The Informal Rulemaking Process. Neil Eisner U.S. Department of Transportation April 2002
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1 The Informal Rulemaking Process Neil Eisner U.S. Department of Transportation April 2002
2 Handout Material The Slides Rulemaking Requirements
3 What We Will Cover What is rulemaking? What is a rule? What are the legal requirements for the informal rulemaking process? How does the process work? o Why is a rule issued? o How is a rule developed? o What is the role of OMB, the White House, SBA/Advocacy, and the Congress? What is the role of the courts? What are the agency s responsibilities after a rule is issued?
4 Background
5 Pre-1946 Agency presumed to know what is best
6 Administrative Procedure Act (APA) 1946 Openness Agency adjudication Agency rulemaking Judicial review of agency action
7
8 Growth of Rulemaking
9
10 But Remember: Numbers of documents or pages in the Federal Register do not indicate whether Issuing a rule Issuing a good or bad rule Rescinding a rule Fixing a bad rule Among thousands of routine and frequent Rulesof-the-Road type rules
11 Post - APA Increasing complexity Court decisions Current trend: significant, additional requirements
12 What Is Rulemaking?
13 Rulemaking The agency process for formulating, amending, or repealing 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.
14 Other Processes for Imposing Requirements
15 Formal Rulemaking Used where a statute other than APA requires rule to be made on the record after opportunity for an agency hearing Rarely used, except for ratemaking, food additives, and other limited categories
16 Hybrid Rulemaking Additional statutory requirements-- e.g., OSHA, Clean Air Act, FTC Act...
17 Adjudication Used to issue an agency s final disposition in a matter other than rulemaking but including licensing
18 Rulemaking Vs. Adjudication Rulemaking o o o o o Fairer Normally prospective Greater clarity/uniformity More flexible (can provide exceptions, etc.) Better control of agenda/policy; do not have to wait for issue to be raised in a controversy Adjudication o o o o o Avoids rulemaking complexity Evaluates past conduct or current rights Modifications easier Conflict minimized Avoids over and under inclusiveness
19 What is a rule?
20 Legislative/Substantive Imposes a binding requirement on those to whom it applies; it has the force of law
21 Interpretative Rule Interprets existing statutes or rules; it tells the public what the agency thinks a statute or rule means
22 Hoctor Case Statute: Animal Welfare Act authorized the USDA to adopt rules to govern the humane handling, care, treatment, and transportation of animals by dealers. Legislative rule: Structural Strength 9CFR 3.125(a). Facility housing animals must be constructed of such material and of such strength as appropriate for the animals involved. Purported interpretive rule: Memorandum to inspectors that all dangerous animals must be included inside a perimeter fence at least 8 feet high. Issued w/o notice and comment.
23 Policy Statement Tells the public how the agency intends to exercise a discretionary power
24 Management or Procedural Rule May also be substantive; two categories Management or Personnel: Involves running or supervising agency s business; concerns agency and does not affect the public Organization, Procedure, or Practice: Describes the agency s structure and functions and the way in which its determinations are made
25 Statutory Implementation Process Statute E.g., no unfair competition Legislative Rule E.g., unfair if significantly lower prices when new entrant Legislative Rule E.g., unfair if lower prices more than 10% when new entrant No Agency Action Interpretative Rule E.g., significantly lower means more than 10% Interpretative Rule E.g., unfair competition means lower prices more than 10% when new entrant Agency Adjudication Agency must only prove prices lowered 10%; interpretation binding on adjudicator but not regulated entity Agency Adjudication Agency must prove 10% is significant Agency Adjudication Agency must only prove prices lowered 10% Agency Adjudication Agency must prove conduct was unfair competition; interpretation binding on adjudicator but not regulated entity Agency Adjudication Agency must prove conduct was unfair competition Private Litigation Judicial Review Court may defer to agency interpretation (generally, agency adjudicatory decisions are reviewable in federal courts; some agency enforcement may be initiated in federal court rather than agency) Court is generally bound by agency legislative rule and may defer to agency interpretation N.B. Assume: in all cases, agency can prove a regulated entity has lowered price by more than 10% and that there was a new entrant
26 Points to Remember Vague or general statutes/legislative rules may be easier to adopt But they increase agency s burden in adjudication or litigation Interpretative rules may provide more specifics But they are not legally binding on regulated entities or courts Adjudication and court decisions have precedential effect equivalent to a legislative rule for those subject to jurisdiction of the adjudicator or court
27 What are the Legal Requirements?
28 The APA Requirements
29 Basic Requirement for Informal Rulemaking Simple process o o o o NPRM Public comments Final rule (with basis and purpose) Exceptions
30 Notice of Proposed Rulemaking Contents: Preamble Rule text optional Comment period
31 Exceptions from APA Informal Rulemaking Requirements Military or foreign affairs functions Agency management or personnel, or public property, loans, grants, benefits or contracts
32 Exceptions from Notice and Comment Requirements Unless otherwise required by statute, these exceptions are available: Good cause ( impracticable, unnecessary, or contrary to the public interest ) Interpretations and policy statements Rules of agency organization, procedure, or practice
33 Preamble Explains need and authority for rule Explains rule text or subjects and issues involved May ask questions Generally summarizes or provides various analyses
34 Logical Outgrowth Test/Scope of Notice NPRM must fairly apprise interested persons of the issues involved Changes may be made based on the comments received, if the public is adequately apprised of their possibility Logical outgrowth/reasonably anticipated
35 Comment period APA - no minimum But (with exceptions) o E.O days o Agency procedures Can extend or reopen Can provide reply period
36 Docket Public Access Rulemaking and supporting documents Public comments Ex Parte communications Late comments Increasing internet-access
37 Final Rule Preamble Responses to public comment Statement of basis and purpose Rule Text
38 Response to Public Comment Comments can be very helpful Problems o Assertions without data o Conflicting data o Cross-town hypocrisy o May ignore each other May get 10s, 100s, 1000s... May be very detailed or postcards Not a vote
39 Effective Date Substantive rules: not less than 30 days after publication Exceptions o Granting exemption or relieving restriction o Interpretative rules and policy statements o Good cause Also: o Implementation date o Compliance date Notice and comment needed for subsequent delay
40 Publication Requirements Legislative rules Must be published in Federal Register or personally served to have effect Interpretative rules, policy statements and staff manuals If not published or actual and timely notice is not provided, must be electronically available before the agency can rely on them, use them, or cite them as precedent
41 Dissemination of Rulemaking Documents Issuance Posting Publication Selective distribution Available to all when given to one
42 Exemptions from Rules For unique circumstances not considered during rulemaking
43 Ex Parte Rules APA has no requirements for informal rulemaking Many agencies do prohibit ex parte communications after NPRM
44 Judicially Imposed Requirements Notice--of significant studies relied upon by agency Expanded preambles to final rule, including response to comments Vermont Yankee
45 Extras ANPRM SNPRM IFR Request for comments Hearings Second round of comments Reply comments Negotiated rulemaking Electronic rulemaking Also: Direct Final Rule
46 Other Requirements Affecting the Informal Rulemaking Process
47 Statutes
48 Freedom of Information Act (FOIA) Requires agencies to make information available to the public, with specified exceptions Electronic FOIA: Requires agencies to make policy statements, interpretations, and administrative staff manuals and instructions to staff that affect the public electronically available
49 Federal Advisory Committee Act (FACA) Requires agencies that meet with more than one person outside the Federal government for the purpose of receiving group advice/consensus recommendations to comply with specified requirements, including charters and notice of public meetings
50 Sunshine Act Requires multi-headed agencies to hold open meetings for their decision making
51 Lobbying/Registration Act Imposes broad requirements on lobbyists who attempt to influence government decisions
52 Paperwork Reduction Act Requires agencies to: Analyze information collection burdens Provide opportunity for notice and comment Obtain OMB approval Prepare an Information Collection Budget (ICB) Attain Reductions in ICB Allow electronic maintenance, submission and disclosure, and electronic signature, when practicable, by October 2003
53 We can lick gravity, but sometimes the paperwork is overwhelming. Wernher von Braun
54 Regulatory Flexibility Act Requires agencies to: Consider impacts on small entities If significant economic impact on substantial number of small entities (SEIOSNOSE), prepare a regulatory flexibility analysis at proposed and final rule stage (unless NPRM not required) If not, must certify no SEIOSNOSE Review of rules with SEIOSNOSE within 10 years
55
56 Small Business Regulatory Enforcement Fairness Act Requires agencies to take additional steps to help small entities These include compliance guides, informal guidance programs, ombudsman, reduction/waiver of penalties, and fairness boards
57 Unfunded Mandates Reform Act Requires agencies to assess effect of rules on state, local and tribal governments and on private industry Where rule requires annual expenditure in excess of $100 million (adjusted annually for inflation), agency is required to consider reasonable number of alternatives and select the least costly, most cost-effective, or least burdensome alternative that achieves objective of rule or explain why it could not
58 Trade Agreements Act Prohibits agencies from setting standards that create unnecessary obstacles to foreign commerce Requires agencies to use performance standards, where appropriate
59 National Technology Transfer and Advancement Act Requires agencies to use technical standards developed/adopted by voluntary consensus standards bodies unless inconsistent with law or impractical
60 Assessment of Federal Regulations and Policies on Families (FY 1999 Omnibus Appropriations Act) Requires agencies to assess rules that may affect family well-being
61 Environmental Requirements Various statutes, regulations, executive orders, and agency orders, including, the National Environmental Policy Act, impose requirements for considering environmental impacts of agency decisions
62 Executive Orders
63 Regulatory Planning and Review (E.O ) Provides for or requires of agencies: Regulatory philosophy and principles Planning mechanism Review of existing regulations OMB review of significant regulations Assessment of economically significant regulations Earlier, more meaningful public participation and use of consensus mechanisms Presidential resolution of conflicts
64 Federalism Requires agencies to consult with state and local governments and consider the impacts of their rulemakings on them when the actions have federalism implications
65 Indian Tribal Governments Requires agencies to consult with Indian tribal governments and consider the impact of their rulemakings on them when the actions have tribal implications
66 Civil Justice Reform Requires agencies to comply with requirements to improve rulemaking drafting to reduce needless litigation
67 Governmental Actions and Interference with Constitutionally Protected Property Rights Requires agencies to be guided by principles in the order (e.g., mere assertion of safety purpose is insufficient to avoid a taking) when formulating or implementing policies that have takings implications
68 Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations Requires agencies to develop a strategy that identifies and addresses disproportionably high and adverse human health or environmental effects of actions on minority and lowincome populations
69 Protection of Children from Environmental Health Risks and Safety Risks Requires agencies to address disproportionate risks to children that result from environmental health or safety risks to the extent permitted by law or appropriate
70 Implementation of the North American Free Trade Agreement Requires agencies to provide a 75-day comment period for any proposed technical regulation
71 Energy Requires agencies to prepare a statement considering adverse energy effects and reasonable alternatives for significant energy actions
72 Other Executive Orders Impose a variety of procedural and substantive requirements (e.g., regulations concerning access for the disabled must be cleared with DOJ)
73 Presidential/White House Memoranda
74 Plain Language (Presidential Memorandum) Requires agencies to use plain language in rulemaking documents
75
76 Regulatory Review Plan (Presidential Chief of Staff Memorandum) Requires review and approval of all proposed or final rules by an appointee of President Bush
77 Agency Procedural Requirements
78 How does the Process Work?
79 Rulemaking Process - Proposed Rule IDENTIFICATION OF NEED Statutory Mandate Agency identification of problem Inspector reports/agency oversight Accident Enforcement issues Requests for interpretation Petition Changes in state-of-art Policy initiatives Independent agency recommendations Etc. DEVELOPMENT Analysis of alternatives Consideration of legal authority/ requirements Consideration of additional actions/rule stage Briefing of senior Departmental officials, as appropriate Preparation of supporting analyses and rulemaking documents AGENCY REVIEW Concurrence of various initiating office officials Briefing and coordination with Departmental officials, as appropriate Approval by Administrator (or designate) NONSIGNIFICANT SIGNIFICANT FEDERAL REGISTER OMB REVIEW OMB must approve most rulemakings; review may include other Federal agencies DEPARTMENTAL REVIEW Appropriate review and approval by secretarial offices In some cases, other parts of department may review Secretary must approve
80 Rulemaking Process - Final Rule REVIEW OF COMMENTS DEVELOPMENT Including decision whether to issue final rule, SNPRM, withdraw, etc. AGENCY REVIEW NONSIGNIFICANT SIGNIFICANT DEPARTMENTAL REVIEW FEDERAL REGISTER OMB REVIEW
81 The Proposed Rule Process Normal rulemaking process involves proposed and then final rule Any time during process, an agency may develop justification for exceptions or additions
82 Why is a Rule Issued?
83
84 Identification of Need for a Rule Statutory Mandate/Authority General Specific Conflicting Vague or problematic Agency identification of a problem Inspector reports/agency oversight Accidents Enforcement issues/problems Requests for interpretation/exemption Etc. Petitions from the public Changes in state of the art Policy initiatives NTSB or similar recommendations Etc. Role of risk assessments
85
86 How is a Rule Developed?
87 Consideration of alternatives Non regulatory alternatives; e.g., Market place incentives Tax incentives Regulatory alternatives; e.g., Information disclosure/labeling Performance vs. design standard Alternative methods of compliance Phase-in Tiering
88 Continued - Consideration of Alternatives Substantive alternatives Different ways to fix the problem Some may achieve more benefits Some may cost more Role of economic and other analyses
89
90 Consideration of Various Requirements Statutes Executive Orders Agency Orders Etc.
91 Legal Authority Must have May impose conditions May impose conflicts May impose procedural requirements
92 Legal Process Requirements Covered Earlier
93 Preparation of Supporting Analyses and Rulemaking Document Analyses: Valuable decision-making tools But may be expensive and time-consuming
94 Risk Assessments Determination Probability of problem occurring (e.g., accident) Probability of problem causing harm (e.g., death) Issues Methodology Data Assumptions Range and distribution of risks
95 Continued - Risk Assessments Comparison to other risks Risk tradeoffs Peer review Etc. Timing Should be done prior to cost-benefit analysis
96
97
98
99 Economic/Cost-Benefit Analyses Determination Costs and benefits of the rule (and alternatives) Issues Regulatory objective Methodology Data Assumptions Direct vs. indirect effects Nonquantifiable costs or benefits Value of life
100
101 Continued - Economic/Cost- Benefit Analyses Benefits not within agency authority Double-counting benefits Who pays/who benefits Tombstone mentality Cost effective vs. cost beneficial Discount rate Reasonable alternatives Sensitivity analyses Total costs/total benefits Different costs and benefits Etc.
102 Continued - Economic/Cost- Benefit Analyses Decision Generally: do benefits justify costs Where legally constrained, analysis may justify effort to change requirements Timing This should form the basis of decision: o Whether rulemaking is justified o What alternative should be chosen
103
104 The Logic of the Decision Problem fixed Sensible Costs and benefits Conflicts Substantive Policy Unintended consequences Federalism Small entities Etc.
105 The Final Rule Process Review of public comments and any new data Reconsideration of proposal and analyses to decide whether to: Issue proposed as a final rule Modify proposal (supplemental proposal or final rule) Withdraw proposal issues Preparation of supporting analyses similar to proposed stage
106 Scheduling the Rulemaking
107
108 Time Constraints Statutory deadlines Act Act by date certain Act by date certain or: Statutory standard goes into effect Agency budget is cut Etc. Judicial deadlines Administrative deadlines APA Reasonableness Need to fix problem quickly or by a certain date
109 Delay - Reasonable vs. Unreasonable Higher priorities Unable to determine reasonable action Disagreement within agency or executive branch Inadequate resources Need further research Prefer not to act Waiting to see if marketplace solves problem Do not believe there is a problem Poor drafting or analysis Inadequate control of rulemaking schedule
110 Continued - Delay Multiple statutory and executive order requirements Failure to consider applicable requirements Political pressure Action by private parties Adverse court decisions Strict judicial review Conflicting, outmoded, or vague statutes Etc.
111 Effect of Delay Pollution continues Safety device is not mandated Unnecessary equipment continues to be required Etc.
112 What is the Role of OMB, the White House, SBA/Advocacy, and the Congress?
113 The Role of OMB/White House OMB review Significant rules 60-day lists Submission of rulemaking documents/supporting analyses o Logged on internet o Agency must note change Other agencies The WH Time factors The issues o Economic analyses o Alternatives o Etc.
114 SBA Office of Advocacy Review of rules Advocates for small business Experts on small business Amicus briefs MOU with OMB
115 The Role of Congress
116 Congressional Review (Provisions in SBREFA) Requires submission of final rules to Congress before they can take effect Provides for expedited review Delays effective date of a major rule; exceptions provided If overturned, rule treated as if never took effect Congress can only disapprove; it cannot change If disapproved, agency cannot adopt a substantially the same rule unless authorized by new statute
117 Congressional Oversight Hearings Reports to Congress Meetings Requirements in reports and appropriations acts Substantive legislation
118 Truth in Regulating Act Requires GAO to prepare and submit to the Congressional committees of jurisdiction, within 180 days of a request from a committee chairman or ranking member, an independent evaluation of the agency s analysis of an economically significant rule (including the costs, benefits, and alternatives) This is a 3-year ( ) pilot project Congress has not appropriated the funds authorized under the Act
119 What is the Role of the Courts? (Judicial Review) Various statutes impose different standards, but under APA can challenge a rule because: Arbitrary, capricious, abuse of discretion,or illegal Unconstitutional In excess of statutory authority Failed to follow legal procedure Can also compel action unlawfully withheld or unreasonably delayed
120 Legal Standards for Reasonableness Reasonable application of statutory criteria Factual support for agency s conclusion Disclosure of data on which decision based -- for public comment Adequate explanation for chain of reasoning Reasonable consideration of important aspects of the problem Adequate explanation for any change in position Appropriate consideration of important alternatives Adequate consideration and response to relevant and significant comments Fairness of remedies Reasonable decisionmaking catch-all
121 What are the Agency s Responsibilities After the Rule is Issued?
122 Implementation of Rules Guidance/interpretations Policy statements Compliance and enforcement activities Training Reporting requirements Inspections Enforcement
123 Reviews of Existing Rules Required by statute (Regulatory Flexibility Act) and Executive Order Some rules force via sunset dates Good practice o Problems not always solved o Changes in state of the art o Etc. Time consuming Public can petition for changes under APA
124 Conclusion
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