Order Code RL33862
Changes to the OMB Regulatory Review Process
by Executive Order 13422
February 5, 2007
Curtis W. Copeland
Specialist in American National Government
Government and Finance Division
Changes to the OMB Regulatory Review Process by
Executive Order 13422
Summary
Executive Order (E.O.) 12866 on “Regulatory Planning and Review,” issued in
September 1993, describes the principles and procedures by which the Office of
Management and Budget’s Office of Information and Regulatory Affairs (OIRA)
reviews hundreds of significant proposed and final agency regulations on behalf of
the President before they are published in the Federal Register. On January 18,
2007, President George W. Bush issued E.O. 13422, making the most significant
amendments to E.O. 12866 since it was published. The changes made by this new
executive order are controversial, characterized by some as a “power grab” by the
White House that undermines public protections and lessens congressional authority,
and by others as “a paragon of common sense and good government.”
The most important changes made to E.O. 12866 by E.O. 13422 fall into five
general categories: (1) a requirement that agencies identify in writing the specific
market failure or problem that warrants a new regulation, (2) a requirement that each
agency head designate a presidential appointee within the agency as a “regulatory
policy officer” who can control upcoming rulemaking activity in that agency, (3) a
requirement that agencies provide their best estimates of the cumulative regulatory
costs and benefits of rules they expect to publish in the coming year, (4) an expansion
of OIRA review to include significant guidance documents, and (5) a provision
permitting agencies to consider whether to use more formal rulemaking procedures
in certain cases.
This report discusses each of these changes, noting areas that are unclear and the
potential implications of the changes, and provides background information on
presidential review of rules. It concludes by noting that the significance of the
changes made to the review process by E.O. 13422 may become clear only through
their implementation, and notes some areas of potential congressional interest. The
changes made by this executive order represent a clear expansion of presidential
authority over rulemaking agencies. In that regard, E.O. 13422 can be viewed as part
of a broader statement of presidential authority presented throughout the Bush
Administration.
The report will be updated as necessary to reflect legislative or executive branch
actions relevant to the implementation of the executive order.
Contents
Regulatory Planning and Review Under E.O. 12866 . . . . . . . . . . . . . . . . . . . . . . 2
Changes Made by E.O. 13422 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Identification of Market Failure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Regulatory Policy Officers as Presidential Appointees . . . . . . . . . . . . . . . . . 5
Estimate of Aggregate Regulatory Costs and Benefits . . . . . . . . . . . . . . . . . 8
OIRA Review of Significant Guidance Documents . . . . . . . . . . . . . . . . . . . 9
Use of Formal Rulemaking Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Concluding Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Changes to the OMB Regulatory Review
Process by Executive Order 13422
Executive Order (E.O.) 12866 on “Regulatory Planning and Review,” issued by
President William Clinton in September 1993, describes the principles and
procedures by which the Office of Management and Budget’s (OMB’s) Office of
Information and Regulatory Affairs (OIRA) reviews hundreds of significant proposed
and final agency regulations on behalf of the President before they are published in
the Federal Register.1 As a result of these reviews, OIRA can have a significant —
if not determinative — role in the development of a broad array of public policies,
from the homeland security rules governing boarding of passenger aircraft to the
amount of arsenic allowed in public water systems.2
On January 18, 2007, President George W. Bush issued E.O. 13422, making the
most significant amendments to E.O. 12866 since it was published.3 The changes
made by this new executive order are controversial, characterized by some as a
“power grab” by the White House that undermines public protections and lessens
congressional authority,4 and by others as “a paragon of common sense and good
government.”5 This report describes the changes made to the regulatory planning
and review process by the new order, noting the potential impact of those changes
and areas that are unclear. First, though, the report provides a brief background
1 Executive Order 12866, “Regulatory Planning and Review,” 58 Federal Register 51735,
Oct. 4, 1993.
2 U.S. General Accounting Office, Rulemaking: OMB’s Role in Reviews of Agencies’ Draft
Rules and the Transparency of Those Reviews, GAO-03-929, Sept. 22, 2003, p. 3, available
at [http://www.gao.gov/new.items/d03929.pdf]. See also CRS Report RL32397, Federal
Rulemaking: The Role of the Office of Information and Regulatory Affairs, by Curtis W.
Copeland; and CRS Report RL32855, Presidential Review of Agency Rulemaking, by T.J.
Halstead.
3 Executive Order 13422, “Further Amendment to Executive Order 12866 on Regulatory
Planning and Review,” 72 Federal Register 2763, Jan. 23, 2007. Five years earlier, E.O.
13258 reassigned certain responsibilities from the Vice President to the President’s chief of
staff, but otherwise did not change the OIRA review process. See Executive Order 13258,
“Amending Executive Order 12866 on Regulatory Planning and Review,” 67 Federal
Register 9385, Feb. 28, 2002.
4 Public Citizen, “New Executive Order Is Latest White House Power Grab,” available at
[http://www.citizen.org/pressroom/release.cfm?ID=2361].
5 Attributed to William Kovacs, Vice President of Environment, Energy, and Regulatory
Affairs, U.S. Chamber of Commerce, in John Sullivan, “White House Sets Out New
Requirements for Agencies Developing Rules, Guidance,” Daily Report for Executives, Jan.
19, 2007, p. A-31.
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section on the regulatory planning and review procedures established by E.O. 12866
and its predecessors. The report ends by offering some concluding observations.
Regulatory Planning and Review Under E.O. 12866
Centralized review of agencies’ regulations within the Executive Office of the
President has been an important part of the federal rulemaking process for more than
35 years. Although each of his three predecessors had some type of review process,
the most significant development in the evolution of presidential review of
rulemaking occurred in 1981, when President Ronald Reagan issued E.O. 12291.6
The executive order established a set of general requirements for rulemaking, and
required federal agencies (other than independent regulatory agencies) to send a copy
of each draft proposed and final rule to OMB before publication in the Federal
Register.7 It also required covered agencies to prepare a cost-benefit analysis for
each “major” rule (e.g., those with at least a $100 million impact on the economy).
As a result of this order, OIRA became the central clearinghouse for covered
agencies’ substantive rulemaking, reviewing between 2,000 and 3,000 rules per year.
In 1985, President Reagan expanded OIRA’s influence further by issuing E.O. 12498,
which required each covered agency to submit a regulatory plan to OMB for review
each year that covered all of their significant regulatory actions underway or
planned.8 Regulatory reviews under these executive orders were highly controversial,
with complaints about the lack of transparency of the review process, unlimited
delays in the completion of the reviews, OIRA serving as a conduit for influence by
regulated parties, and executive branch displacements of congressional delegations
of rulemaking authority.9
On September 30, 1993, President Clinton issued E.O. 12866, which revoked
E.O. 12291 and E.O. 12498 and established a new process for OIRA review of rules.
The order limited OIRA’s reviews to actions identified by the rulemaking agency or
OIRA as “significant” regulatory actions, defined as those that were “economically
significant” (e.g., those with at least a $100 million impact on the economy) or that
(1) were inconsistent or interfered with an action taken or planned by another agency;
(2) materially altered the budgetary impact of entitlements, grants, user fees, or loan
programs; or (3) raised novel legal or policy issues. As a result of this change, the
number of rules that OIRA reviewed dropped from between 2,000 and 3,000 per year
to between 500 and 700 per year. For each significant draft rule, the executive order
6 Executive Order 12291, “Federal Regulation,” 46 Federal Register 13193, Feb. 19, 1981.
7 Independent regulatory agencies include the Federal Communications Commission, the
Nuclear Regulatory Commission, and the Securities and Exchange Commission, and are
created by Congress to be more independent of the President than other agencies (e.g.,
commission members may generally be removed by the President only for cause).
8 Executive Order 12498, “Regulatory Planning Process,” 50 Federal Register 1036, Jan.
8, 1985.
9 See, for example, Morton Rosenberg, “Beyond the Limits of Executive Power: Presidential
Control of Agency Rulemaking Under Executive Order 12291,” Michigan Law Review, vol.
80 (1981), pp. 193-247.
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requires the issuing agency to provide to OIRA the text of the draft rule, a description
of why the rule is needed, and a general assessment of the rule’s costs and benefits.
For draft rules that are “economically significant,” the executive order requires a
detailed cost-benefit analysis, including an assessment of the costs and benefits of
“potentially effective and reasonably feasible alternatives to the planned regulation.”
E.O. 12866 also differs from its predecessors in other respects. For example,
the order requires that OIRA generally complete its reviews of proposed and final
rules within 90 calendar days. It also requires both the rulemaking agencies and
OIRA to disclose certain information about how the regulatory reviews were
conducted. For example, agencies are to identify for the public (1) the substantive
changes made to rules between the draft submitted to OIRA for review and the action
subsequently announced, and (2) changes made at the suggestion or recommendation
of OIRA. OIRA is required to, among other things, provide agencies with a copy of
all communications between OIRA personnel and parties outside the executive
branch, and to maintain a public log of all regulatory actions under review and of all
the documents provided to the agencies. Finally, E.O. 12866 required all agencies
(including independent regulatory agencies) to prepare a regulatory plan listing the
most important regulatory actions that the agency expects to issue in the next fiscal
year. Agency heads were required to approve this plan personally.
Changes Made by E.O. 13422
The most important changes made to E.O. 12866 by E.O. 13422 fall into five
general categories: (1) a requirement that agencies identify in writing the specific
market failure or problem that warrants a new regulation, (2) a requirement that every
agency head designate a presidential appointee within the agency as a “regulatory
policy officer” who can control upcoming rulemaking activity in that agency, (3) a
requirement that agencies provide their best estimates of the cumulative regulatory
costs and benefits of rules they expect to publish in the coming year, (4) an expansion
of OIRA review to include significant guidance documents, and (5) a provision
permitting agencies to consider whether to use more formal rulemaking procedures
in certain cases. Each of these changes is described more fully in the following
sections.
Identification of Market Failure
E.O. 12866 begins with a statement of regulatory philosophy and principles that
sets the tone for agency rulemaking covered by the order. The principles say that, “to
the extent permitted by law and where applicable,” agencies should (among other
things) assess alternatives to direct regulation, design regulations in the most cost-
effective manner possible, and base regulations on the best information available.
As originally written, the first such principle was that “[e]ach agency shall identify
the problem that it intends to address (including, where applicable, the failures of
private markets or public institutions that warrant new agency action) as well as
assess the significance of that problem.”
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E.O. 13422 changes that language somewhat, stating the following:
Each agency shall identify in writing the specific market failure (such as
externalities, market power, lack of information) or other specific problem that
it intends to address (including, where applicable, the failures of public
institutions) that warrant new agency action, as well as assess the significance of
that problem, to enable assessment of whether any new regulation is warranted.
The new language appears to (1) elevate “market failure” to greater prominence as
a rulemaking rationale (removing the “where applicable” caveat and placing it before
and on par with the more general statement of problem identification); (2) more
clearly define what constitutes a market failure (e.g., “externalities, market power,
lack of information”);10 (3) require a more precise delineation of why the agency is
issuing the rule (the “specific” market failure or the “specific” problem); (4) require
that the delineation be in writing; and (5) make clear that the purpose of this
requirement is to facilitate a determination of whether the rule is needed.
The general principle that a covered agency describe the need for a new
regulation is procedurally established in Section 6 of E.O. 12866. For rules that are
significant, but not economically significant (e.g., do not have a $100 million impact
on the economy), agencies are required only to provide a “reasonably detailed
description of the need for the regulatory action.” For economically significant rules,
however, more detailed cost-benefit analyses are required. OMB Circular A-4
(which describes how those studies should be done) says agencies “should try to
explain whether the action is intended to address a significant market failure or to
meet some other compelling public need such as improving governmental processes
or promoting intangible values such as distributional fairness or privacy.”11
Therefore, the “market failure” language in E.O. 13422 can arguably be read to apply
to all rules what had previously applied only to economically significant rules.
Also, although the order requires agencies to make this determination in writing,
E.O. 13422 does not indicate where this written determination should appear (e.g.,
in the Federal Register notice for the proposed or final rule), or, additionally,
whether it should be made available to the public in the rulemaking docket.
Conceivably, therefore, agencies could satisfy the requirements of the order by
preparing a written determination of the need for a rule without providing it to
anyone outside government.
10 According to OMB Circular A-4, an “externality occurs when one party’s actions impose
uncompensated benefits or costs on another party. Environmental problems are a classic
case of externality. For example, the smoke from a factory may adversely affect the health
of local residents while soiling the property in nearby neighborhoods.” It says “[f]irms
exercise market power when they reduce output below what would be offered in a
competitive industry in order to obtain higher prices,” such as when a monopoly exists.
Inadequate information can occur when the public is unaware of the dangers associated with
the use of a product. To view a copy of this circular, see [http://www.whitehouse.gov/omb/
circulars/a004/a-4.pdf].
11 To view a copy of this circular, see [http://www.whitehouse.gov/omb/circulars/
a004/a-4.pdf].
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Some commentators have criticized this provision in E.O. 13422 as an attempt
to bypass Congress by establishing standards for regulatory initiation that are not
consistent with statutory requirements. For example, Public Citizen said the
requirement “diminishes standards Congress may have required agencies to use, such
as the best control technology, by elevating a new market failure standard that
Congress never required.”12 For example, some statutes (e.g., the Clean Air Act)
require agencies to establish regulations based solely on what is required to protect
human health. These critics contend that requiring agencies to identify a “specific
market failure” or a “specific problem” constitutes a new standard for regulatory
initiation. Supporters of this provision may contend, though, that the requirement to
identify a “problem” is sufficiently broad to cover all statutory bases, and therefore
is not inconsistent with them.
Public Citizen has also criticized this provision as “yet another layer added to
the agency analysis” that “places yet another hurdle for agencies to issue regulations
in pursuit of protecting the public.” Similarly, Gary Bass, executive director of OMB
Watch, said that President Bush, by requiring agencies to show a market failure, “has
created another hurdle for agencies to clear before they can issue rules protecting
public health and safety.”13 On the other hand, supporters of this provision may
contend that requiring agencies to identify the specific problem being addressed in
a regulation is not onerous, and can help ensure the effectiveness of the resultant
rules.
Finally, although stated in terms of a requirement (“[e]ach agency shall”), this
and other principles of regulation in the executive order are preceded by more
permissive language, stating that agencies “should” adhere to the principles “to the
extent permitted by law and where applicable.” Given this language, concerns about
the usurpation of congressional standards for rulemaking and unnecessary delay may
be exaggerated. Ultimately, though, the extent to which these changes are significant
may be revealed only through how they are implemented by OIRA and the agencies.
Regulatory Policy Officers as Presidential Appointees
As originally written, E.O. 12866 required the head of each covered agency
(other than independent regulatory agencies) to designate a regulatory policy officer
who reported to the agency head.14 The policy officer is required to “be involved at
each stage of the regulatory process to foster the development of effective,
innovative, and least burdensome regulations and to further the principles set forth
in this Executive order.” According to agency officials, these regulatory policy
12 Public Citizen, “New Executive Order Is Latest White House Power Grab.”
13 Robert Pear, “Bush Directive Increases Sway on Regulation,” New York Times, Jan. 30,
2007, p. A1.
14 Although the regulatory planning sections apply more broadly, the executive order
generally defines an “agency” as “any authority of the United States that is an ‘agency’
under 44 U.S.C. 3502 (1), other than those considered to be independent regulatory
agencies, as defined in 44 U.S.C. 3502 (10).” The order does not define “agency head,” but
agency policy officers in Cabinet departments have typically been designated by the
secretary.
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officers were most commonly each agency’s general counsel (which are usually
presidential appointees with Senate confirmation) or some other presidential
appointee within the agencies.
E.O. 13422 retains the above general statement of the policy officer’s duties, but
also requires each agency head to “designate one of the agency’s Presidential
Appointees” to be that officer, to do so within 60 days of the date of the executive
order (i.e., by March 19, 2007), to advise OMB of the designation, and to “annually
update OMB on the status of this designation.” Although the agency head is still
permitted (within the parameters of White House and OMB control) to select the
individual for this position, the requirement that the individual be a presidential
appointee limits the agency head’s discretion (compared to the unlimited authority
that agency heads enjoyed before this amendment) and strengthens the relationship
of the agency policy officers with the President. However, if most of the regulatory
policy officers are already presidential appointees, it is not clear how this requirement
will affect the current set of regulatory policy officers.
E.O. 13422 also appears to significantly enhance the role of the agency
regulatory policy officer as part of the regulatory planning process. Specifically, the
order states that “[u]nless specifically authorized by the head of the agency, no
rulemaking shall commence nor be included on the Plan without the approval of the
agency’s Regulatory Policy Office.” Notably, this provision speaks in terms of a
regulatory policy “office” as opposed to a regulatory policy “officer,” suggesting (but
not requiring) that agencies may provide staff to assist the policy officers in their
duties within the agencies. In any event, this change appears to represent an
elevation in the duties and responsibilities of the agency policy officer when
compared to the role previously ascribed to that officer (i.e., to “be involved” in the
regulatory process, to “foster the development” of sound rules, and to “further” the
order’s principles). Unless specifically authorized by the agency head, the
presidential policy officer must approve the listing of all significant forthcoming
regulatory actions in the regulatory plan and approve the initiation of all rulemaking
actions. (Previously, only the agency head could approve the regulatory plan, and
there was no language in the order prohibiting rulemaking in the absence of the
regulatory policy officer’s approval.) As characterized in the New York Times, “[t]he
White House will thus have a gatekeeper in each agency to analyze the costs and the
benefits of new rules and to make sure the agencies carry out the president’s
priorities.”15
15 Robert Pear, “Bush Directive Increases Sway on Regulation.” Newspaper editorial writers
have offered various opinions regarding this issue. For example, see David McNaughton,
“Reverse Regulation: With Another Nonsense Order, President Bush Quashes Legitimate
Rule-making by Inserting Political Overseer,” The Atlanta Journal-Constitution, Feb. 2,
2007, p. A10, which cited Emory University Law Professor William Buzbee as saying that
this provision “makes it even more likely that regulatory decisions will be made by someone
more sympathetic to political pressure and ideology than to the federal agency’s legal duty.”
Also, see Jim Wooten, “Vouchers, Transit Alert, Sen. Obama,” The Atlanta Journal-
Constitution, Feb. 2, 2007, p. A11, which approved of this provision and said “[t]here’s
nothing radical about applying cost-benefit analysis to proposed laws and regulations.”
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The executive order’s use of the word “designate” suggests that agency heads
must select regulatory policy officers from among current presidential appointees
within the agencies. (Neither the President nor agency heads are authorized to create
presidential appointee positions; only Congress can do so.) The order is silent as to
whether the designated presidential appointee would be subject to Senate
confirmation. Senate confirmation of presidential appointees is generally considered
a way to strengthen congressional influence over agency decision making, because
(among other things) nominees often agree during the confirmation process to appear
subsequently before relevant congressional committees. According to the most
recent listing of “Policy and Supporting Positions” (known as the “Plum Book”),
most major regulatory departments and agencies have few (and in some cases, no)
presidential appointees who are not Senate confirmed.16 Therefore, in most cases,
agency heads must select presidential appointees who are subject to Senate
confirmation.
Even in agencies with a number of presidential appointees not subject to Senate
confirmation, one could argue that it is up to Congress to decide whether the position
of regulatory policy officer should be occupied by an appointee who is Senate
confirmed. The Supreme Court has held that “any appointee exercising significant
authority pursuant to the laws of the United States is an ‘Officer of the United
States,’ and must, therefore, be appointed in the manner prescribed” in the
Constitution.17 Given the enhanced power and authority of the policy officer to
control day-to-day rulemaking activities within federal agencies (“no rulemaking
shall commence”), the policy officer could be considered an officer of the United
States under the appointments clause of the Constitution. Article II, Section 2, clause
2 of the Constitution states the following:
[The President] shall nominate, and by and with the Advice and Consent of the
Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges
of the supreme Court, and all other Officers of the United States, whose
Appointments are not herein otherwise provided for, and which shall be
established by Law: but the Congress may by Law vest the Appointment of such
inferior Officers, as they think proper, in the President alone, in the Courts of
Law, or in the Heads of Departments.
16 U.S. Congress, House Committee on Government Reform, United States Government
Policy and Supporting Positions, Nov. 22, 2004. For example, the Department of
Transportation had 32 positions subject to presidential appointment with Senate
confirmation (PAS positions) in 2004, but none without Senate confirmation (PA positions).
The Environmental Protection Agency had 14 PAS positions, but no PA positions; the
Department of Labor had 19 PAS positions, but no PA positions. On the other hand, the
Department of Homeland Security had 18 PAS positions, but also had six PA positions.
This CRS report did not consider noncareer (“general”) Senior Executive Service positions
to be “presidential appointee” positions. However, some have argued that, because some
type of White House approval for their appointment is required, these noncareer SES
positions could be considered a type of “presidential appointee” positions. If so, then the
agency heads would have a wider range of “presidential appointee” positions from which
to designate regulatory policy officers.
17 Buckley v. Valeo, 424 U.S. 1, 126 (1976).
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Therefore, one could argue that it is the role of Congress to prescribe, in law, whether
the regulatory policy officer position should be subject to Senate confirmation. In
fact, to take this argument further, even if the agency head designated a person in a
Senate-confirmed position for this new position, one could argue that this person
would have to undergo another confirmation process because the scope of the
person’s responsibilities had been changed significantly.
One other element of this process is also unclear, and may represent a change
in the scope of presidential influence in rulemaking. As noted previously, the
requirement that each agency head appoint one of the agency’s presidential
appointees as the regulatory policy officer does not apply to independent regulatory
agencies. However, E.O. 12866 requires independent regulatory agencies to develop
regulatory plans, and the requirement in E.O. 13422 that the “Regulatory Policy
Office” approve items included in the plan and the commencement of all rulemaking
amends that section of E.O. 12866. Therefore, this provision could arguably be read
to require that independent regulatory agencies have presidential appointees as
regulatory policy officers, thereby extending the reach of the President and
presidential review into agencies that had not previously been subject to such scrutiny
(and commensurately lessening the agencies’ relationships with Congress, which
created them).
Estimate of Aggregate Regulatory Costs and Benefits
As part of the above-mentioned regulatory planning process, agencies have been
required to provide a “summary of each planned significant regulatory action
including, to the extent possible, alternatives to be considered and preliminary
estimates of the anticipated costs and benefits.” E.O. 13422 adds to this provision
the requirement that each agency provide its “best estimate of the combined
aggregate costs and benefits of all its regulations planned for that calendar year to
assist with the identification of priorities.”
At first impression, the changes established by this provision appear relatively
straightforward, simply requiring agencies to tally up the costs and benefits of the
individual rules listed in the regulatory plan. However, upon closer examination,
some aspects of this provision appear unclear. For example, the regulatory plans that
agencies develop are supposed to be published at the start of each fiscal year in
October, and are required to reflect the most significant proposed and final rules that
they expect to publish “in that fiscal year or thereafter.” Therefore, the requirement
in E.O. 13422 that agencies develop estimates of aggregate costs and benefits for
regulations planned “for that calendar year” seems inconsistent with the previous
focus on fiscal years.
More substantively, some critics of the order have suggested that this provision
is intended to elevate the role of cost-benefit analysis in the development of
regulatory priorities. They argue that cost-benefit analysis is inherently biased
against regulation, particularly with regard to such issues as global warming and
long-term exposure to carcinogens, so the effect of this provision would be to reduce
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regulatory activity.18 Other critics have said this provision is a prelude to the
development of a regulatory budget in which the costs associated with an agency’s
rules could be capped and no new rules could be issued unless other costs were
reduced or eliminated.19 Proponents of this provision, on the other hand, may argue
that such aggregate estimates are needed to reveal the cumulative impacts of
rulemaking. Individually, regulations on a particular industry may not be significant,
but the aggregation of the impact of multiple rules may reveal cumulative effects that
are not otherwise apparent.
Also, agencies’ regulatory plans are published as part of the Unified Agenda of
Federal Regulatory and Deregulatory Actions, and contain information about the
most significant regulatory actions that agencies expect to undertake in the coming
year.20 The listed items include both proposed and final rules that the agency expects
to issue during that period. For forthcoming proposed rules, agencies often have not
developed cost or benefit estimates because the specifics of the proposed rules have
often not been developed. Even for forthcoming final rules, agencies frequently
provide only general information about expected costs or benefits. Also, some items
that are listed in agencies’ regulatory plans are never issued as final rules, and some
agency rules never appear in agencies’ regulatory plans. Therefore, the requirement
in the executive order that agencies provide aggregate cost and benefit information
may prove difficult to implement in a meaningful fashion. However, as noted
previously, agencies are required to do so only “to the extent possible.”
OIRA Review of Significant Guidance Documents
Another controversial provision in E.O. 13422 has been the expansion of OIRA
review from agencies’ draft regulations to also include significant agency guidance
documents.21 Specifically, the new executive order adds the following to E.O.
12866:
Each agency shall provide OIRA, at such times and in the manner specified by
the Administrator of OIRA, with advance notification of any significant guidance
18 Public Citizen, “New Executive Order Is Latest White House Power Grab.”
19 OMB Watch, “Undermining Public Protections: Preliminary Analysis of the Amendments
to Executive Order 12866 on Regulatory Planning and Review,” available at
[http://www.ombwatch.org/article/articleview/3685/1/132?TopicID=3].
20 To view the most recent regulatory plan (published in December 2006), see
[http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=2006_unified_agenda_&do
cid=f:ua061002.pdf].
21 On the same day that E.O. 13422 was issued, OMB also issued a “Final Bulletin for
Agency Good Guidance Practices” that mirrored, in many respects, the provisions in this
section of the executive order. Unlike the order, however, the bulletin requires agencies to
include certain standard elements in their significant guidance documents, to list those
documents on the agencies’ websites, and to publish a notice in the Federal Register
soliciting public comments on economically significant documents. To view a copy of this
bulletin, see [http://www.whitehouse.gov/omb/memoranda/fy2007/m07-07.pdf]; and Office
of Management and Budget, “Final Bulletin for Agency Good Guidance Practices,” 72
Federal Register 3432, Jan. 25, 2007.
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documents. Each agency shall take such steps as are necessary for its Regulatory
Policy Officer to ensure the agency’s compliance with the requirements of this
section. Upon the request of the Administrator, for each matter identified as, or
determined by the Administrator to be, a significant guidance document, the
issuing agency shall provide to OIRA the content of the draft guidance
document, together with a brief explanation of the need for the guidance
document and how it will meet that need. The OIRA Administrator shall notify
the agency when additional consultation will be required before the issuance of
the significant guidance document.
E.O. 13422 defines a “guidance document” as “an agency statement of general
applicability and future effect, other than a regulatory action, that sets forth a policy
on a statutory, regulatory, or technical issue or an interpretation of a statutory or
regulatory issue.” It says a “significant” guidance document is one that is
disseminated to regulated entities or the general public that, for purposes of this
order, may reasonably be anticipated to:
(A) Lead to an annual effect of $100 million or more or adversely affect in a
material way the economy, a sector of the economy, productivity, competition,
jobs, the environment, public health or safety, or State, local, or tribal
governments or communities;
(B) Create a serious inconsistency or otherwise interfere with an action taken or
planned by another agency;
(C) Materially alter the budgetary impact of entitlements, grants, user fees, or
loan programs or the rights or obligations of recipients thereof; or
(D) Raise novel legal or policy issues arising out of legal mandates, the
President’s priorities, or the principles set forth in this Executive order.
These categories are essentially the same as those used in E.O. 12866 to define
significant rules, the only difference being the use of the prefatory phrase “may
reasonably be anticipated to” instead of “is likely to result in a rule that may.”
The implications of these amendments to the scope of presidential review of
agency actions are potentially significant. Agencies issue thousands of guidance
documents each year that are intended to clarify the requirements in related statutes
and regulations.22 Therefore, the requirement that agencies provide OIRA with
advance notification of significant guidance documents may represent a major
expansion of the office’s (and, therefore, the President’s) influence, particularly when
coupled with the ability of OIRA to determine which guidance documents are
“significant” and the ability of OIRA to conclude that “additional consultation will
be required” before a document is issued. Also, the requirement that presidentially
appointed regulatory policy officers ensure compliance with this requirement
22 For example, the Occupational Safety and Health Administration indicated in 2000 that
it had issued 3,374 guidance documents since March 1996. See U.S. Congress, House
Committee on Government Reform, Non-Binding Legal Effect of Agency Guidance
Documents, 106th Cong., 2nd sess., H.Rept. 106-1009 (Washington: GPO, 2000), p. 5.
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arguably represents another extension of the President’s authority in regulatory
agencies.
As is the case with other aspects of E.O. 13422, though, several aspects of these
provisions are unclear. For example, although the order refers to guidance
“documents,” the definition of the term is not limited to written materials. In a
related OMB bulletin on agency guidance that was issued the same day as the
executive order amendments, OMB said that the bulletin’s definition of a guidance
document (which is the same as in the executive order)
is not limited only to written guidance materials and should not be so construed.
OMB recognizes that agencies are experimenting with offering guidance in new
and innovative formats, such as video or audio tapes, or interactive web-based
software. The definition of “guidance document” encompasses all guidance
materials, regardless of format.23
Therefore, a wide range of agency communications with the public — even oral
statements by agency officials and staff — may be considered guidance “documents,”
as long as they are statements of “general applicability and future effect.”
However, given the definition provided in the executive order, it is unclear what
could constitute a “significant” guidance document. Guidance documents, unlike
regulations, cannot have a binding effect on the public.24 Therefore, it is not clear
how guidance can be expected to have the effects delineated in the definition (e.g.,
“lead to an annual effect of $100 million or more” or “materially alter the budgetary
impact” of entitlements or grants). Arguably, because no guidance document can,
by itself, have such an effect, the requirement that agencies provide OIRA with
advance notification of any significant guidance documents could have little or no
impact on regulatory agencies. On the other hand, OMB has said that “there are
situations in which it may reasonably be anticipated that a guidance document could
lead parties to alter their conduct in a manner that would have such an economically
significant impact.”25 Ultimately, because OIRA is given the authority to determine
which documents are “significant,” the scope and impact of this section’s
requirements may be as broad as OIRA determines that it needs to be.
Also unclear is the extent to which certain transparency provisions in E.O.
12866 will apply to guidance documents. For example, will agencies be required to
disclose the changes to their significant guidance documents made at the suggestion
and recommendation of OIRA (just as they are with regard to rules)? Will OIRA be
required to list publicly the significant guidance documents that are under its review,
23 Office of Management and Budget, “Final Bulletin for Agency Good Guidance Practices,”
p. 3434.
24 See, for example, Appalachian Power Co. v. EPA, 208 F.3d 1015 (D.C. Cir. 2000);
Chamber of Commerce v. Department of Labor, 174 F.3d 206 (D.C. Cir. 1999); Robert A.
Anthony, “Interpretive Rules, Policy Statements, Guidances, Manuals, and the Like —
Should Agencies Use Them to Bind the Public?” Duke Law Journal, vol. 41 (1992), p. 1311.
25 Office of Management and Budget, “Final Bulletin for Agency Good Guidance Practices,”
p. 3435.
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and to disclose its meetings with outside entities regarding those documents?
Because E.O. 13422 did not change those sections of E.O. 12866, it is reasonable to
presume that the transparency provisions applicable to rules are not applicable to
agencies’ significant guidance documents.
Supporters of the expansion of presidential review to significant guidance
documents have said the change will standardize and make more transparent the
process by which federal agencies develop, issue, and use guidance documents.26
Critics contend that the potentially broad scope of this provision may result in fewer
guidance documents being issued, with the policy officer or OIRA review serving as
a “bureaucratic bottleneck that would slow down agencies’ ability to give the public
information it needs.”27 Another possible effect of this requirement, given the
number of guidance documents that agencies currently issue, is that OIRA staff may
be inundated with such documents to review (on top of the hundreds of significant
proposed and final rules and the thousands of paperwork clearances they produce
each year) — at least until it is clear to the agencies what is and is not covered.
Use of Formal Rulemaking Procedures
E.O. 13422 also amends Section 6 of E.O. 12866 by adding the following
sentence: “In consultation with OIRA, each agency may also consider whether to
utilize formal rulemaking procedures under 5 U.S.C. 556 and 557 for the resolution
of complex determinations.” Virtually all agency regulations are currently issued
under informal rulemaking procedures under 5 U.S.C. 553, in which agencies publish
proposed rules in the Federal Register for public comment, and subsequently publish
a final rule reflecting any changes made as a result of those comments. Formal
rulemaking, as the name implies, is a much more rigorous, trial-like, on-the-record
procedure in which interested persons testify and cross-examine witnesses, and the
agency may take depositions and issue subpoenas. It is generally considered a more
time-consuming and expensive process than informal rulemaking. Also, according
to 5 U.S.C. 556(d)(1), “[e]xcept as otherwise provided by statute, the proponent of
a rule or order has the burden of proof.” Formal rulemaking was criticized in the
1970s, and has fallen into disuse since then.28 The Administrative Conference of the
United States recommended that Congress should not require procedures beyond
informal rulemaking, and should never require trial-type procedures for resolving
questions of policy or fact.29
26 John Sullivan, “White House Sets Out New Requirements for Agencies Developing
Rules, Guidance,” citing Paul Noe, partner at C&M Capitolink, who was a counselor to
former OIRA administrator John Graham.
27 Public Citizen, “New Executive Order Is Latest White House Power Grab.”
28 For a discussion of formal rulemaking, see Jeffrey S. Lubbers, ed., A Guide to Federal
Agency Rulemaking, Fourth Edition (Chicago: American Bar Association, 2006), pp. 58-59.
29 ACUS Recommendation 72-5, Procedures for the Adoption of Rules of General
Applicability, 38 Federal Register 19782, 1972; Jeffrey S. Lubbers, ed., A Guide to Federal
Agency Rulemaking, Fourth Edition, pp. 309-310.
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The executive order does not indicate, and OIRA has not explained, why this
provision was added to E.O. 12866. Agencies have always had the ability to employ
formal rulemaking when they conclude that it is in the agencies’ best interest to do
so. Therefore, the statement that agencies “may also consider whether to utilize
formal rulemaking procedures” seems to grant discretion where discretion was
already allowed. On the other hand, an agency’s “consultation with OIRA” may
result in greater use of formal rulemaking if OIRA can convince the agency that it is
in their best interest to do so. If that occurs, agency rulemaking could become even
more “ossified” than it already is.30
Concluding Notes
The amendments made by E.O. 13422 to E.O. 12866 are the most significant
since the latter order was issued in 1993, but the characterizations of the changes by
interested parties are dramatically different. Jeffrey Rosen, general counsel at OMB,
reportedly characterized the new executive order as “a classic good-government
measure that will make federal agencies more open and accountable.”31 On the other
hand, Gary Bass, executive director of OMB Watch said the changes made to the
regulatory review process were “bad, bad, bad,” and predicted that they would
hamper the government’s ability to respond to regulatory crises such as E.coli
outbreaks on fresh vegetables.32 One Member of Congress was quoted as saying that
the order “allows the political staff at the White House to dictate decisions on health
and safety issues, even if the government’s own impartial experts disagree. This is
a terrible way to govern, but great news for special interests.”33
However, the ultimate impact of these changes to the regulatory review process
is unclear, and will likely depend on how the changes are implemented by OIRA and
the agencies. Will, for example, OIRA insist that agencies identify a “specific market
failure” before issuing proposed or final rules, or will that provision be interpreted
more broadly to require simply a clear statement of the rules’ intentions? Will
agency heads continue to have discretion in the appointment of regulatory policy
officers (albeit less than before since they must now select from current presidential
appointees), or will the White House direct the agency heads in those appointments?
Will the requirement that agencies provide estimates of aggregate costs and benefits
be used as a prelude to greater control and the development of regulatory budgets, or
30 Several observers have commented on the “ossification” of the rulemaking process as a
result of numerous statutory and executive order requirements. See, for example, Thomas
O. McGarity, “Some Thoughts on ‘Deossifying’ the Rulemaking Process, Duke Law
Journal, vol. 41 (June 1992), pp. 1385-1462; Richard J. Pierce, Jr., “Seven Ways to
Deossify Agency Rulemaking,” 47 Administrative Law Review, vol. 47, winter 1995, pp.
59-93; Paul R. Verkuil, “Rulemaking Ossification — A Modest Proposal,” Administrative
Law Review, vol. 47 (summer 1995), pp. 453-459.
31 Robert Pear, “Bush Directive Increases Sway on Regulation.”
32 John D. McKinnon, “White House Flexes Muscles Over U.S. Regulations,” Wall Street
Journal (Europe), Feb. 1, 2007, p. 12.
33 Robert Pear, “Bush Directive Increases Sway on Regulation.”
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will such estimates be relatively easy to develop and reveal cumulative effects that
have heretofore been hidden? Will the requirement that OIRA be notified of
forthcoming significant agency guidance documents prove to be a major expansion
of presidential influence over regulatory agencies, or will “significant guidance
document,” as defined in the order, be a contradiction in terms resulting in virtually
no such documents being covered by the order’s requirements? And finally, will
OIRA require agencies to enter into more formal rulemaking procedures, or will
agencies continue to be allowed to use such procedures in rare circumstances? As
noted previously with regard to individual elements, the scope and effect of these
changes to E.O. 12866 are likely to become apparent only through their application
by OIRA and the agencies.
These uncertainties notwithstanding, the issuance of these amendments to E.O.
12866 are important if for no other reason than that the President deemed them
necessary. It is reasonable to conclude that the President had some purpose in mind
that led to the issuance of the new executive order. Notably, although E.O. 13422
requires agencies to provide written rationales for why they are issuing regulations,
no such rationale was offered in conjunction with this or any of the other new
requirements in the order. For example, it is unclear what “market failure” or other
specific problem led to the issuance of the requirements that agencies have regulatory
policy officers who are presidential appointees, or that agencies submit significant
guidance documents to OIRA for review? To date, other than broad statements about
openness and accountability, neither the President nor OMB has described why these
changes were made to E.O. 12866.34 However, neither the President nor OMB are
required by law to offer such an explanation.
The changes made by this executive order represent a clear expansion of
presidential authority over rulemaking agencies. In that regard, E.O. 13422 can be
viewed as part of a broader statement of presidential authority presented throughout
the Bush Administration — from declining to provide access to executive branch
documents and information to presidential signing statements indicating that certain
statutory provisions will be interpreted consistent with the President’s view of the
“unitary executive.”35
34 The closest OMB has come to an explanation for these changes is in a footnote in the final
bulletin on agency good guidance practices that was issued the same day as the executive
order. In the bulletin, OMB said that “E.O. 13422 addresses the potential need for
interagency review of certain significant guidance documents by clarifying OMB’s authority
to have advance notice of, and to review, agency guidance documents.” See footnote 12 in
the “Final Bulletin for Agency Good Guidance Practices,” available at
[http://www.whitehouse.gov/omb/memoranda/fy2007/m07-07.pdf].
35 For a discussion of the Bush Administration’s use of signing statements, see CRS Report
RL33667, Presidential Signing Statements: Constitutional and Institutional Implications,
by T.J. Halstead. More generally, see Adriel Bettelheim, “Executive Authority: A Power
Play Challenged,” CQ Weekly, Oct. 30, 2006, p. 2858. For a discussion of the unitary
executive principle, see Christopher S. Yoo, Steven G. Calabresi, Anthony J. Colangelo,
“The Unitary Executive in the Modern Era, 1945-2004,” 90 Iowa L. Rev. 601 (Jan. 2005);
and Robert v. Percival, “Presidential Management of the Administrative State: The Not-So
Unitary Executive,” 51 Duke Law Journal 963 (Dec. 2001).
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Some public interest groups and others have suggested that Congress hold
hearings on the changes made to the regulatory planning and review process by E.O.
13422.36 If Congress elects to do so, potential topics for review could include the
intended purpose of the changes, how OIRA intends to implement them, the scope
of their likely effects, and the implications of the changes for the balance of power
between Congress and the President in controlling regulatory activity based on
statutory authorities.
36 See, for example, [http://www.citizen.org/pressroom/release.cfm?ID=2361], in which
Public Citizen said that “Congress must immediately arrange hearings to hold the president
accountable for this affront to the rule of law.”