Rulemaking
Part III
When is Formal Rulemaking Required?
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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
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Why avoid formal rulemaking?
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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
Putting the Notice in Notice and Comment
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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. . . .
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Notice of the Proposed Rule
Chocolate Manufacturers Ass’n v. Block
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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?
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The Notice Problem
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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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What about Technical Information
Underlying the Rule?
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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?
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Shelby Amendments to the Freedom of
Information Act
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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?
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Health Insurance Portability and
Accountability Act of 1996
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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?
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Additions to the Published Record
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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
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comment on it.
Negotiated Rulemaking
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What is this?
What are the advantages?
What are the public participation issues?
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Ex Parte Communications
Adjudications and Article III Trials
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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?
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Rulemaking
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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?
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Home Box Office, Inc. v. FCC
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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?
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Sierra Club v. Costle
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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?
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Volpe Test
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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?
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What is the president's role in
rulemaking?
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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.
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Bias and Prejudice
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Remember the cases on bias of decisionmakers in
adjudications?
Should these also apply to rulemaking?
How does notice and comment change the
situation?
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Association of National Advertisers , Inc.
v. FTC
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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?
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Clear and convincing evidence that he has an
unalterably closed mind on matters critical to
the rulemaking
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How are state agencies different from
federal agencies?
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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?
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Hybrid Rulemaking (Congressional
Mandates) at the FTC
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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
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proposal and the alternatives.
Executive Orders Regulating Rulemaking
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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
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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?
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Cost-benefit and Risk-benefit analysis
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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?
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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
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OMB - Office of Management and Budget
OIRA - Office of Information and Regulatory
Affairs
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Executive Order 12866
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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.
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The Regulatory Philosophy
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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.
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CBA under 12866
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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
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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
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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;
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What must the agency provide OIRA - II
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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;
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What must the agency provide OIRA - III
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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.
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What are the potential effects on agencies
of these mandates?
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Does this undermine the intent of their
enabling laws?
How can the president do this without
legislation?
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12866 and Rulemaking
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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?
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Unfunded Mandates
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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
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