Rulemaking

1
Rulemaking

• Part III

2
When is Formal Rulemaking Required?

• Grew out of ratemaking
• Just like formal adjudications
• Very time consuming and expensive
• Courts try to avoid making agencies do it
• Must have magic language
• Only when rules are required by statute to be
  made on the record after opportunity for an
  agency hearing

3
Why avoid formal rulemaking?

• The peanut hearings
• Should peanut butter have 87 or 90 peanuts?
• 10 years and 7,736 pages of transcript
• What was the concern in Shell Oil v. FPC?
• Formal rulemaking was impossibly time consuming
  to use for regulating something changeable such
  as natural gas rates.
• Why does just getting the right to be heard at a
  formal hearing benefit parties that oppose a rule?

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The Procedures of Notice-and-Comment Rulemaking
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Putting the Notice in Notice and Comment

• 553(b) . . . The notice shall include  
• (1) a statement of the time, place, and nature of
  public rulemaking proceedings
• (2) reference to the legal authority under which
  the rule is proposed and
• (3) either the terms or substance of the proposed
  rule or a description of the subjects and issues
  involved. . . .

6
Notice of the Proposed RuleChocolate
Manufacturers Assn v. Block

• What did Congress tell the agency to do that
  resulted in these regs?
• What did the proposed rule address?
• What about fruit juice?
• How was the final rule different from the
  proposed rule?

7
The Notice Problem

• What was the CMA's claim?
• What was the agency defense?
• Does the rule have to be the same?
• Why have notice and comment then?
• What is the logical outgrowth test?
• How would you use it in this case?
• What did the court order in this case?
• What will the CMA do?

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(No Transcript)
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(No Transcript)
10
What about Technical Information Underlying the
Rule?

• Portland Cement v. Ruckelshaus, 486 F2d 375
  (1973)
• The agency must disclose the factual basis for
  the proposed rule, if it relied on scientific
  studies or other collections of information
• Connecticut Light and Power v. NRC, 673 F2d 525
  (1982)?
• The agency cannot play hide the peanut with
  technical information
• Why is this a big deal in environmental regs?
• What are the potential downsides of this policy?

11
Shelby Amendments to the Freedom of Information
Act

• As we will learn later, the FOIA traditionally
  applied only to information in possession of
  government agencies
• Senator Shelby, at the urging of several business
  lobbies, successfully extended FOIA to
  information produced by federally funded research
  and in the hands of universities
• Why would business lobbies want access to this
  information, esp. in environmental rulemakings?
• Why might such access be a problem for professors?

12
Health Insurance Portability and Accountability
Act of 1996

• Congress directed HHS to promulgate privacy rules
  on electronically transmitted medical records
• Why is this a special problem?
• Proposed rule covered electronically transmitted
  records
• Final rule covers all records, if any are
  electronically transmitted.
• Is this a notice problem?

13
Additions to the Published Record

• Rybachek v EPA
• EPA added 6000 pages of supporting info
• Court said the agency may supplement the
  rulemaking record in response to comments asking
  for explanation
• Idaho Farm
• Agency added a report to the record, then relied
  on it in the final rule.
• The agency may not add new material and then rely
  on it without given an opportunity to comment on
  it.

14
Negotiated Rulemaking

• What is this?
• What are the advantages?
• What are the public participation issues?

15
Ex Parte Communications
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Adjudications and Article III Trials

• Why do we care about ex parte communications in
  trials?
• How is this different in adjudications?
• How does separation of functions reduce the
  problem of ex parte communications in
  adjudications?

17
Rulemaking

• How does the notice provision in rulemaking
  change the issues in ex parte communications?
• How does the notice requirement eliminate the ex
  parte communications issues for communications
  before the promulgation of the rule?
• When are ex parte communications an issue?
• How can you cure this?

18
Home Box Office, Inc. v. FCC

• What was being regulated?
• Who were the contacts with?
• What did the court say should be avoided?
• If it is not avoided, what needs to be done?

19
Sierra Club v. Costle

• Sierra Club claimed Senator Bird coerced the EPA
  on coal burning power plant standards
• Why would Senator Bird care about this?
• How could Senator Bird put pressure on the agency?

20
Volpe Test

• The Volpe test for whether a rulemaking may be
  overturned solely on evidence of Congressional
  pressure
• 1) was there specific pressure on the agency to
  consider improper factors?
• 2) did the agency in fact change its mind because
  of these considerations?
• How can the agency defend itself from a Volpe
  attack?
• What did the Court Rule when it applied Volpe to
  this Case?
• Why is it proper for congressmen to comment on
  proposed rules?

21
What is the president's role in rulemaking?

• Controls and supervises executive branch
  decisionmaking
• How is the role different in adjudications?
• When should the president's contacts be
  documented?
• When the statute requires that they be docketed
• If the rule is based on factual information that
  comes from such a meeting.

22
Bias and Prejudice

• Remember the cases on bias of decisionmakers in
  adjudications?
• Should these also apply to rulemaking?
• How does notice and comment change the situation?

23
Association of National Advertisers , Inc. v. FTC

• FTC is adopting rules on TV advertising directed
  at children
• Chairman has written and spoken at length on the
  evils of TV ads aimed at children
• Plaintiffs seek to disqualify him because of bias
• What happened in Cinderella?
• Cinderella disqualified the same Chairman from
  participating in an adjudication because he had
  prejudged some of the facts.

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Is the Standard Different for Rulemaking?

• Clear and convincing evidence that he has an
  unalterably closed mind on matters critical to
  the rulemaking

25
How are state agencies different from federal
agencies?

• Limited staff
• Greater reliance on the expertise of board
  members, rather than staff
• Board may hear lots of testimony and review a lot
  of info - they cannot afford the time and effort
  to put together volumes of supporting info for
  regs
• Should state agencies have a reduced publication
  requirement?
• Should they be able to publish rules without
  explanation and only have to explain if asked?

26
Hybrid Rulemaking (Congressional Mandates) at the
FTC

• issue an advance notice of proposed rulemaking,
  which describes the area of inquiry under
  consideration and invites comments from
  interested parties
• send the advance notice and, 30 days before its
  publication, the notice of proposed rulemaking to
  certain House and Senate committees
• hold a hearing presided over by a hearing officer
  at which persons may make oral presentations and
  in certain circumstances to conduct
  cross-examination of persons
• include a statement of basis and purpose to
  address certain specified concerns
• and conduct a regulatory analysis of both the
  proposed and final rules that describes the
  proposal and alternatives that would achieve the
  same goal and analyzes the costs and benefits of
  the proposal and the alternatives.

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Executive Orders Regulating Rulemaking

• What is the president's authority over
  rulemaking?
• What about for independent agencies?
• Why should the president exercises authority over
  rulemaking?
• Coordination of agencies?
• Assuring that the agencies carry out the
  administration's objectives?

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Regulatory Analysis

• What is CBA?
• Why is CBA sometimes very controversial,
  especially for environmental regulations?
• What is the value of regulatory analysis?
• What is PBA?
• (political benefit analysis)
• Why does it always trump CBA?

29
Cost-benefit and Risk-benefit analysis

• Justice Breyer's tunnel vision problem
• Each rule is seen without reference to all the
  other regulations
• Why is this a problem in environmental law?
• The cost of removing the last 5 of crap
• What about asbestos and brown fields?
• Why does HHS and the state continue to favor high
  tech medicine over primary care?
• What is the CBA?

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What are areas where CBA can have adverse effects?

• Do the costs and benefits always fall on the same
  group?
• How does the diffuse and long term nature of
  benefits complicate CBA?
• Should we use CBA for health regulations?

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Acronyms

• OMB - Office of Management and Budget
• OIRA - Office of Information and Regulatory
  Affairs

32
Executive Order 12866

• OIRA must review rules that have an impact of
  more than 100M aggregate or substantial impact on
  a segment of the economy or any thing else.

33
The Regulatory Philosophy

• Federal agencies should promulgate only such
  regulations as are required by law, are necessary
  to interpret the law, or are made necessary by
  compelling public need, such as material failures
  of private markets to protect or improve the
  health and safety of the public, the environment,
  or the well-being of the American people. In
  deciding whether and how to regulate, agencies
  should assess all costs and benefits of available
  regulatory alternatives, including the
  alternative of not regulating.

34
CBA under 12866

• Costs and benefits shall be understood to include
  both quantifiable measures (to the fullest extent
  that these can be usefully estimated) and
  qualitative measures of costs and benefits that
  are difficult to quantify, but nevertheless
  essential to consider.

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Choosing Among Alternatives

• Further, in choosing among alternative regulatory
  approaches, agencies should select those
  approaches that maximize net benefits (including
  potential economic, environmental, public health
  and safety, and other advantages distributive
  impacts and equity), unless a statute requires
  another regulatory approach.
• Pretty simple? -)

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What must the agency provide OIRA - I

• An assessment, including the underlying analysis,
  of benefits anticipated from the regulatory
  action (such as, but not limited to, the
  promotion of the efficient functioning of the
  economy and private markets, the enhancement of
  health and safety, the protection of the natural
  environment, and the elimination or reduction of
  discrimination or bias) together with, to the
  extent feasible, a quantification of those
  benefits

37
What must the agency provide OIRA - II

• An assessment, including the underlying analysis,
  of costs anticipated from the regulatory action
  (such as, but not limited to, the direct cost
  both to the government in administering the
  regulation and to businesses and others in
  complying with the regulation, and any adverse
  effects on the efficient functioning of the
  economy, private markets (including productivity,
  employment, and competitiveness), health, safety,
  and the natural environment), together with, to
  the extent feasible, a quantification of those
  costs

38
What must the agency provide OIRA - III

• An assessment, including the underlying analysis,
  of costs and benefits of potentially effective
  and reasonably feasible alternatives to the
  planned regulation, identified by the agencies or
  the public (including improving the current
  regulation and reasonably viable nonregulatory
  actions), and an explanation why the planned
  regulatory action is preferable to the identified
  potential alternatives.

39
What are the potential effects on agencies of
these mandates?

• Does this undermine the intent of their enabling
  laws?
• How can the president do this without legislation?

40
12866 and Rulemaking

• What if the statute says no CBA - can the
  president impose it anyway?
• Why is there a special provision for analyzing
  impact on small businesses?

41
Unfunded Mandates

• What is an unfunded mandate?
• How is this stealth regulatory reform?
• Unfunded Mandates Act of 1995 - Agency must do a
  CBA if the costs exceed 100M
• What would be the impact of banning unfunded
  mandates?
• What are the types and impact of unfunded
  mandates on public schools?
• Oregon's answer in land use