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least intrusive way to implement statutes, and to follow the President's direction on major rules. (We note that some elements of S. 343 reflect substantive policy judgments on which the Administrative Conference takes no position.)
DISCUSSION OF KEY ELEMENTS OF S. 343 1. Regulatory Analysis of New Rules. The Administrative Conference has long supported the concept of regulatory analysis as a tool for improving the rulemaking process. As reflected in our 1985 recommendation, Agency Procedures for Performing Regulatory Analysis of Rules, Recommendation 85–2, which I attach, regulatory analysis can be a useful device in rulemaking if it is taken seriously by upper level decisionmakers, if the function is effectively integrated into the rulemaking process, and if its limitations are recognized by those relying on it. The bill, of course provides a Congressional prod for the use of regulatory analysis.
At the same time, the Conference's experience has revealed that an overabundance of broadly-applicable statutory analysis requirements has actually been counterproductive to the goal of increasing agency accountability. The more distinct requirements that Congress imposes, the less attention agencies with reduced resources can realistically devote to meaningful analysis of each one. The Conference therefore believes that any analytical requirements Congress chooses to incorporate into law should be narrowly focused and structured to apply to the most significant rules likely to be affected by the concern Congress wants addressed. S. 343's effort to distinguish between “major rules” and the variety of other rules that need not command so much of an agency's resources, and to concentrate the agency's analysis of major rules on their overall costs and benefits, with appropriate opportunity for public input at the notice of rulemaking stage of the process, represents a reasonable step in that direction. We have no position on where the threshold should be drawn for major rules, except to note that Presidents of both parties going back to 1978 appear to believe that the $100 million effect on the economy is a reasonable break-point.
The Conference also supports Presidential review of agency rules. Such review can improve the coordination of agency actions, encourage consistency and resolve conflicts among agencies, and avoid duplication in regulatory activity. The Conference also supports the specific proposal in S. 343 to bring the independent regulatory agencies within the Presidential review process.
The Conference has also strongly supported what is known in some circles as “increased transparency" of the presidential review process, that is, making it open and visible to the public, so that the regulated community and the public can see exactly how decisions are made. We believe that increased transparency is important to the public's trust of the regulatory process. Nothing is more corrosive of the public's regard for regulation than the belief that secret deals are being made behind closed doors. We concluded that such transparency should be part of any program of Presidential review. Although Subchapter IV authorizes the President to establish procedures for compliance with the oversight provisions, it contains no specific provisions requiring any public disclosure. We believe that it should. Our Recommendation 88– 9, at paragraphs 4, 5 and 6, offers some minimum standards for public disclosure of information relating to the oversight process. Recommendation 88-9 is attached and we offer it for the
Committee's consideration. (We would note that the currently operative executive order, E.O. 12866, meets our recommended minimum standards.)
2. Regulatory Analysis of Existing Rules. While we recognize the need for agency attention to existing rules, we have concerns over the mechanism for that attention created by section 625. That section permits any person subject to an existing major rule to petition an agency or the President to perform a cost-benefit analysis for that rule. In our view, this provision may have the consequence of allowing a few individuals effectively to set an agency's agenda, and to do so on a haphazard basis. This is particularly so because the bill is likely to stimulate individuals to file petitions even if the agency had performed a proper cost-benefit analysis under existing statutes or executive orders. Moreover, the statutory deadlines for agency processing of petitions for cost-benefit analysis of existing rules will likely exacerbate the problem.
As you know, agency resources are becoming increasingly limited. The decisions about allocating those resources are best made by Congress, the President, and the agency itself. It is noteworthy in this regard that courtstend to avoid resolving lawsuits in ways that usurp agency priorities. If Congress believes that agencies should revisit particular rules or topics, it can, of course, provide for that specifically in substantive legislation. Alternatively, if it believes that a more comprehensive review of existing regulations is desirable, it can provide a general statutory mecha
nism in S. 343 that would require agencies, under a reasonable schedule, to canvass their existing rules on their own initiative, determine which ones might meet the criteria of “major rules," and establish a timetable for revisiting these existing major rules and undertaking the requisite cost-benefit analysis. This is the approach followed generally in subchapter IV of $. 291. We would also point out, in this regard, that section 553(e) of the APA already accords interested persons the right to petition an agency for the issuance, amendment, or repeal of a rule, and under the APA, the agency's action in response to a petition, although not subject to any explicit time limit, is judicially reviewable.
3. Judicial Review of Major Rule Determinations. Section 624 provides for judicial review of presidential and agency determinations regarding the classification of a rule as a “major" rule. The Conference believes that "[t]he presidential review process should be designed to improve the internal management of the federal government and should not create any substantive or procedural rights enforceable by judicial review." See section 7 of Recommendation 88–9, attached. We believe that section 624 should, at a minimum, be revised to exclude judicial review of the President's determination regarding a major rule. In our view, there is no need for such judicial review because the agency's determination as to whether a rule is” major "will be reviewable. The President's principal oversight role would appear to be to designate certain rules as “major" where an agency has not done soma matter that would appear to us to lie essentially within the President's prerogatives.
As for judicial review of the agency's major rule determination, we believe that it should take place after the completion of the rulemaking, rather than within 30 days of the determination. Courts have generally disfavored interlocutory review of agency determinations allowing agencies to complete their rulemaking processes with court review of all procedural and substantive determinations occurring at one time on the basis of a complete agency record. The reviewing court, of course, at that time would retain full power to remand agency determinations that run afoul of the requirements of section 622.
4. Judicial Review of Agency Statutory Interpretations. As we read section 628, except for 628(c)(2), which I shall discuss separately, it is intended to codify the scope of judicial review of agency interpretations of statutes set forth by the Supreme Court in Chevron USA v. NRDC, 467 U.S. 837 (1984). The Administrative Conference recognizes the value of the Chevron standard, having stated in Recommendation 93-4 that
courts * * * should (undertake) a searching review of the range of factors or permissible choices that may be considered by the agency, and require deference to agency application of those factors once they are shown to be
legally appropriate. Id. at 9 III(C)(1). Thus, we think that most of section 628 is broadly consistent with our recommendation. I would point out that our recommendation in this respect reflects a consensus position that the judicial members of the Conference (including several members of the U.S. courts of appeals) found acceptable. The Chevron case, of course, is a decade old, and there is a decade's worth of case law applying it although that case law is not completely consistent. In the circumstances, it is imperative that the legislative history make clear whether S. 343 simply codifies Chevron or is designed to change the Chevron doctrine in some respect. Otherwise, there will be a proliferation of needless and entirely unproductive litigation over whether, and to what extent, the new statutory standard differs from that crafted by the courts.
Section 628(c)(1)(C) does not derive from the Chevron doctrine. Rather, it appears to be a decisional standard governing the agency's treatment of costs and benefits in the context of statutory construction. Although the “reasoned decisionmaking” portion of the provision is useful, the last portion of the provision, requiring a statutory construction that “maximizes net benefits to society," may be construed as different from the overarching decisional requirements contained in section 623(a) (1) and (2). It also appears inconsistent with the provisions of section 623(b). These differences will likely cause considerable confusion. Because any final rule must meet the substantive decisional criteria set out in section 623, and a reviewing court will evaluate all elements of the rule (including any statutory, construction that undergirds the rule) against those criteria, we believe that section 628(c)(1) should therefore be changed to read “the agency has engaged in reasoned decisionmaking."
TWO USEFUL ADDITIONS TO S. 343
1. There are several categories of rules that the Administrative Procedure Act now exempts from public notice-and-comment requirements. The Conference has long en
dorsed the elimination of these exemptions for rules relating to public property, loans, grants, benefits or contracts. See Recommendations 69_8 and 93-4, 'attached hereto.
Many of these categories of rules have an impact on the public, and, in the interest of increasing agency accountability, the public should be able to comment on these impacts. (In fact, many agencies have waived the exemption.) The Conference suggests that S. 343 be amended to eliminate this anomaly. 2. The Conference has also advocated the
use of negotiated rulemaking as a mechanism for providing direct input by the affected public into development of a proposed rule. Negotiated rulemaking, which Congress endorsed in the 1990 Negotiated Rulemaking Act, is an arrow in the alternative dispute resolution quiver that directly targets the rulemaking process. It offers the public and agencies, in appropriate cases, the chance to come together to share information and actually negotiate the terms of a rule that the agency, the regulated community, and other affected interests can all live with. The process, although not feasible in many situations, has been used dozens of times in the last decade, and experience suggests that it has produced rules that have engendered much less litigation than conventional rulemaking processes.
We suggest that the Committee consider amending Section 622 to provide that where an agency uses negotiated rulemaking to develop a proposed rule, the costbenefit analysis requirement would not be applicable to that rulemaking. The rationale for this suggestion is that negotiated rulemaking involves direct face-to-face dialogue on regulatory issues between the agency and the people who will be affected. Many of the kinds of information that section 622 would mandate for the cost-benefit analysis are exchanged in the course of the negotiating process. Finally, the negotiation process is quite likely to ensure, by itself, that any consensus rule will meet the requisite cost-benefit objectives outlined in the bill. So, requiring preparation of a cost-benefit analysis on top of the negotiated process is probably not necessary. However, negotiated rulemaking requires a large up-front dedication of resources. Requiring an agency to prepare a full-blown cost-benefit analysis following a successful negotiation would discourage agencies from using what is generally seen as a useful tool in appropriate cases.
CONCLUSION I have included as an appendix to my testimony some technical comments on other aspects of the bill. My staff and I would be happy to work with you on any portions of the legislation on which we can be helpful, and we can provide statutory language to effect the two additions we propose. Mr. Gellhorn and I would be happy to answer questions.
APPENDIX General. The scope of some portions of the bill are not as clear as they might be.
ne sections seem to apply only to “major" rules, while some leave the issue open to question. For example, section 623 appears to apply only to major rules because of the reference to cost-benefit analyses while sections 627 and 628 appear to apply to all rules, not just major rules. We believe that all these provisions are intended to apply only to major rules and should be drafted accordingly.
Section 625. The term “subject to" in subsection (a) is a new standard. Litigation occurs every time Congress adds a new statutory term to existing legislation. We believe that Congress' goal of allowing affected interests to request a cost-benefit analysis can be achieved by resort to an existing statutory term, thereby eliminating the prospect of litigation simply to resolve a new statutory term. In connection with judicial review of agency rules, section 702 of the APA uses the term “adversely affected or aggrieved" in describing who has standing to seek court review. Although there is always a question in a particular case as to whether someone meets that standard, there is nevertheless a body of case law built up over the years that can serve as a guide. Thus, we suggest that the same standard be used here.
Section 627. Section 627(a) appears to create a new test for reviewing courts to use in determining whether agency rulemakings exceed the agency's statutory jurisdiction. The APA, Section 706(2)(C), already requires reviewing courts to set aside agency action found to be “in excess of statutory jurisdiction, authority, or limitations, or short of statutory right.” Thus, this provision appears unnecessary, and the new language will likely lead to confusion. Similarly, section 627(b) provides for various exceptions_from 627(a) for various regulatory "relief 'clarification(s).” This could create interpretive difficulties since many rules are both partially regulatory and partially deregulatory in nature. The word "clarification” is
particularly susceptible of many interpretations. Finally, of course, section 706(2XC) remains in effect.
Section 628. As drafted, the scope of section 628 is unclear. If it is intended to apply to review of major rules, which the larger context for the section suggests, then subsection (a) should be amended to replace “In reviewing a final agency. action” with “In reviewing a major rule.” This change would clarify that the judicial review standard is not intended to apply to all rules, nor to other final agency action (such as adjudications).
Section 655. Subsection (b) amends section 611 of the Regulatory Flexibility Act to authorize judicial review of an agency determination that a rulemaking warrants a regulatory flexibility analysis. The provision would authorize "an affected small entity", to petition for review. While we believe that any provision that authorizes judicial review of regulatory flexibility determinations should be confined to the small businesses that the statute is designed to protect, we would recommend that the language be changed to provide that "an adversely affected or aggrieved" small entity may file a petition. This terminology is already the standard for review contained in section 702 of the APA and the use of identical terminology will avoid needless litigation over any difference in language. Prompt review will tend to ensure that those affected by the rule will know whether the rule is valid before they are required to incur any compliance costs. We agree that, where a statute already provides a time limit for filing a petition for review of final rules, the same time limit should apply to petitions for review of the regulatory flexibility determination bearing on the rule. In the interest of consistency with judicial review provisions government-wide, the Conference has favored a time period of 90 days following a rule's issuance where another time period is not already provided.
Since 1974 executive branch agencies have been subject to a series of Presidential executive orders that required agencies to prepare comprehensive impact analyses for major rulemaking proposals. Variously termed "inflation impact statements," "regulatory analyses," and "regulatory impact analyses," these analyses were all designed to identify or measure the costs and benefits of rulemaking options being considered by Federal administrative agencies. Congress also has imposed impact analysis requirements on administrative agencies through the National Environmental Policy Act of 1969, the Regulatory Flexibility Act of 1980, and by amendments to authorizing statutes for particular agencies.
The regulatory analysis function has become increasingly formalized within agencies as a result of the proliferation and durability of these requirements. This Recommendation is based on a Conference study of the ways agencies have incorporated the regulatory analysis function into their decisionmaking process. A general conclusion from this study is that regulatory analysis can be a useful device in rulemaking if it is taken seriously by upper level agency decision makers; the regulatory analysis function is effectively integrated into the rulemaking process, and the limitations of regulatory analysis are recognized by those who rely upon it.
The Recommendation contains specific advice on the use and limits of regulatory analysis and on integration of regulatory Analysis into the agency rulemaking process. Unless expressly so stated, the Recommendation is not intended to address Application of the Freedom of Information Act to agency records usmoof in regulatory analysis. In particular, it is not intended to repand or decrease the statutory protections afforded trade srrrrls and commercial or financial information obtained for use in regulatory Analysis.