Executive Order 13422, Part 1
Centralized oversight of guidance
31 Jan 2007 in Regulatory Policy
On January 19 we posted links to OMB's new government-wide guidance on the issuance of guidance in lieu of rulemaking, the traditional form of regulation, and a simultaneously released Executive order. Today we comment on new Executive order 13422.
Three sections of Executive order 13422 have captured the imagination of reporters and the stakeholders they rely upon as sources:
- New definitions related to guidance documents, the quasi-regulatory actions federal agencies often issue outside of normal rulemaking procedures
- A change in the regulatory philosophy emphasizing market failure as the predominant (but not only) rationale for regulation
- New regulatory planning procedures that, among other things, require each agency's Regulatory Policy Officer to be a presidential appointee
Today we comment on the first of these new elements -- the expansion of regulatory oversight to include guidance documents. We will address the remaining issues tomorrow and Friday.
The Wall Street Journal's John D. McKinnon describes (subscription may be required) these provisions as "[a] White House move to tighten its control over federal regulations ... providing fresh evidence of the Bush administration's intent to leave its conservative imprint on government over the next two years." McKinnon says "the White House has given itself more review authority over many informal agency dictates known as guidance, but "White House officials deny that, saying it is simply strengthening a review process that already occurs in many instances." In a similar vein, Bloomberg's Cindy Skrzycki says "the Bush administration rewrote the book on federal regulation."
Are these characterizations reasonable?
Previously, the term "guidance" applied to a broad range of actions by federal agencies that contained some measure of regulatory content but did not rise to the level of burden implied by regulation. On one extreme, the National Weather Service issues guidance all the time alerting the public to weather forecasts and extreme weather conditions. These publications do not impose a duty on anyone, however well advised the public might be to get out of the rain. At the other extreme are documents with enormous regulatory impact. A recent textbook example of the latter is EPA's "PCB Risk Assessment Review Guidance Document." Upon review, the D.C. Circuit said this guidance constituted a legislative rulemaking subject to the Administrative Procedure Act because it established binding cleanup standards. (The court ruled this guidance illegal and ordered it vacated; see General Electric v EPA.)
There is no bright line dividing guidance from regulation, and it is precisely because of the absence of a bright line that the issuance of guidance often causes controversy.
Historically, the Office of Management and Budget has not systematically reviewed guidance. One reason is that agencies have not submitted guidance documents to OMB for review and OMB staff tend to learn about them only after the fact. This could occur, for example, if a guidance document generated a public controversy. Presidents dislike learning from the newspapers about controversial policy decisions their subordinates have made in their name. OMB desk officers dislike reading on their morning commute that the agency they are supposed to be overseeing has issued a controversial guidance they didn't know anything about.
An alternative way OMB staff might learn about guidance after the fact occurs when an agency issues guidance to announce an important policy decision, then uses the existence of the guidance to justify the incorporation of these policy decisions in a subsequent rulemaking. In this second case, the purpose of issuing guidance may well be to circumvent the president from giving policy direction the agency does not want to receive.
Agencies have a broader interest in issuing guidance besides circumventing OMB oversight, and that's to skirt the Administrative Procedure Act and the public scrutiny it invites. Years ago, agencies could issue guidance without public notice, but the courts responded by requiring these actions to be subject to notice and comment. That led agencies desiring to evade scrutiny to meet the letter but not the spirit of the law. They'd publish notice but describe their proposed action using incomprehensible language. This problem was absorbed into a larger campaign for regulatory writing using "plain English" (later PC-ed into "plain language"). The campaign was capped by a memorandum issued by President Clinton, and of course, a guidance document on how to implement the president's memorandum.
What's going on is a perpetual cat-and-mouse game. Regulatory agencies (mice) scurry around trying to sneak the cheese (issue regulatory demands) without being caught. The OMB staff (cats) watch the mouse holes within their reach (regulations), but some of the mouse holes have always been inaccessible (guidance). Executive order 13422 enables the OMB staff to reach these mouse holes for the first time. It 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 (emphasis added)
We have highlighted the exclusion for regulatory action because it was defined in Executive order 12866 as:
any substantive action by an agency (normally published in the Federal Register that promulgates or is expected to lead to the promulgation of a final rule or regulation, including notices of inquiry, advance notices of proposed rulemaking, and notices of proposed rulemaking.
Executive order 12866 thus contained a rather large mouse hole: an agency could circumvent centralized regulatory review as long as the agency never intended to "lead to the promulgation of a final rule or regulation." To be fair, this mouse hole is an old one. Executive order 12291 also uses a definition that excludes guidance:
"Regulation" or "rule" means an agency statement of general applicability and future effect designed to implement, interpret, or prescribe law or policy or describing the procedure or practice requirements of an agency,..."
The Order and accompanying bulletin on good guidance practices has elicited support and opposition from predicable quarters. Skrzycki quotes William Kovacs of the U.S. Chamber of Commerce as saying it is "the most serious attempts by the executive branch to control the regulation mills of the hundreds of federal agencies.'' McKinnon quotes Gary Bass, executive director of anti-OMB advocacy group OMB Watch, as saying that the new procedures were "[b]ad, bad, bad." According to McKinnon, Bass "predicted they would hamper the government's ability to respond to regulatory crises -- such as the recent E. coli outbreaks on fresh vegetables." According to Skrzycki, Columbia University administrative law professor Peter Strauss says the new action usurps the authority Congress delegated to Executive branch agencies.
All these comments seem overstated. For example, it isn't clear what practical effect OMB's new authority to review guidance will actually have. The staff is limited in size and it cannot endure a major increase in workload. For this reason alone it will have to exercise its new authority very selectively. For this to be as big an event as Kovacs suggests, the OMB regulatory review staff would have to be roughly doubled in size.
The concerns raised by Bass appear as overwrought as Kovacs' are overly enthusiastic. OMB does not now exercise its oversight authority on emergency regulations, so there is no credible basis for predicting that it will do so with respect to emergency guidance. Agencies will be expected to alert OMB in advance to any emergency actions they plan to take irrespective of whether they are classified as rules or guidance. This should arouse no genuine controversy, for it is difficult to seriously argue that the president should be kept in the dark.
As for Strauss' concern about the usurpation of agency prerogatives, section 10 of Executive order 13422 (titled "Preservation of Agency Authority") says:
Nothing in this order shall be construed to impair or otherwise affect the authority vested by law in an agency or the head thereof, including the authority of the Attorney General relating to litigation.
Executive order 13422 likely will have two important effects if it is fully implemented. First, fewer actions that should be promulgated as regulations will be issued as guidance documents. For that reason, there should be fewer controversy guidance documents issued. Second, there should be fewer cases litigated in which a court overturns or vacates an agency guidance that should have been promulgated as a legislative rule.
Executive order 13422 authorizes the OMB staff to police previously inaccessible mouse holes. We will watch to see how much policing actually occurs.
