On Friday, December 2, 2011, the House is scheduled to consider H.R. 3010, the Regulatory Accountability Act of 2011.  The bill was introduced by Rep. Lamar Smith (R-TX) on September 22, 2011, and referred to the Committee on the Judiciary.  On November 3, 2011, a mark-up was held and the bill was reported as amended by a vote of 16-6. 

H.R. 3010 will be considered under a rule, H. Res. 477, that provides one hour of general debate equally divided and controlled by the chair and ranking minority member of the Committee on the Judiciary.  Additionally, the rule makes in order only those amendments to H.R. 3010 printed in part B of the Rules Committee report (seven amendments, each debatable for ten minutes), and provides for one motion to recommit with or without instructions.

H.R. 3010 would define “major rule,” “high-impact rule,” “guidance,” and “major guidance” to broaden the definitions of rules that would be impacted by the bill.      

The bill would update and reform the rulemaking process by setting mandatory rulemaking principles.  The bill would require that, in a rule making, an agency should make all preliminary and final factual determinations based on evidence and consider, in addition to other applicable considerations, the following:

• “The legal authority under which a rule may be proposed, including whether a rule making is required by statute, and if so, whether by a specific date, or whether the agency has discretion to commence a rule making;
• “Other statutory considerations applicable to whether the agency can or should propose a rule or undertake other agency action;
• “The specific nature and significance of the problem the agency may address with a rule (including the degree and nature of risks the problem poses and the priority of addressing those risks compared to other matters or activities within the agency's jurisdiction), whether the problem warrants new agency action, and the countervailing risks that may be posed by alternatives for new agency action;
• “Whether existing rules have created or contributed to the problem the agency may address with a rule and whether those rules could be amended or rescinded to address the problem in whole or part;
• “Any reasonable alternatives for a new rule or other response identified by the agency or interested persons, including not only responses that mandate particular conduct or manners of compliance, but also: the alternative of no federal response; amending or rescinding existing rules; potential regional, state, local, or tribal regulatory action or other responses that could be taken in lieu of agency action; and potential responses that specify performance objectives rather than conduct or manners of compliance, establish economic incentives to encourage desired behavior, provide information upon which choices can be made by the public, or incorporate other innovative alternatives rather than agency actions that specify conduct or manners of compliance;
• “Notwithstanding any other provision of law; the potential costs and benefits associated with potential alternative rules and other responses, including direct, indirect, and cumulative costs and benefits and estimated impacts on jobs, economic growth, innovation, and economic competitiveness; means to increase the cost-effectiveness of any Federal response; and incentives for innovation, consistency, predictability, lower costs of enforcement and compliance (to government entities, regulated entities, and the public), and flexibility.”

H.R. 3010 would override provisions in existing law that limit agencies from considering costs in a small number of rulemaking settings.  However, the bill would not require agencies to base final rulemaking decisions in those settings on cost considerations at the expense of other statutory considerations. 

In the case of a rule making for a major rule or high-impact rule or a rule that involves a novel legal or policy issue arising out of statutory mandates, the bill would require that no later than 90 days before a notice of proposed rule making is published in the Federal Register, an agency must publish advance notice of proposed rule making in the Federal Register.  H.R. 3010 would require that the agency:

• “Include a written statement identifying, at a minimum--the nature and significance of the problem the agency may address with a rule, including data and other evidence and information on which the agency expects to rely for the proposed rule; the legal authority under which a rule may be proposed, including whether a rule making is required by statute, and if so, whether by a specific date, or whether the agency has discretion to commence a rule making; preliminary information available to the agency concerning the other considerations; and in the case of a rule that involves a novel legal or policy issue arising out of statutory mandates, the nature of and potential reasons to adopt the novel legal or policy position upon which the agency may base a proposed rule;
• “Solicit written data, views or argument from interested persons concerning the information and issues addressed in the advance notice; and
• “Provide for a period of not fewer than 60 days for interested persons to submit such written data, views, or argument to the agency.”

Before it determines to propose a rule, the bill would require the following completion of procedures, and if applicable, the agency would be required to consult with the Administrator of the Office of Information and Regulatory Affairs (OIRA).  The bill would require that if the agency determines to propose a rule, the agency must publish a notice of proposed rule making (Advance Notices of Proposed Rulemaking (ANPRs), to include:

• A statement of the time, place, and nature of public rule making proceedings;
• Reference to the legal authority under which the rule is proposed;
• The terms of the proposed rule;
• A description of information known to the agency on the subject and issues of the proposed rule;
• A reasoned preliminary determination of need for the rule, and an additional statement of whether a rule is required by statute;
• A reasoned preliminary determination that the benefits of the proposed rule meet the relevant statutory objectives and justify the costs of the proposed rule;
• A discussion of the alternatives to the proposed rule, and other alternative responses, the costs and benefits of those alternatives, whether those alternatives meet relevant statutory objectives, and why the agency did not propose any of those alternatives; and
• A statement of whether existing rules have created or contributed to the problem the agency seeks to address with the proposed rule; and if so, whether or not the agency proposes to amend or rescind any such rules, and why. 

 After concluding the ANPR process, the bill would allow an agency to publish a Determination of Other Agency Course, describing the alternative response the agency chose rather than to issue a new rule.  H.R. 3010 would require that the agency consult with OIRA, and disclose all information provided to or considered by the agency in its decision-making process, including but not limited to any preliminary risk assessment or regulatory impact analysis.  The bill would require that if the agency proceeds with the rulemaking, then the agency must give interested parties at least 60 days to submit written data, views or arguments related to the proposed rule, and 120 days to do so for any proposed major or high-impact rule. 

H.R. 3010 would provide an early opportunity for quick administrative appeals of whether the key studies or other information on which agencies base their proposed rules meet standards set under the Information Quality Act (IQA). 

The bill would require that following the notice of a proposed rule making, receipt of comments on the proposed rule, and any hearing held, and before adoption of any high-impact rule (a proposed rules that would impose at least $1 billion burden on the economy), the agency must hold a hearing.  The agency would be required to provide a reasonable opportunity for cross-examination at the hearing and limit the hearing to the following issues:

• Whether the agency's asserted factual predicate for the rule is supported by the evidence;
• Whether there is an alternative to the proposed rule that would achieve the relevant statutory objectives at a lower cost;
• If there is more than one alternative to the proposed rule that would achieve the relevant statutory objectives at a lower cost than the proposed rule, which alternative would achieve the relevant statutory objectives at the lowest cost;
• Whether, if the agency proposes to adopt a rule that is more costly than the least costly alternative that would achieve the relevant statutory objectives, the additional benefits of the more costly rule exceed the additional costs of the more costly rule;
• Whether the evidence and other information upon which the agency bases the proposed rule meets the requirements of the IQA;
• Upon petition by an interested person who has participated in the rule making, other issues relevant to the rule making, unless the agency determines that consideration of the issues at the hearing would not advance consideration of the rule or would, in light of the nature of the need for agency action, unreasonably delay completion of the rule making.  The bill would require that an agency grant or deny a petition under this paragraph within 30 days of its receipt of the petition.

H.R. 3010 would improve requirements at the final rulemaking stage as well.  The bill would require that in adopting a final rule, an agency must do the following:

• Consult with the OIRA Administrator;
• Rely only on the best reasonably obtainable scientific, technical and economic information;
• Adopt only the least-cost alternative considered during rulemaking that meets statutory objectives, unless the agency explains why a more costly rule is justified to serve interests of public health, safety or welfare clearly within the scope of the statutory provision that authorizes the rule and the more costly rule’s additional benefits justify its additional costs;
• Publish a notice of final rulemaking giving: “a concise, general statement of the rule’s basis and purpose,” an explanation of the need for the rule, the costs and benefits, any final risk assessment or regulatory impact analysis, and why the agency did not adopt an alternative rule or amend or rescind an existing rule.  The bill would require that the agency rest specific, final determinations on the critical issues considered during formal rulemaking hearings, based on data that meets the strictures of the Information Quality Act;
• Publish plans for periodic review of high-impact and major rules to determine whether the agency’s final rule still is needed, achieves statutory objectives, and produces benefits that justify its costs or whether the rule could be modified or rescinded.

The bill would seek to prevent the abuse of “interim-final rules.”  H.R. 3010 would seek to prevent agencies in cases of public urgency to issue “interim-final rules” that are effective before full rulemaking procedures are completed, but also requires prompt subsequent completion of full rulemaking procedures and allows affected entities to seek rapid judicial review of agency decisions to adopt interim-final rules (except for national security rules).  The bill would allow an agency to forego the rulemaking process when the “rulemaking is undertaken only to correct a de minimis technical or clerical error in a previously issued rule or for other noncontroversial purposes.”  Furthermore, if the agency receives significant adverse comment on such rules within 60 days, then it must conduct normal notice-and-comment rulemaking.   

The bill would require the publication of a substantive final or interim rule no less than 30 days before its effective date. 

H.R. 3010 would require OIRA to issue guidelines for agencies to follow as they assess scientific and economic issues in rulemaking, including cost-benefit analysis and assessment of risks; as they observe statute-specific rulemaking regimes in conjunction with the generally applicable procedures of the Administrative Procedure Act (APA) as amended; to assure better coordination, simplification and coordination by agencies in rulemaking; and, as they conduct hearings.  The bill would require that the agency include in the rulemaking record “all documents and information prepared or considered by the agency during the proceeding” including, at the discretion of the President or the OIRA Administrator, communications from OIRA to the agency.  The record must also be made available to the public online whenever feasible, but if not then by other electronic means, and otherwise.

The bill would exempt the Board of Governors of the Federal Reserve System and the Federal Open Markets Committee from performing cost-benefit analysis or holding formal hearings for monetary policy rules (such an exemption is part of the Congressional Review Act). 

H.R. 3010 would curb agency abuse of purportedly non-binding “guidance” – particularly guidance with major economic impacts – to avoid statutory rulemaking requirements.  Specifically, when issuing major guidance, the bill would require the agency consult with OIRA; document that the guidance is “understandable and complies with relevant statutory objectives and regulatory provisions;” summarize the underlying evidence; identify the costs and benefits of the guidance; and, describe alternatives to the guidance, their costs and benefits, and why the agency rejected them.  H.R. 3010 would require that this documentation be published online or made available to the public by electronic means, or otherwise.  The bill would specify that agency guidance is not legally binding, and requires agencies to disclose this on its guidance.  The bill would also prohibit agencies from issuing guidance that is duplicative of, or inconsistent or incompatible with, existing statutes or regulations.

The bill would clarify that an agency’s denial of an Information Quality Act correction petition, or an agency’s failure to grant or deny a petition within 90 days, is reviewable by a court as a final action.  The bill would provide for immediate judicial review of agency decisions to establish “interim-final rules” before complying with normal rulemaking requirements. 

H.R. 3010 would clarify the scope and standards of judicial review available under the APA.  The bill would allow courts to review agency action for violations of the Information Quality Act and would prohibit judicial deference to agency guidance and other interpretive statements rendered outside of the rulemaking process; agency determinations of cost-benefit issues, other economic assessments or risk assessments that do not comply with applicable OIRA guidelines; and, agency determinations of law and fact to support interim-final rules.  The bill would allow agency denials of petitions for hearings or consideration of specific issues in hearings to be reviewed for abuse of discretion.

H.R. 3010 would not apply to rulemakings pending or completed as of the date of enactment.

According to the House Committee on the Judiciary, the costs and overreach of federal regulation—especially new regulation—hold back job creation and growth.  The Administrative Procedure Act (APA), the basic but outdated charter of agency rulemaking, lies at the root of this problem.  Its minimal limitations on rulemaking have hardly changed in decades as America’s economy has been revolutionized and competition from less regulated countries has soared.

The “Regulatory Accountability Act of 2011” legislates strong reforms to correct this problem.  It would build on executive orders which Presidents (from both parties) have used, making their key reforms permanent, judicially enforceable and applicable to all agencies.  The Act is critical to meet the rising tide of major regulations—those that cost the regulated community $100 million or more or have significant adverse impacts on competition, employment or productivity. 

The Regulatory Accountability Act makes the regulatory process more transparent, agencies more accountable and regulations more cost-effective.  It will not impose new rulemaking requirements on regulations already proposed or in effect and will not prevent agencies from achieving statutory objectives.

The Congressional Budget Office (CBO) estimates that enacting H.R. 3010 would cost about $70 million over the 2012-2016 period, assuming appropriation of the necessary funds.  Such funding would cover the government-wide costs of additional personnel, contractor costs, and other administrative expenses associated with meeting the new requirements under the legislation.  CBO also expects that enacting H.R. 3010 could delay the issuance of some final rules each year.  As a result, CBO and the staff of the Joint Committee on Taxation (JCT) expect that enacting H.R. 3010 could have effects on both direct spending and revenues.  Therefore, pay-as-you-go procedures apply to the legislation.  However, given the large number of major rules issued each year and the extent to which rules vary in their nature and scope, CBO cannot determine the level of costs or savings stemming from delaying the effective date of some rules.  In addition, while enacting the bill could affect direct spending and revenues if agencies not funded through annual appropriations incur additional costs, CBO estimates that any net increase in spending or change in revenues for those agencies would not be significant.

Amendment No. 1—Rep. Moore (D-WI):  This amendment would require that an agency take into account whether a problem “disproportionately impacts certain vulnerable subpopulations (including individuals whose income is below 200 percent of the poverty line, individuals who are aged 65 and older, and veterans), and whether such an impact would be mitigated by new agency action.

Amendment No. 2—Rep. Olson (R-TX):  This amendment would clarify that cumulative costs and benefits and estimated impacts on jobs shall include an estimate of the net gain or loss in domestic jobs.

Amendment No. 3—Rep. Jackson Lee (D-TX):  This amendment would grant an agency the discretion to determine whether or not to provide advanced notice, no later than 90 days, of a proposed rule prior it being published in the Federal Register.

Amendment No. 4—Rep. Jackson Lee (D-TX):  This amendment would strike a section of the Act that would allow any member of the public to petition for a hearing to determine whether the proposed rule fails to comply with the Information Quality Act.

Amendment No. 5—Rep. Connolly (D-VA):  This amendment would prohibit any rules relating to the “safety of food, the safety of the workplace, air quality, the safety of consumer products, or water quality,” from being blocked or repealed by H.R. 3010. 

Amendment No. 6—Rep. Nadler (D-NY):  This amendment would exempt from H.R. 3010 any actions made by the Nuclear Regulatory Commission under the Atomic Energy Act. 

Amendment No. 7—Rep. Jackson Lee (D-TX):  This amendment would exempt any rules promulgated by the Department of Homeland Security from H.R. 3010.