Rulemaking

1. Rulemaking Part II

2. Exemptions to Notice and Comment Requirements Is notice and comment a constitutional requirement?

3. Military and foreign affairs • Why exempt these? • Limiting the term of residence for Iranian nationals after the hostage incident • National security issues? • Extending asylum to persons subject to reproductive restrictions in China • Was this just an individual benefit or part of a foreign policy?

4. Agency Procedures • Like the code of civil procedure • Does not change the substantive rights of the parties • Does not change the regulated behavior, only the process in agency procedures

5. Actions where Secrecy is Important • Wage and price controls • Bidding on contracts • Negotiations on land purchases and sales

6. Emergency Proceedings • Emergency Rules • http://www.state.la.us/osr/osr.htm • Misused in LA • Interim Final Rules • Published and in effect, but will be modified after comments are in. • Calculations and other non-discretionary rules • Technical corrections • Can require notice and comment if the correction causes a different result

7. Non-APA Requirements • APA is the default if there is no other statutory guidance • National Environmental Policy Act imposes requirements if the rule affects the environment • Regulatory Flexibility Act - small business • Executive Order 12866 - more $100M impact • The book calls these hybrid rulemaking, do no confuse this with court imposed hybrid rulemaking as in Vermont Yankee

8. Beginning Rule Making • Why was the court willing to order the agency to make a rule in the Regulators? • Why do agencies often fail to follow congressional direction to make rules? • What is a request for a rulemaking and what does it force the agency to do?

9. 553(b) - Exceptions to Notice Requirements • 1) Interpretative rules, general statements of policy, and rules of agency organization, procedure, and practice; and • 2) Rules when the agency finds for good cause that notice and public procedure are impracticable, unnecessary, or contrary to the public interest. • No notice means no comment under 553(c)

10. Exception 1 - Interpretative Rules • It is only explaining the law or providing guidance for action • Prosecution guidelines • IRS audit guidelines • Since they do not change the law, they have no legal effect • Like precedent cases in the civil law? • Does that mean you can ignore them?

11. How do you know if it an Interpretive Rule or a Legislative Rule? • Why would an agency want to use an interpretive rule rather than a legislative rule? • What is the risk to the agency if they do and the court disagrees? • What is the benefit to the regulated parties of interpretive rules? • What if the agency is prevented from providing guidance documents?

12. How Does the Nature of the Enabling Act Affect Rulemaking? • Very general laws • Little effective guidance in the statute • Makes any interpretative rule more likely to been seen as a legislative rule • Very specific laws - like the ADA • No room for legislative rules • Everything is guidance

13. EPA Example - Wetlands • EPA makes a rule that states that the term “waters of the United States” (which defines the jurisdiction of EPA under the Clean Water Act) includes wetlands that potentially provide habitat to migratory birds. • Is this an interpretative rule or a legislative rule? • Can we tell just looking at the rule?

14. What Do We Need to Know? • Will the agency say that the rule is binding? • The substantial impact test • How might this rule affect the buyers of wetlands? • Is this a substantial impact? • What is the agency's defense? • Is the substantial impact test circular?

15. The “Legally Binding” or “Force of Law” Test • What is the enforcement test? • What do we need to know to tell whether the agency can enforce the law without this rule? • Is the agency required to define wetlands? • Was the agency doing enforcement before this rule? • Under this test, is this an interpretative rule? • What if statute allows the agency to define toxic substances that cannot be dumped into lakes? • Would a list of these substances be legislative?

16. General Policy or Specific Requirements? • Remember, 553(b) does not require notice and comment for general policy statements • Assume the statute says that in licensing actions, a physician must reply to agency request for information in a reasonable time. • Would a requirement that this be in 7 days be a policy statement or a rule? • Why does the inclusion of specific factual information undermine the claim that it is a general policy statement?

17. How High do I Build the Fence?Hoctor v. USDA, 82 F.3d 165 (7th Cir. 1996) • Statute requires the agency to adopt rules for the safe housing of dangerous animals • Agency uses notice and comment to promulgate a rule requiring that reasonable precautions be taken to prevent the escape of the animals • Agency then issues guidance saying that a reasonable precaution would be an 8 foot fence • Interpretation or legislation? • How could the agency enforce the provision without the height rule?

18. Junk in the Park: United States v. Picciotto, 875 F.2d 345 (D.C. Cir. 1989) • Can the agency use notice and comment to promulgate a legislative rule that says that the agency can add other requirements in specific situations without notice and comment? • Why or why not? • What if the rule just says that nothing can be brought to the park that would be disruptive or impede public access?

19. Consistency, the Hobgoblin of Interpretative Rules • What is the result if an interpretative rule is inconsistent with a legislative rule? • Using an interpretative rule to change a calculation established by a rule • Some courts also find that an interpretative rule cannot be changed with a subsequent interpretative rule, but can only be modified by a legislative rule • Why is logically inconsistent? • This is not widespread in the courts

20. Other Factors • Publication in the FR • Must interpretative rules be published in the FR? • What does failure to publish indicate? • Does this make sense? • Is it important that the agency clearly label the rule as interpretative?

21. Federal Mine Safety and Health Act Example • Secretary has the statutory right to sue both the mine owner and the mine operator for violations of the Act. • Secretary publishes a policy statement explaining that the agency can and will sue both of them for infractions, depending on the nature of the infraction. • Does this require notice and comment? • Why?

22. Corps of Engineers Example • Corps issues a guidance document saying that one way to qualify for a wet lands development certificate is to promise to restore 2X as much wet land as you fill • Does this need notice and comment? • Why? • What if the Corps will only issue permits to people who agree to this? • How would you prove this?

23. Coercion: Chamber of Commerce v. U.S. Dept. of Labor, 174 F.3d 206 (D.C. Cir. 1999) • DOL made a policy statement that it would reduce inspections of workplaces that adopted an OSHA suggested safety plan that exceeded federal minimums • Is this really voluntary? • Does coercion make this a binding rule? • What about DOJ guidance that a corporate compliance plan will count as mitigation under the Sentencing Guidelines?

24. How does the Agency Treat the Rules? • Assume the agency says the statement is only an enforcement guideline • What if the employees doing the enforcement always follow the guideline? • Does this change its legal status? • What position do these decisions on guidance put the agency in when the regulated parties or the public asks what the guidelines mean?

25. Can Interpretative Guidance be Retroactive? • The APA prohibits retroactive rules • Could congress create an exception to the APA and allow a retroactive rule? • Why does the ban on retroactive rules not apply to interpretive rules? • How do judges change the law retroactively? • If interpretive rules cannot change legal rights, does retroactive really mean anything?

26. Procedural Rules • Procedural rules are exempt from notice and comment • The form of an application for benefits is procedural • The facts that the claimant has to establish to get the benefits are substantive • A procedural rule can become substantive if the change in procedure has a substantial impact on the regulated parties. • Procedural change for submitting bills by home health providers imposed a huge logistic and financial cost.

27. What is Formal Rulemaking? • A rulemaking conducted as a trial type hearing • The agency support for the rule must be presented at the hearing • Interested parties may present and cross-examine evidence • History - grew out of rate making • Rate making affects a small number of parties • The courts thought they should get due process

28. Why avoid formal rulemaking? • The peanut hearings (FDA must do formal rulemaking in some situations) • 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?

29. When is Formal Rulemaking Required? • Disfavored by the modern courts • Must have magic statutory language or be required by the agency's on rules • Only when rules are required by statute to be "made on the record after opportunity for an agency hearing" • Lawyering tip • When would you want to argue that formal rulemaking is required? • What do you have to do to support you request?

30. The Procedures of Notice-and-Comment Rulemaking

31. Putting the Notice in Notice and Comment • 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. . . .

32. Notice of the Proposed Rule: Chocolate Manufacturers Ass’n v. Block • What did Congress tell the agency to do that resulted in these regs? • WIC • What evil substance was being regulated? • What food did the proposed rule address? • Cereal • What about fruit juice? • How was the final rule different from the proposed rule?

33. The Notice Problem • 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?

34. Limits on Logical Outgrowth - Arizona Public Service Co. v. E.P.A. • What did the EPA propose that Indian Tribes be allowed to do that states were doing? • State plans are subject to judicial review - Why did the tribes object to this in comments? • How was the rule changed? • What was the claim by plaintiffs? • How did the court analyze the problem? • Why shouldn't have been a surprise?

35. What about Technical Information Underlying the Rule? (not in book) • 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 hide technical information. • Why is this a big deal in environmental regs? • What are the potential downsides of this policy?

36. Shelby Amendments to the Freedom of Information Act (not in book) • 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?

37. Additions to the Published Record (not in book) • Rybachek v EPA • EPA added 6000 pages of supporting info when responding to comments • 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 comment on it.

38. Negotiated Rulemaking • What is this? • Why is often used in environmental rulemaking? • What are the advantages? • What are the public participation issues?

39. Stop here

40. Ex Parte Communications

41. Rulemaking • 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?

42. Bias and Prejudice • Remember the cases on bias of decisionmakers in adjudications? • Should these also apply to rulemaking? • How does notice and comment change the situation?

43. Association of National Advertisers , Inc. v. FTC • 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 • Court held that plaintiffs must show clear and convincing evidence that he has an unalterably closed mind on matters critical to the rulemaking • No rulemaking has ever been overturned on the basis that a decisionmaker was unlawfully prejudiced.

44. DC Federation of Civic Associations v. Volpe, 459 F.2d 1231 (D.C. Cir. 1971) • 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?

45. Sierra Club v. Costle, 657 F.2d 298 (D.C. Cir. 1981) • Rule making on coal fired power plants • Why is this controversial then and more so now? • Sierra Club claimed that the president influenced the agency • Is that wrong? What is the cure? • Senator Bird also weighed in • What do plaintiffs need to show to establish undue influence? • Why is an outcome test, combined with the record, a good solution?

46. What is the president's role in rulemaking? • Controls and supervises executive branch decisionmaking • What just happened with the ozone regs? • 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.

47. Should State Rules Differ from Federal Rules on Notice and Comment? • 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 • What about LA's 300+ tiny boards? • Should state agencies have a reduced publication requirement? • Should they be able to publish rules without explanation and only have to explain if asked?

48. Congressional Mandates (Hybrid Rulemaking) at the FTC • 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 proposal and the alternatives.