Archive

Improving Regulatory Systems

Recommendations and Actions

REG05: Streamline Agency Rulemaking Procedures

Background

In an effort to coordinate policies within each agency and within the executive branch, numerous layers of review and analyses have been added on top of the relatively simple notice-and-comment requirements of the Administrative Procedure Act (APA). Clearance is required by numerous offices within the agency (and again within the department if the agency is part of a department) and by the Office of Management and Budget (OMB). As has been previously noted, the entire process is repeated twice--first at the proposal stage, then again when the rule is finalized. After a several-month-long study by a contractor, one agency found that it took an 18-foot flow chart with 373 boxes to describe its then-current rulemaking process.[Endnote 1]

Another reason for the extensive internal review is the fear of litigation challenging the rule. Agencies compile extensive records to defend themselves if rules are challenged in court--even for issues no one has raised during the public comment period. An agency can spend considerable resources developing a rule only to have it nullified in court because the rule was based on an impermissible statutory interpretation. If a successful challenge is brought after the rule is issued, an entire program may be thrown into a state of disarray.[Endnote 2]

Some agencies have statutory provisions that help reduce the amount of litigation preparation needed during the rulemaking process. For example, some statutes prohibit litigants from challenging a rule on any basis other than ones raised during the public comment period and require challenges to be brought within 60 days of the day the rule is issued.[Endnote 3]

The straightforward APA notice-and-comment rulemaking process has now become so formalized that its name--informal rulemaking--seems a misnomer. Some agencies, however, have additional statutory requirements that make their rulemaking process even more cumbersome. For example, the Federal Trade Commission is required to conduct trial-type hearings that allow cross-examination of witnesses.[Endnote 4]

NEED FOR CHANGE

Although different agencies have different internal rulemaking processes, within an agency too often the same review process is used and the same number of clearances are required regardless of the significance or complexity of a rule.[Endnote 5] A process with numerous checks makes sense for significant rules (e.g., ones that announce a major policy, initiate a new regulatory program, have a significant effect on the economy, or are particularly controversial). However, a large number of the thousands of rules issued each year are not significant and do not warrant extensive review by numerous offices. Anecdotal evidence indicates that insignificant rules (which may be a clarification of an existing rule or a small change needed to undo an unintended consequence of an existing rule) often languish on reviewers' desks because the rules are not high priority and the reviewers are busy with other demands.[Endnote 6] Even relatively minor changes to an existing program can easily take nine months or more.

The failure to establish a process that differentiates between significant and insignificant rules is costly. The current lengthy process precludes quick, minor adjustments to existing programs, wastes the time of numerous reviewers, and frustrates staff responsible for getting the rules out and keeping programs functioning. Evidence that the rulemaking process has become too cumbersome is provided by the frequency with which agency staff turn to other methods of establishing agency policy. Instead of issuing rules, agencies issue policy statements, guidance documents, and memos to agency personnel that are often not required to go through public comment, extensive internal agency clearance or OMB review.[Endnote 7]

SOME EFFORTS AT STREAMLINING. The Clinton administration's regulatory review executive order is a major step in streamling the regulatory process. It will streamline the review process by requiring the Office of Information and Regulatory Affairs (OIRA) to review only significant rules.

The Environmental Protection Agency (EPA) also has made efforts to streamline its process and avoid the "double" review process (i.e., all clearances required both at proposal and final rule stage) by issuing "direct final" rules for certain rules on which it believes the public will not comment. Although EPA issues many rules that are controversial and that benefit from public comment, a significant number of rules receive no comments. These rules include:

--minor modifications of existing rules (such as directions about where to submit information or technical changes to testing standards that have been adopted by a professional association);

--federal approval of changes to a state plan implementing federal law affecting only one or a small group of companies (especially where the federal agency has very little discretion); and

--"significant new use" rules limited to specific chemicals.

In this direct final rulemaking approach, EPA publishes a notice in the Federal Register saying that a rule will become effective in 60 days unless, within 30 days, someone submits written notice of an intent to file an adverse or negative comment. If no such notice of intent is filed, the rule becomes final without going through a second round of intra- and inter-agency review. If even one person files such a notice, EPA withdraws the rule, republishes it as a proposed rule, and proceeds with normal notice- and-comment rulemaking and the second round of review. (Republishing the rule as a proposal serves two functions. First, it gives an opportunity to comment to people who may have kept silent because they wanted the rule to go into effect immediately. Second, it self-imposes a penalty--additional steps and further delay--which serves to prevent the agency from overreaching in the use of this technique.)

This approach avoids the second round of clearances and review, which otherwise delays rules, wastes time, and should be superfluous (especially if all reviewers are warned the first time that the rule might go final without further review). Theoretically, the second review ought to be very quick, but clearing any document through numerous government offices takes time. The paper shuffling also wastes the reviewers' time by requiring them to look at something twice when once would have sufficed.

EPA uses this process routinely in two areas--approval of changes to state implementation plans and "significant new use" rules for chemicals.

--In a pilot project testing this procedure for EPA approval of changes to state implementation plans under the Clean Air Act, 90 rules were processed in an average of 181 days, which was considerably better than the 419 days it took to process 81 comparable rules prior to the use of the direct final process.[Endnote 8] For the last 10 years, EPA has used the process nationwide to approve changes to state plans.

--In 1989, as a result of an informal reg neg process with industry and environmental groups, EPA adopted the direct final rulemaking process for chemical-specific significant new use rules (SNURs) issued under the Toxic Substances Control Act.[Endnote 9] SNURs for at least a hundred chemicals have been issued as direct final rules.[Endnote 10]

EPA also uses direct final rules occasionally for other types of rules. The agency has rarely had to withdraw a rule because public comments were filed, and no one has ever challenged these rules for failure to comply with the APA.[Endnote 11]

Some agencies have streamlined the process by issuing broad, generic rules to resolve common issues or to establish standards applicable to multiple industries instead of conducting separate rulemakings for each issue or industry. For example, the Social Security Administration and the Nuclear Regulatory Commission each have successfully issued rules concerning common problems arising in disability claims and applications for power plants, respectively. On the other hand, the Occupational Safety and Health Administration was not allowed by a court to use a generic, instead of a hazard-by-hazard, approach for permissible exposure levels for air contaminants.[Endnote 12]

The National Marine Fisheries Service has established categories of rulemaking notices that appear in final form in the Federal Register after reduced review. For example, when a quota of fish previously specified by regulation has been taken in a particular fishery, a notice closing that fishery is published in the final rule section of the Federal Register. Violators of these closure notices may be subject to a variety of civil enforcement proceedings. These notices are not reviewed by either the Department of Commerce or OIRA.[Endnote 13]

Agencies also conserve agency resources by adopting voluntary national consensus standards rather than developing criteria in-house.[Endnote 14]

ACTIONS

1. Streamline internal agency rulemaking procedures. (1)

The President should direct heads of regulatory agencies to review and streamline their internal rulemaking processes. The Regulatory Coordinating Group (RCG), in consultation with the Administrative Conference of the United States (ACUS), should assist the process by providing a forum for agencies to exchange information and coordinate hiring of contractors (if any are necessary) to avoid duplicative efforts. A variety of principles should be adopted to streamline the process and reduce the cost of issuing rules, including:

--Agencies should differentiate between significant and insignificant rules and use a shorter process for insignificant rules. The new regulatory review executive order requires OIRA review only for significant rules. Agencies also should strive to group or tier rules and to adjust the process so that the number of steps in the clearance process varies with the significance or importance of the rule.

--Executive departments (such as the Department of Health and Human Services) should review their internal delegations to determine whether agencies headed by Presidential appointees (such as the Food and Drug Administration) can issue some insignificant rules without departmental review. It might be appropriate to develop a triage system similar to the one in the new regulatory review executive order.

--Agencies should determine whether there are continuing, unnecessary roadblocks in the process and then determine how to remove them.

--Agencies should get early input from top policymakers on the choice of regulatory approach to be taken so that agency resources are not wasted drafting regulations that are inconsistent with the desired policies.

2. Use "direct final" rulemaking to reduce needless double review of noncontroversial rules. (1)

The head of each regulatory agency should use "direct final" rulemaking or a similar approach at least once in the next year (or explain why it cannot be done).[Endnote 16] The direct final process should only be used for rules that the agency believes are so noncontroversial that no one would file adverse or negative comments on the proposal. Under this process, the agency would publish a direct final rule in the Federal Register. The Federal Register notice should explain that the rule would become effective in 60 (or some other appropriate number) days if, within 30 (or some other appropriate number) days, the agency did not receive notice from any person of the intention to file adverse or negative comments.[Endnote 17] If the agency is notified that adverse comments would be filed, the agency would be required to withdraw the direct final rule, republish it as a proposed rule, and go through the usual notice-and-comment procedures.

3. Develop specifications for rulemaking petitions. (1)

The heads of regulatory agencies should issue regulations specifying what must be in petitions for rulemaking and describing the process for filing them.[Endnote 18] Such regulations should explain that detailed petitions, complete with a text of a proposed rule and underlying analyses, may help the agency respond to the petition more quickly. Sufficiently detailed petitions may form a basis for a notice of proposed rulemaking. After a public comment period, the agency could then either withdraw the proposal or modify it as necessary and adopt it as a final rule.[Endnote 19]

4. Evaluate and draft proposed legislative changes to speed the rulemaking process. (4)

Heads of regulatory agencies, in coordination with the Regulatory Coordinating Group (RCG) and ACUS should:

--identify existing statutes that unnecessarily require cross-examination and other adjudicative fact-finding procedures in rulemakings and should recommend whether the administration should seek legislative changes;

--identify which, if any, statutes should be amended to limit the amount of time parties have to challenge a rule, or to limit the issues on judicial review to those that were raised during the public comment period, and should recommend whether the administration should seek legislative changes; and

--recommend whether the administration should seek amendments to ensure that regulatory statutes provide sufficient flexibility for agencies to issue "generic rules" that would settle, in one proceeding, issues that would otherwise recur in numerous separate rulemakings or enforcement proceedings.

The Chair of the RCG, in coordination with ACUS, should study whether:

--The administration should seek an amendment to the Federal Advisory Committee Act to exempt advisory committees that meet only once from its requirements.[Endnote 20]

--It would be feasible, useful and constitutional for agencies to be able to seek judicial resolution (similar to a declaratory judgment) by a court of difficult statutory interpretations that are important to resolve before an agency finalizes a rule and expends significant resources.[Endnote 21] If the administration seeks legislation, the procedure to be established should ensure that affected interests are represented and that issues are not presented prematurely (i.e., before the agency has definitively determined that there is an actual problem of statutory interpretation).

CROSS-REFERENCES TO OTHER NPR ACCOMPANYING REPORTS

Department of Labor, DOL03: Expand Negotiated Rulemaking and Improve Up-front Teamwork on Regulations.

Department of Education, ED05: Streamline and Improve the Department of Education's Grants Process.

Department of Health and Human Services, HHS02: Reengineer the HHS Process for Issuing Regulations.

Streamlining Management Control, SMC08: Expand the Use of Waivers to Encourage Innovation.

ENDNOTES

1. Although that agency has since modified its process, the process depicted on the chart is not atypical of rulemaking procedures throughout the government.

2. See Corrosion Proof Fittings v. EPA, 947 F.2d 1201 (5th cir. 1991) (EPA's asbestos rule, 10 years in the making, remanded to agency for lack of substantial evidence).

3. See the Clean Air Act, 42 U.S.C. 7607(b)(1) and (d)(7)(B) (1991 Supp.).

4. 15 U.S.C. 57a (1988). The Securities and Exchange Commission has similar requirements in the Securities Act Amendments, 15 U.S.C. 78f(e) (1988), as does the Environmental Protection Agency (EPA) in the Toxic Substances Control Act, 15 U.S.C. 2605(c) (1988).

5. Some very minor or repetitive rules have an expedited process, but most agency processes fail to adequately match the thoroughness of the process with the complexity of the rule. The American Waterways Operators reports that a staff member from the Office of Information and Regulatory Affairs noted that "the Coast Guard's rigorous internal review process applies equally to rules of sweeping consequence and minor technical guidelines." The American Waterways Operators, "The Federal Regulatory Process: Opportunities for and Obstacles to Government/Industry Cooperation," May 1992, p. 17.

6. Interview with Richard Wilson, Director, Office of Mobile Sources, Environmental Protection Agency, May 14, 1993.

7. To a certain extent, the use of such other methods allows agencies to differentiate between significant and insignificant rules and is a useful development. However, there are drawbacks to these methods-- although technically these policies cannot bind people outside the agency, as a practical matter, they may have that effect. Unlike rules (which are published in the Federal Register and codified in the Code of Federal Regulations), less formal statements of agency policy are not necessarily compiled in one place and may not be accessible to the public. There is a general sense that agencies are turning to policy statements and guidance too frequently. See Emery, Fred, Rulemaking as an Organizational Process (1982), p. 46 (unpublished report to ACUS); Anthony, Robert, "Agency Efforts to Make Nonlegislative Documents Bind the Public," Admin. Law Review, Vol. 44 (1992), p. 31. an expanded version of the latter article will shortly appear as Interpretive Rules, Policy Statements, Guidance, Manuals and the Like--Should Agencies Use Them to Bind the Public?, 1992 Administrative Conference of the U.S. Recommendations and Reports.

8. Environmental Protection Agency, Requirements for Preparation, Adoption, and Submittal of State Implementation Plans; New SIP Processing Procedures to Save Time and Resources, 47 FR 27073, 27074 (June 23, 1982) (in this notice EPA uses the term "immediately final" rather than "direct final").

9. Interview with James Nelson, Associate General Counsel, Environmental Protection Agency (May 11, 1993). See 40 C.F.R. 721.170(d)(4)(1).

10. See note 9 above.

11. Interviews with Alan Eckert, Associate General Counsel, Environmental Protection Agency, May 6, 1993; James Nelson, Associate General Counsel, EPA, May 11, 1993; and Howard Hoffman, Senior Attorney, EPA, May 10, 1993. In response to an informal request to all attorneys in Environmental Protection Agency's Office of the General Counsel, no direct final rule was identified as having been challenged in court for failure to comply with the Administrative Procedure Act (APA).

12. AFL-CIO v. OSHA, 965 F.2d 962 (11th Cir. 1992).

13. Memorandum to Jeffrey Lubbers, Team Leader, NPR Improving Regulatory Systems Team, from Gloria Gutierrez, Acting Chief Financial Officer and Assistant Secretary for Administration, Department of Commerce, Aug. 5, 1993.

14. Administrative Conference of the United States, Recommendation 78-4, "Federal Agency Interaction with Private Standard-Setting Organizations in Health and Safety Regulations," 1 C.F.R. 305.78-4.

15. These principles should apply to all agencies even though agency processes vary significantly from agency to agency, depending, in part, on the agency's mission and culture.

16. Agencies can use direct final rules without new legislation, although the process does pose some litigation risk. Arguably, direct final rules meet the requirements of the APA. However, an argument could be made to the contrary. Agencies should determine when it is appropriate to take that risk after consultation with their general counsels. One factor that may make it easier for EPA to use the process is the special provisions in the Clean Air Act and the Toxic Substances Control Act that require anyone challenging a rule to bring the judicial challenge within 60 days after the rule is published in the Federal Register. 42 U.S.C. 7607(b)(1) (1991 Supp.); 15 U.S.C. 2618 (1988). Agencies that do not want to take the litigation risk associated with direct final rules should structure review procedures to accomplish nearly the same thing. Instead of a direct final rule automatically going into effect unless the agency withdraws it, the agency could publish in the Federal Register a notice of no adverse comment that makes the rule final. Internal and OMB review procedures should not require review of such a notice if everyone is notified that this process might be used.

17. The rule cannot become effective until at least 30 days after the close of the public comment period. See 5 U.S.C. 553.

18. Administrative Conference of the United States, Recommendation 86-6, "Petitions for Rulemaking," 1 C.F.R. 305.86-6.

19. In setting up such procedures, care must be taken not to turn over to private parties the governmental functions of setting the agency's agenda and analyzing rules. The regulations should ensure that the agency's decision to withdraw a proposal would not be subject to additional judicial review merely because the agency has invited rulemaking petitions.

20. 5 U.S.C. App. (1988).

21. The Carnegie Commission recommended this procedural innovation. Carnegie Commission on Science, Technology, and Government, Risk and the Environment: Improving Regulatory Decision Making (Washington, D.C., June 1993), p. 111.

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