There have been two significant developments with respect to rulemaking, both on the same day. The President issued Executive Order 13422, and OMB issued its Bulletin on Good Guidance Practices on January 25, 2007.

Chapter 3C.1 – Note 5 after Nova Scotia

Replace the existing Note 5, p. 247, with the following:

5. Tight Presidential control and other requirements to be addressed. As Nova Scotia Food Products suggests, there is a great deal more to issuing a Notice of Proposed Rulemaking than simply publishing a notice in the Federal Register. The agency must undertake extensive research and analysis as it considers the sort of data that Nova Scotia Food Products requires the agency to reveal in the NPRM. In addition to all of that effort, the WTC must demonstrate that it has complied with several other statutes and Executive Orders, including the Regulatory Flexibility Act, the Paperwork Reduction Act, the Unfunded Mandates Act, and Executive Order 12866. Jeffrey S. Lubbers, A Guide to Federal Agency Rulemaking 184 (3d ed. 1998).

But there is a threshold question that precedes all of this work – who decides whether the agency will pursue rulemaking? Is it the agency head, or is it the President? Since the beginning of the administrative state, the answer has consistently been the agency head, but as discussed in subchapter 3F, Presidents have increased their control over the rulemaking process over the last four decades. The most recent manifestation of this effort is Executive Order 13422, issued January 18, 2007. Amending E.O. 12866, which has long required each agency head to designate a Regulatory Policy Officer, E.O. 13244 provides that the Regulatory Policy Officer must be “one of the agency’s Presidential Appointees,” and that “[u]nless specifically authorized by the head of the agency,” no rulemaking may be initiated without the approval of the Regulatory Policy Officer.

It has been suggested that this change portends an inappropriate degree of Presidential/OMB control over agency rulemaking, but since the provision allows the head of the agency to authorize rulemaking without the approval of the Regulatory Policy Officer, the ultimate authority formally remains with the agency head. Future developments will determine whether this change merely reflects existing practice or constitutes a significant assertion of Presidential power. The amended version of Executive Order 12866 is available here.

Chapter 3D.2 - New Note 11

Add the following Note after American Mining Congress v. Mine Safety & Health Administration:

11. The President and OMB weigh in on informal agency statements. Reflecting the various concerns about agency reliance upon informal statements, OMB recently issued a Bulletin for Agency Good Guidance Practices. OMB, FINAL BULLETIN FOR AGENCY GOOD GUIDANCE PRACTICES, 72 Fed. Reg. 3432 (Jan. 25, 2007). The Final Bulletin is available here. OMB’s introductory discussion of the Bulletin provides a concise description of both the benefits and drawbacks of agency use of informal statements, which the Bulletin refers to as “guidance documents”:

In its 2002 Report to Congress, OMB recognized the enormous value of agency guidance documents in general. Well-designed guidance documents serve many important or even critical functions in regulatory programs. Agencies may provide helpful guidance to interpret existing law through an interpretive rule or to clarify how they tentatively will treat or enforce a governing legal norm through a policy statement. Guidance documents, used properly, can channel the discretion of agency employees, increase efficiency, and enhance fairness by providing the public clear notice of the line between permissible and impermissible conduct while ensuring equal treatment of similarly situated parties.

Experience has shown, however, that guidance documents also may be poorly designed or improperly implemented. At the same time, guidance documents may not receive the benefit of careful consideration accorded under the procedures for regulatory development and review. These procedures include: (1) Internal agency review by a senior agency official; (2) public participation, including notice and comment under the Administrative Procedure Act (APA); (3) justification for the rule, including a statement of basis and purpose under the APA and various analyses under Executive Order 12866 (as further amended), the Regulatory Flexibility Act, and the Unfunded Mandates Reform Act; (4) interagency review through OMB; (5) Congressional oversight; and (6) judicial review. Because it is procedurally easier to issue guidance documents, there also may be an incentive for regulators to issue guidance documents in lieu of regulations.

Seeking to enhance the quality of guidance and to assure accountability, transparency, and consistency, OMB established various requirements for the handling of “significant guidance documents” by agencies other than independent agencies. Guidance documents qualify as “significant” if, for example, they would have an annual impact of $100 million or on the national economy, would be inconsistent with actions or plans of other agencies, would materially alter budgetary impacts, or would raise novel issues of law or policy. Among other things, the Bulletin: (1) requires agencies to adopt procedures to assure significant guidance documents are “approved by appropriate senior agency officials,” (2) prohibits agencies from departing from significant guidance documents without similar approvals, (3) mandates internet access to comprehensive lists of such guidance documents and a means of public response, and (4) prohibits the use of mandatory language (“must,” “shall,” “required”) except to describe statutory or regulatory requirements. As to “economically significant guidance documents,” (those with an annual economic impact of $100 million or a materially adverse effect on the economy or a sector of the economy), the Bulletin requires agencies to seek public comment and to respond to the comments, virtually imposing the requirements of § 553 of the APA on all economically significant guidance documents.

On the same day, President Bush issued Executive Order 13422, which amends Executive Order 12866 to subject guidance documents to the constraints that had previously applied only on rulemaking. See Chapter 3F.2. E.O. 13422 for the first time asserts OMB authority over the issuance of guidance documents, requiring advance notice to OMB’s Office of Information and Regulatory Affairs (OIRA) of all significant guidance documents and effectively subjecting guidance documents to the control of the presidentially-appointed Regulatory Policy Officer. Executive Order 13422 is available here, and Executive Order 12866, as amended, is available here.

How should Ben respond to the OMB Bulletin on guidance practices and the new Executive Order? What is the likely effect of the Bulletin and the Executive Order on the agencies to which it applies and those affected by those agencies’ programs?

Chapter 3F.2 – Note 3 after Bonfield

Add the following paragraph at the end of the existing Note 3, p. 247:

As discussed in connection with Chapter 3C.1, the current Bush Administration has issued Executive Order 13422, amending E.O. 12866 to provide that Regulatory Policy Officers must be Presidential appointees and that no rulemaking may be commenced without approval of the Regulatory Policy Officer unless specifically authorized by the head of the agency. E.O. 13422 also amends §1(b)(1) of the “Principles of Regulation” to require each agency to “identify in writing the specific market failure . . . or other specific problem that it intends to address . . . to enable assessment of whether any new regulation is warranted.” The previous version had simply required the agency to “identify the problem that it intends to address” and referred to “the failures of private markets” as one possible basis for regulatory action. It remains to be seen whether these amendments merely reflect the regulatory philosophy of the Bush Administration or represent a significant change in the OMB-agency relationship described above.

Executive Order 13422 is available here, and Executive Order 12866, as amended, is available here.