regulated community and to the public. For example, except under certain situations, S. 634 requires agencies to prepare risk assessments for "each major rule relating to human health, safety, or natural resources that is proposed by the agency after the date of enactment" of subchapter III, is "pending on the date of enactment," or is subject to a petition under Section 625 or Section 627. Section 634(a). Subchapter III also sets out general principles that are to govern the preparation of risk assessments prepared by agencies, and prescribes generally how risk characterization and communication are to be performed. Sections 635, 636. Not later than one year after enactment, the President is required to issue regulations "to implement the risk assessment and characterization principles set forth" in Sections 635 and 636. See Section 637(a)(1). These regulations must be "sufficiently specific" to ensure that risk assessments are "conducted consistently by the various agencies." Section 637(a)(2). Section 637 further provides for the review of risk assessments upon the petition of any person who can show that there is a "reasonable likelihood" that the risk assessment is (1) "inconsistent with the principles set forth in sections 635 and 636," (2) "produces substantially different results," (3) "is inconsistent with a rule issued" under Section 637(a)(1), (4) “does not take into account material significant new scientific data or scientific understanding." Section 637(b)(1) (A)–(D). The agency must respond to such a petition within 90 days "by agreeing or declining to review the risk assessment" and must state the basis for its decision. Section 637(b)(2). If the agency agrees to review the risk assessment, the review must be completed within 180 days. Section 637(b)(3). Denial of a petition is subject to judicial review under the APA. Section 637(b)(4). Decisional criteria for risk assessments are established in Section 638. This section provides, among other things, that "[fjor each major rule subject to this subchapter, the head of the agency, subject to review by the President, shall make a determination" that there is "no alternative that is allowed by the statute under which the major rule is promulgated that would provide greater net benefits or that would achieve an equivalent reduction in risk in a more cost-effective and flexible manner." It is not entirely clear how this "decisional criteria" for subchapter III is intended to mesh with the decisional criteria for subchapter II, found in Section 623. Under Section 639, agencies are instructed to "prioritize the use of the resources available" under "any laws protecting human health and safety or the environment" so that the agencies may determine which risks are the "most serious" and may address those risks in a "cost effective manner." Section 639(a) (1)–(2). An agency's prioritization of risks shall be included in its annual budget report to the Congress. Section 639(c). The risk assessment provisions of S. 291 are generally similar to those in S. 343, although S. 291 includes a "savings provision," not contained in S. 343, that provides, in part, that "[n]othing in this title shall be construed to *** modify any statutory standard or requirement designed to protect human health, safety, or the environment." Section 633(1). • Commentary: We generally support the risk assessment provisions contained in S. 343, although we believe that care should be taken to ensure that any decisional criteria or other requirements that overlap with or which are potentially inconsistent with the provisions of subchapter II be revised or removed to eliminate the overlap or inconsistency. In short, the requirements of subchapter III should not be allowed inadvertently to undercut or muddle the clear-cut application of the requirements of subchapter II. A FINAL WORD A STRATEGIC APPROACH TO REGULATORY REFORM LEGISLATION The main goal of regulatory reform legislation should be to make the major decisions of policy and of institutional architecture, and then to articulate those decisions in statutory language that empowers the Executive Branch to do the job creatively and well. This means setting conceptually-sound frameworks and giving the bureaucrats some flexibility and discretion in implementing them, trusting to the legislative oversight process and federal court review to hold them accountable (but within reasonably wide limits, if the intelligent exercise of discretion is to be promoted and rewarded). In short, it involves Congress' employing the same techniques of good management and delegation as do other managers, and insisting that EPA do likewise with the states. That is not how things have been working with environmental and other forms of legislation and regulation for some time, either as between the Congress and EPA or as between EPA and the states. Congress must take the lead in changing this. It will be hard for Congress to resist continuing to micro-manage the bureaucrats. If there is to be effective regulation, however, the cycle must be broken. Congress should not be shy about telling the agencies when it wants a fundamental change of direction, or about correcting them when they ignore those instructions, but it should let the agencies do their job properly if they will. As discussed above, S. 343 meets these tests. It does not micro-manage. Rather, it sets out a broad framework within which both cost/benefit analyses and risk assessments can be tailored to the decisional necessities faced by the agencies, just as the Judiciary Committee called for in its 1981 Report and provided for in S. 1080. A corollary to the principle of "legislating, not micro-managing," is the "fix what's broke don't hammer the symptom" principle. Too often, in the field of environmental legislation at least, Congress has seen an environmental harm, and like King Canute, has simply ordered that it cease. Too seldom has it seen that the harm is only the end result of "market failure" and sought the best way to address that failure. As noted above, environmental harms are the symptom of the deeper problem of "external costs" and thus of mis-pricing by the market system. When the real problem is understood, more subtle, but more fundamental legislative solutions may be found. Such "fixes" go to the heart of the issue, can result in restructuring the market incentives, can result in decentralized remedies driven by the markets themselves rather than by legislative flats that fly in the face of market behavior, and thus can have a much greater chance of success with less social and economic disruption than when the symptom is simply hammered directly. No environmental legislation should be enacted without a clear understanding of the "market failure" at which it is aimed, and without analysis of how best to achieve the desired result by correcting (or even only partially correcting) that failure if it is possible to do so, leaving to the market to work out the ultimate result. It is for these reasons that regulatory reform legislation should promote the use of flexible, performance-based and market-driven regulatory solutions. Once again, S. 343 meets these requirements. It encourages flexible performancebased regulations and market-driven solutions. See, e.g., Section 621(7) (definition of "market-based mechanism "); Sections 622(c)(2) (Ć)(iii) and (D) (draft cost/benefit analyses must consider alternatives that "employ performance or other marketbased standards that permit the greatest flexibility"; assessment of feasibility of "market-based mechanisms "). ATTACHMENT A SENATORS WHO SPONSORED S.1080 AND WHO ARE MEMBERS OF THE 104TH CONGRESS Republican (19) Thurmond Roth Hatch Dole Simpson* Grassley* Hatfield Domenici Lugar Cochran Kasselbaum Pressler D'Amato Chafee |