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Tuesday, November 27, 2012

Independent Regulatory Agencies, Cost- Benefit Analysis, and Presidential Review of Regulations

Maeve P. Carey
Analyst in Government Organization and Management

Michelle D. Christensen
Analyst in Government Organization and Management

When issuing regulations that have the full force and effect of law, agencies are required to follow certain procedures. The Administrative Procedure Act (APA) of 1946 set up the basic framework for rulemaking: agencies are required to publish a notice of rulemaking in the Federal Register, take comments on the proposed rule, and publish a final rule in the Federal Register. Since the passage of the APA, additional procedures have been established in various statutes, executive orders, and guidance documents.

One potential change to the rulemaking process that has been discussed over the past three decades and proposed in legislation in the 112th Congress is the extension of the requirements of Executive Order (E.O.) 12866 to the independent regulatory agencies, also known as independent regulatory commissions (hereafter referred to as IRCs). E.O. 12866 contains two major requirements: first, it requires that agencies complete cost-benefit analysis (CBA) of “economically significant” rules, considering the potential costs, benefits, and feasible alternatives to proposed and final rules. Second, the order requires centralized review of “significant” rules in the Office of Management and Budget’s (OMB’s) Office of Information and Regulatory Affairs (OIRA). Historically, the IRCs have been exempted from requirements for CBA and centralized review. Senator Rob Portman introduced a bill in the 112th Congress, S. 3468, that would authorize the President to extend to the IRCs, by executive order, E.O. 12866’s requirements for CBA and OIRA review. If the requirements of E.O. 12866 were extended to the IRCs, there could be significant implications for those agencies. 

Potential Extension of CBA Requirements
. Proponents of extending the requirements argue that subjecting the IRCs to CBA requirements and OIRA review could improve the quality of regulations issued by those agencies. On the other hand, extending CBA requirements and OIRA review to the IRCs could grant OIRA (and by extension, the President) the potential authority to influence or delay rulemaking proceedings, and such a requirement could potentially decrease the independence of the IRCs. The IRCs with fewer regulatory responsibilities that issue relatively fewer “significant” rules each year may find the additional requirements of S. 3468 minimally burdensome, even if their current cost-benefit practices are not as rigorous as what would be required under E.O. 12866. Conversely, the IRCs with greater regulatory responsibilities or the IRCs with recently expanded regulatory responsibilities may find the additional CBA requirements more burdensome. It is also possible that some IRCs may not have the staff with the technical expertise necessary to conduct cost-benefit analysis that is more extensive than their current requirements. 

Potential Extension of OIRA Review
. The second major element of E.O. 12866 is OIRA review of “significant” regulations. During the review process, OIRA examines each regulation to ensure that the agency followed the principles and procedures outlined in E.O. 12866, including the applicable requirements for conducting CBA, and that the regulation is consistent with the policy preferences of the President. Numerous individuals, including former OIRA officials and several administrative law scholars, have spoken in support of potential OIRA review of regulations issued by IRCs. Much of this support for OIRA review relies on the underlying premise that increased presidential control, through OIRA review, of rulemaking could improve both the rulemaking process within agencies and the quality of the regulations themselves. On the other hand, some have expressed hesitation or opposition to the extension of OIRA review to the IRCs, suggesting that the independence of the IRCs could be compromised and that OIRA review of IRCs’ rules could lead to delay.

Date of Report: November 16, 2012
Number of Pages: 27
Order Number: R42821
Price: $29.95

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