The human cost of regulatory ossification

by Thomas McGarity

November 06, 2013

Tomorrow, a subcommittee of the Senate Judiciary Committee chaired by Senator Richard Blumenthal (D. Connecticut) hosts a Hearing on the consequences of excessive regulatory “ossification” entitled, “Justice Delayed II: The Impact of Nonrule Rulemaking on Auto Safety and Mental Health.”  I will be testifying at that hearing on the effects of agencies’ moving to more informal rule-making procedures as a way to avoid the burdensome analytical and internal review requirements that currently make it so difficult for them to promulgate rules.

During the 1980s and 1990s, the rulemaking process became increasingly rigid and cumbersome as presidents, courts and Congress added an assortment of analytical requirements to the simple rulemaking model and as evolving judicial doctrines obliged agencies to take great pains to ensure that the technical bases for rules were capable of withstanding judicial scrutiny under what is now called the “hard look” doctrine of judicial review.  More than twenty years ago, Professor E. Donald Elliott, himself a former General Counsel of the Environmental Protection Agency, referred to this phenomenon as the "ossification" of the rulemaking process, and I wrote an article based on my study for the Carnegie Commission describing the ossification phenomenon, identifying some of its causes, and suggesting some ways to “de-ossify” the rulemaking process. 

My 2012 article on “blood sport” rulemaking highlights many of the tactics that stakeholders now use for slowing down or influencing the outcome of high-stakes rulemaking proceedings, many of which are employed outside the APA’s notice-and-comment process. Under the pressure of constant opposition from the regulated industries and with only sporadic countervailing pressure from beneficiaries of the regulated programs, statutory deadlines are missed, ambitious policy goals remain unachieved, and the protections envisioned by the authors of the statute gradually erode away.   

Along with many other scholars, I am convinced that the current rulemaking process is not merely ossified -- it is broken. 

The results are not pretty. As informal rulemaking has become increasingly burdensome, regulatory agencies are not able to meet their statutory obligations, and some agencies have effectively given up on meeting their statutory goals by promulgating rules. In addition to frustrating congressional policy goals, the current broken state of the informal rulemaking process deprives the government of one of rulemaking’s greatest virtues -- the administrative efficiency of promulgating generic rules, rather than making policy on a case-by-case basis. When generic rulemaking becomes too resource-intensive for the agency to consider, the taxpayer is the ultimate loser. In addition, agencies have reduced incentives to revise existing rules, even when forced by statute to revisit existing rules, because that would involve a new rulemaking initiative. Experimentation is also riskier in an atmosphere in which any change is likely to involve costly and time-consuming rulemaking.  This results in reduced agency incentives to experiment with flexible or temporary rules.  Agencies that have the authority to do so have begun to make policy in individual adjudications, and many agencies have resorted to less formal policymaking techniques such as policy statements, interpretative rules, manuals, and interim final rules that are never finalized.

For example, the National Highway Traffic Safety Administration, has effectively given up on rulemaking unless specifically required by statute, focusing instead on its statutory power to force the recall of motor vehicles that contain "defects" related to safety performance.  The move away from rulemaking to adjudication gives the agency the flexibility to allow policies to evolve through the gradual process of stare decisis.  So long as the adjudicatory record supports the specific action, the agency can avoid explaining the factual and policy underpinnings for broad rules that it articulates in adjudications.   

When agencies resort to articulating rules in adjudications as a vehicle for avoiding informal rulemaking, however, regulatees are no longer put on notice of the standards of conduct that the agency is applying to them and both regulatee and beneficiary groups are deprived of the opportunity that informal rulemaking provides to influence the agency's thinking on the rule through the comment process.

More troublesome, perhaps, from the standpoint of open government is the increasing tendency of agencies to engage in "non-rule rulemaking.” Although informal guidance documents and technical manuals are a necessary part of a complex administrative regime, agencies typically issue them without the benefit of public comments.  Adopting these less formal devices as a way to avoid burdensome and intrusive rulemaking requirements therefore renders regulatory agencies much less accountable to the public and paves the way to arbitrary decision-making.

So what are some potential solutions to the pervasive ossification of the rulemaking process? The first thing that Congress can do to fix the broken informal rulemaking model is to step up its oversight of the rulemaking process and of the roles that agency staffs, desk officers in the Office of Information and Regulatory Affairs (OIRA), lobbyists for regulatees and beneficiary groups, think tanks, trade associations, and ordinary citizens play in that process.  Congressional oversight of rulemaking should be systemic and not limited to inquiries into particular rulemaking exercises. 

Some agencies like OSHA believe that their statutes mandate a more formal rulemaking process than the notice-and-comment process envisioned by section 553.  Congress could amend those statutes to make its intent clear that formal hearings and other formal procedures are not necessary in particular contexts. Congress could enact legislation to reduce or eliminate one or more of the many analytical requirements in statutes and executive orders.  An agency is most interested in analyzing issues that are directly relevant to the success or failure of the rulemaking initiative in the relevant judicial and political arenas.  Eliminating marginally useful analytical requirements would probably not reduce the intensity of the agency's analysis of the pertinent issues.  Since the process of producing analytical paperwork is both time consuming and expensive, the rulemaking process would probably move along more expeditiously after Congress removed unnecessary analytical hurdles.

The primary objection to OIRA review of rulemaking is that OIRA’s input often goes beyond comments on the agency’s analysis to demands that the agency change the substance of the rules.  Unidentified White House officials can use the OIRA review process to advance policies that run counter to the agencies' statutes.  Agencies are understandably reluctant to cede decisionmaking authority to OIRA, and Congress should be equally concerned about the White House’s de facto exercise of unconstrained power over the agencies’ implementation of congressional goals.  Much of what motivates the agencies to attempt to circumvent the rulemaking process is the prospect dealing with the acrimonious and time-consuming process of OIRA review.

Abuse of the OIRA review process can be limited and its accountability enhanced by increasing its transparency.  OIRA review is not governed by the Administrative Procedure Act, and the transparency of that review process has waxed and waned over the years.  OIRA review remains far from transparent, because the rules of engagement with agencies are often ignored in practice. To break the process of regulatory ossification, White House oversight of rules should be significantly cut back.

Congress might think about enacting legislation designed to signal to the courts its intention that they reduce the intensity of judicial review of informal rulemaking.  It could, for example, amend the APA to change the scope of review for informal rulemaking.  That being said, it is hard to imagine words that could specify less intensive review than the words “arbitrary and capricious.”  At the end of the day, the scope of rulemaking review may be an issue that is best worked out by the courts with the aid of outside criticism from administrative law scholars.

Informal rulemaking has many advantages over case-by-case adjudication and less transparent devices such as policy statements and guidance documents.  But the informal rulemaking model that has resulted from thirty years’s worth of intense oversight and intermeddling by the White House and some reviewing courts is badly broken.  Congress needs to repair this valuable decisionmaking tool so that the regulatory agencies can move forward with protecting public health, safety and the environment. Tomorrow’s hearing is a step in the right direction.

 

 

 

 

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Thomas O. McGarity holds the Joe R. and Teresa Lozano Long Endowed Chair in Administrative Law at the University of Texas in Austin. He is a member of the board of directors of the Center for Progressive Reform, and a past president of the organization.

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