Answer 3. The answer to your question is not to fall into the traditional congressional trap of requiring agency "hammers" by requiring the agency to respond in 180 days. The agency should have the authority to respond in a reasonable time and to respond that a full scale review is not appropriate at this time, if for example a full cost-benefit review had taken place only a year earlier and no new facts were put forward to support such a review. In general "regulatory hammers" are a form of micro-management of agency resources that rarely work successfully. The result is likely to be a "boiler plate" agency response rather than a reasoned one.

Answer 4. I do not read the interplay of section 623(b) and section 625 as requiring that all existing rules must be revisited and tested against the two new standards listed in 623(a). This would only occur if there were a petition to perform a cost-benefit analysis.

I do think it appropriate that persons be able to petition agencies to examine whether existing rules meeting the new (albeit more stringent) congressional standards. I would point out that both the Reagan and Clinton Executive Orders require some species of cost-benefit analysis and that this approach is not unknown to agencies. Indeed Executive Order 12866 specifically states "Each agency shall assess both the costs and the benefits of the intended regulation and * propose or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify its costs.

**

I would further note that section 623(b) states that section 623(a) decisional criteria does not apply "when such statute contains explicit textual language prohibiting the consideration of the criteria set forth in this section." While we can debate the meaning of "explicit textual language” (and I would agree that the term is clumsy at best) this “saving clause” does reduce the impact of the problem to which you have adverted.

In that regard, I would not favor an amendment to section 623 that would make clear that Congress intended the decisional criteria of section 623(a) to be applicable to future legislation only. You may want to consider, however the extent to which the term "express textual language" in section 623(b) means that Congress intends to override the judicial interpretation of Congressional intent in a substantive statute such as OSHA or the Consumer Products Safety Commission.

RESPONSES TO SENATOR KOHL'S QUESTIONS FROM MARSHALL J. BREGER Answer 1. I read the "substantial increase” and “adverse effect" standards of section 621 as a proxy for the dollar trigger (be it $25, $50 or $100 million) in the same section and assume that courts would read them in that light. To that extent one could argue that those criteria are surplusage. What is needed, however, is a "safety value" by which a rule whose "gross annual effect" on the economy is less than the statutory dollar trigger but which has a significant impact on one particular industry sector would be treated as a "major rule". The last sentence of section 621 (4)(A)(i) meets that concern.

Answer 2. In general, I do not believe interlocutory review to be a useful approach to judicial review of administrative agency action in unusual circumstances. As my testimony states, determinations of "major rule" status ought be reviewable but I "would suggest merging review with review of the final rule, this reducing the inefficiencies inherent in interlocutory challenges *** I believe that S. 291 proposes something along these lines."

I do not believe that the litigation over economic effects is outside the competence of the federal courts. The federal court would presumably not be hearing evidence but reviewing the decision of the agency in light of its decisional methodology. Such review is certainly within the experience of federal courts.

Answer 3. As my testimony suggests I am supportive of the section 625 petition principle which allows private parties to petition for review of existing major rules under the S. 343 cost-benefit criteria.

(a) It does not matter that there may be thousands of petitions. Agencies can turn down a petition if there is good reason to do so.

(b) As my testimony suggests I would not utilize a regulatory "hammer”.

Answer 4. In general I agree with Cass Sunstein's comment. The term "beyond the level of regulatory action needed to satisfy statutory requirements' needs further refinement.

Answer 5. The federal courts should not be compelled to substitute its own decisional process for the agency and engage in de novo review. I do not read S.

343 as requiring such a scope of review. The courts job is to review the decisional processes of the agencies in light of the proper statutory standard.

RESPONSES TO SENATOR KOHL'S QUESTIONS FROM PETER FERRARA

Question 1. Section 621 defines a "major" rule that would be subject to the mandates of S. 343. The definition encompasses any rule, or group of "closely related rules" that are likely to result in (i) "a substantive increase in costs or prices for wage earners, consumers, individual industries, nonprofit organizations, and [local governments]; or (ii) "significant adverse effects on competition, employment, investment, productivity, innovation *** or the ability of enterprises * * * to compete

in domestic or export markets."

Do you believe that the "substantial increase" and "adverse effect" standards quoted above constitute workable definitions? Is it not the case that a skilled advocate could colorably argue on judicial review that almost any rule might fall within the ambit of (i) or (ii) above in light of the expansive nature of these definitions? And doesn't this mean that the distinction between "major" and "minor" rules is likely to be of little value?

Answer 1. Private citizens will only put the major resources into a skillful advocate to challenge the rules if they think they have more than a minor impact. These terms are no more elastic than other legislative language enacted in many statutes. Question 2. Are you supportive of section 624 which provides for interlocutory judicial review of the government's decision that a particular regulation is not a "major" rule within the meaning of section 621?

Answer 2. Yes.

Question 2a. If you are, please explain why you believe the increased litigation resulting from such interlocutory review-as opposed to comprehensive review following promulgation of a rule-would be justified; that is, what are the benefits that exceed those very real and substantial costs?

Answer 2a. The government should not be acting to impose costs before it deter mines the likely impact through valid study.

Question 2b. Litigation of the "major rule" question might well involve argument over whether a particular proposed rule would have the economic effects noted above in question #1; there can be little doubt that litigation of this sort would occasion frequent battles of experts and consultants. Is it wise, cost-effective, and consistent with the competence of the federal courts to embroil them in debates over whether any given rule-no matter the regulatory context-will have significant adverse effects on competition, employment, investment, etc * * *?

Answer 2b. This is very similar to concepts the Federal courts deal with in antitrust law and other regulatory areas.

Question 3. Are you supportive of section 625 which allows private parties affected by existing, major rules to petition for their analysis under the cost-benefit mechanism set forth in S. 343?

Answer 3. Yes.

Question 3a. Is it unreasonable to venture that, at the very least, many hundred, if not more than one thousand rules might be subject to such petitions?

Answer 3a. As well they should be, because current major rules should be analyzed as well.

Question 3b. Shouldn't the Subcommittee be concerned that the unrestrained submission of section 626 petitions (which must be processed within short, fixed time limits) might overwhelm regulatory agencies, and preventing them from attending to other matters and issues that might require prompt and substantial action? Answer 3b. The agencies should be allocating the manpower to deal with this as they should not be acting without knowing what they are doing.

Question 3c. If you are supportive of section 625, please explain why you believe the standard for granting petitions (found in section 625(a)(3)) is appropriate. Subparagraph (3) of section 625(a) provides that the Administration shall grant a petition that is, conduct a cost-benefit analysis-if "reasonable questions" exist as to whether the net benefits of a given rule do, indeed, exceed its net costs. Is it not the case that competent regulatory lawyers and economists could, in most instances, convince a court that "reasonable questions" exist? And doesn't this mean that the standard set forth in subparagraph (3) does little, if anything, to limit the set of petitions requiring review to those that have the most merit?

Answer 3c. The review should not be significantly limited. It would be desirable to require review of all current significant rules.

Question 3d. Are you supportive of section (a)(4) which provides for judicial review of refusals to grant section 625 petitions? In light of the low, “reasonable question”

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threshold for the grant of such petitions, is it not reasonable to assume that private parties would, in most instances, be quite willing to litigate the denial of a petition? If you endorse section 625(a)(4), please explain why you believe the increased federal court litigation resulting from such review would be justified; that is, what are the benefits that exceed these significant costs?

Answer 3d. Same answer as to paragraph (c) above.

Question 4. Section 626 of S. 343 prohibits the promulgation of any federal regulation "that expands Federal power or jurisdiction beyond the level of regulatory action needed to satisfy statutory requirements ***" (emphasis added). Please respond to the following comments about section 627 that were made by Professor Cass Sunstein of the University of Chicago in written testimony submitted to the Subcommittee:

The basic problem is that the section appears to be based on a misunderstanding of regulatory law. Agencies are generally given the power to issue "necessary and appropriate" rules to implement their statutory minima. Many of them are "implementing" rules that enforce the statute pursuant to a legislative mandate that does not specify any statutory minima. May of them involve allocating licenses or holding auctions (consider the Federal Communications Commission) that are not, strictly speaking, legally required.

Ordinarily, and strictly speaking, no particular rule is "needed to satisfy statutory requirements." For example, much of what is done by the EPA or the SEC is designed to implement the statute by promoting clean air or efficient trading practices *** [but] is not "needed to satisfy statutory requirements." If under section 627 agencies can do only what is, strictly speaking, legally necessary, they will not do many of the things that Congress has expected them to do. In short: Section 627 is much too crude and confusing to be enacted into law.

Answer 4. I would refer this comment to the statute's authors for their response. [Note: It may force Congress to be explicit in its directions and, therefore more accountable to the voters.]

Question 5. Do you believe that, in their oversight of the executive's regulatory decisionmaking, the federal courts should be compelled to evaluate and choose between competing cost-benefit analyses and risk assessment methodologies, as they might be under the judicial review provisions of S. 343? Are such sophisticated, factintensive and ultimately subjective judgments within the core competence of the judicial branch?

Answer 5. What they are being asked to do here is no different from what they must do in antitrust law, securities regulation and many other areas of regulation.

RESPONSES TO SENATOR THURMOND'S QUESTIONS FROM PETER FERRARA Question 1. Mr. Breger, in your written testimony you object to the 180-day time limit in S. 343 within which an agency must respond to a petition to review an existing regulation. Could you both please give us your views on how long, on average, you think it would take for an agency to conduct an adequate cost-benefit analysis, and how much you estimate it would cost?

Answer 1. I think the 180 day limit is necessary to ensure that agencies don't effectively evade the requirements by dragging out the studies for years. The costs would vary, but they are necessary because the government should not act without knowing what it's doing.

Question 2. Can either of you give us a rough idea of how many rules are promulgated each year which have annual costs of more than $50 million? In addition, do you have any idea of how many rules already exist which have annual costs of more than $50 million?

Answer 2. While I don't know the precise number, over a period of years it amounts to several hundred. The Administration applies Executive Order 12866 to "significant rulemaking actions," which it interprets as $100 million in economic impact. Thus, there is a list of several hundred such rules at OMB. S. 343 would expand this number, but not in an unreasonable manner.

Question 3. Could you both please discuss whether you think the definition of "major rule," with its $50 million limit, is satisfactory?

Answer 3. I think the limit should be no higher because there is a danger that agencies will try to divide up each regulation in smaller pieces to fall below the threshold. [Note: HR 1022 sets a $25 million threshold; $5 million at Superfund sites. It was passed by the House on 2/28/95.]

Question 4. In determining whether the $50 million limit is met for a "major rule," could you both please state your views on whether you believe one-time costs of compliance should be amortized, so that only part of the cost of new equipment, for example, is considered in a single year, or should the total amount spent be considered in the year it was incurred?

Answer 4. Amortization is a hopeless arbitrary morass that agencies would try to manipulate to fall below the threshold.

Agencies should be required to apply consistent and transparent accounting practices. Amortization should not be used as an excuse by agencies to avoid performing their duties under statute, including the duty to carefully consider the impact of regulations.

Question 5. Could you both please discuss whether you think there would be impact on independent agencies which would result from the Presidential review established by S. 343?

Answer 5. The so-called independent agencies should be subject to that Presidential review, as there needs to be a check and balance on them just as with everyone else.

RESPONSES TO SENATOR HEFLIN'S QUESTIONS FROM PETER FERRARA

QUESTIONS RE: SECTION 625

Question 1. Do you believe the $50 million threshold is too low or should it be raised to $100 as suggested by Thomasina Rogers, who has testified on behalf of the Administrative Conference? Please explain your answer.

Answer 1. The $50 million threshold is preferable because otherwise it may be too easy for agencies to divide up regulations in smaller pieces to evade the requirements. [Note: HR 1022 sets $25 million threshold; $5 million at Superfund sites, passed House 2/28/95.]

Question 2. As an alternative to Section 625, would it be reasonable to require that agencies conduct on a regular basis an examination of their existing major rules undertaking the requisite cost-benefit analysis?

Answer 2. Section 625 is preferable because it would force agencies to focus on what the public thinks are the most troublesome regulations.

Question 3. If you are satisfied with the provisions of Section 625 and the new threshold amount of $50 million (vs. $100 million), are there ways to prevent regulatory gridlock given what most likely will be a substantial increase in petitions requesting cost-benefit analyses?

Answer 3. Agencies should not be enforcing regulations when they don't know what the impact would be, so holding up regulations until a cost benefit analysis is done would not be regulatory gridlock but prudent decision making.

QUESTIONS RE: SECTION 623(B)

Question 1. Do you favor this wholesale approach which adds the 2 new standards?

Answer 1. These standards should apply to every significant regulation to ensure that the government is not imposing more costs than benefits on its citizens.

Question 2. What is your reaction to criticism that Section 623 is a "backdoor" approach to overriding this previous legislation and, instead, such legislation should separately be amended by adding the 2 new standards?

Answer 2. I don't see what would be gained by separately amending each statute, nor do I see how the new standards would be considered a backdoor approach as they are being proposed openly in legislation.

Question 3. Would you favor an amendment to Section 623 that would make it clear that Congress intended these 2 decisional criteria would be applicable only to future legislation?

Answer 3. It would make no sense to apply these requirements only to future regulations and not current ones. Current regulations when costs exceed the benefits need to be reformed if not repealed.

QUESTIONS RE: SECTIONS 343, 624 AND 624(D)

Question 1. Some critics of S. 343 believe that the judicial review provisions of Section 624 and in particular 624(d) cede too much power away from Congress to Federal judges. How do you reply to this criticism?

Answer 1. The bill provides for the proper roles for Congress and the Courts, with Congress setting down the rules and principles and the Courts examining whether the agencies properly applied them in particular cases.

Question 2. Do you believe the judicial review provisions of 624 will result in substantially more litigation or the result will be minimal? Please explain your answer. Answer 2. I think Section 624 will result in the proper amount of litigation. Since private litigation is quite costly, regulations will mostly be challenged when agencies are not following the rules properly.

Judicial review is favored in many environmental statutes when the government or private sector fails to achieve the statutory goals. It is only fair to permit judicial review when regulatory agencies exceed their statutory authority or ignore statutory obligations.