8.1 Rulemaking process

Administrative agencies play a crucial role in implementing laws through rulemaking. This process allows agencies to create regulations with the force of law, based on authority granted by Congress or the President. Rulemaking enables agencies to interpret statutes, establish procedures, and enforce laws effectively.

The rulemaking process involves various types of rules, including legislative, interpretive, and procedural. Agencies typically use informal notice-and-comment procedures, but may also engage in formal or hybrid rulemaking. Public participation, judicial review, and oversight by Congress and the President help ensure accountability in agency rulemaking.

Rulemaking authority of agencies

• Rulemaking is the process by which administrative agencies create regulations that have the force of law
• Agencies derive their rulemaking authority from statutes passed by Congress and executive orders issued by the President
• Rulemaking allows agencies to implement and enforce laws, interpret statutes, and establish procedures for carrying out their functions

Sources of rulemaking power

Statutory grants from Congress

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• Congress delegates rulemaking authority to agencies through specific statutes
• These statutes define the scope and limits of an agency's rulemaking power
• Agencies must act within the boundaries set by their enabling statutes when promulgating rules
• Statutes may provide broad or narrow grants of rulemaking authority (Clean Air Act, Telecommunications Act)

Presidential executive orders

• The President can direct agencies to engage in rulemaking through executive orders
• Executive orders may instruct agencies to address specific policy issues or implement presidential priorities
• Agencies must comply with executive orders as long as they do not conflict with statutory mandates
• Examples include Executive Order 12866 on regulatory planning and review

Types of agency rules

Legislative rules

• Legislative rules have the force and effect of law and are binding on the public
• They are created through the notice-and-comment rulemaking process or formal rulemaking procedures
• Legislative rules establish new rights, duties, or obligations and can impose penalties for noncompliance
• Examples include EPA regulations on air quality standards and FDA rules on food safety

Interpretive rules

• Interpretive rules clarify or explain existing laws or regulations without creating new legal obligations
• They provide guidance on how an agency interprets and applies its statutory authority
• Interpretive rules are not binding on the public and do not require notice-and-comment procedures
• Examples include agency manuals, policy statements, and interpretive bulletins

Procedural rules

• Procedural rules govern the internal operations and practices of an agency
• They establish the methods, forms, and deadlines for agency proceedings and decision-making
• Procedural rules do not affect substantive rights or impose new obligations on the public
• Examples include rules on filing requirements, hearing procedures, and appeals processes

Informal rulemaking process

Notice and comment rulemaking

• Informal rulemaking, also known as notice-and-comment rulemaking, is the most common method for creating agency rules
• The agency publishes a proposed rule in the Federal Register and invites public comments
• The public has a specified period (usually 30-60 days) to submit written comments on the proposed rule
• The agency must consider all relevant comments and provide a reasoned explanation for its final rule

Publication in Federal Register

• The Federal Register is the official daily publication for rules, proposed rules, and notices of federal agencies
• Agencies must publish their proposed and final rules in the Federal Register to provide public notice
• The publication includes the text of the rule, its effective date, and a statement of its basis and purpose
• The Federal Register is available online and in print for public access

Public participation and input

• Public participation is a key component of the informal rulemaking process
• Interested parties, including individuals, organizations, and industry groups, can submit comments on proposed rules
• Comments may support, oppose, or suggest modifications to the proposed rule
• Agencies must consider all relevant comments and respond to significant issues raised by commenters
• Public input helps ensure that agency rules are well-informed, transparent, and responsive to public concerns

Formal rulemaking process

Trial-type hearings

• Formal rulemaking involves trial-type hearings presided over by an administrative law judge
• Parties to the proceeding have the right to present evidence, cross-examine witnesses, and make oral arguments
• The agency must base its final rule on the record developed during the formal hearing
• Formal rulemaking is less common than informal rulemaking and is typically required by statute

Opportunity for oral presentation

• In formal rulemaking, interested parties have the right to make oral presentations before the agency
• Oral presentations allow parties to explain their positions, respond to questions, and engage in dialogue with the agency
• The administrative law judge may limit the time and scope of oral presentations to ensure a fair and efficient hearing
• Oral presentations are transcribed and become part of the formal rulemaking record

Stricter procedural requirements

• Formal rulemaking involves more stringent procedural requirements than informal rulemaking
• Agencies must follow the Administrative Procedure Act's (APA) formal rulemaking provisions
• These requirements include providing notice of the hearing, allowing for discovery, and issuing subpoenas
• The agency's final rule must be supported by substantial evidence in the formal hearing record
• Formal rulemaking procedures are designed to ensure due process and a thorough examination of the issues

Hybrid rulemaking

Combining formal and informal elements

• Hybrid rulemaking combines elements of both formal and informal rulemaking procedures
• Congress may require hybrid rulemaking through specific statutory provisions
• Hybrid rulemaking may involve a notice-and-comment period followed by a limited oral hearing
• The agency has discretion to determine the extent of formal and informal procedures in hybrid rulemaking
• Hybrid rulemaking seeks to balance the need for public participation with the efficiency of informal procedures

Exceptions to rulemaking procedures

Good cause exemption

• The APA allows agencies to bypass notice-and-comment procedures for good cause
• Good cause exists when following normal rulemaking procedures would be impracticable, unnecessary, or contrary to the public interest
• Agencies must provide a brief statement explaining their reasons for invoking the good cause exemption
• Examples of good cause include emergencies, minor technical corrections, and rules with no substantive impact

Interpretive rules exemption

• Interpretive rules are exempt from the notice-and-comment requirements of informal rulemaking
• Agencies can issue interpretive rules without publishing a proposed rule or soliciting public comments
• This exemption allows agencies to provide timely guidance on the interpretation of existing laws and regulations
• However, interpretive rules must still be published in the Federal Register and are subject to judicial review

Procedural rules exemption

• Procedural rules that govern agency organization, procedure, or practice are exempt from notice-and-comment requirements
• This exemption allows agencies to establish and modify their internal procedures without going through the rulemaking process
• Procedural rules must be published in the Federal Register, but public comments are not required
• Examples include rules on agency filing requirements, meeting procedures, and internal delegations of authority

Judicial review of agency rulemaking

Arbitrary and capricious standard

• The arbitrary and capricious standard is the most common standard of review for agency rulemaking
• Under this standard, courts will uphold an agency rule unless it is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law
• Courts examine whether the agency considered relevant factors, articulated a rational connection between the facts and its decision, and provided a reasoned explanation
• The arbitrary and capricious standard is deferential to agency expertise but requires a reasoned decision-making process

Substantial evidence standard

• The substantial evidence standard applies to agency rules developed through formal rulemaking procedures
• Under this standard, courts will uphold an agency rule if it is supported by substantial evidence in the formal hearing record
• Substantial evidence means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion
• The substantial evidence standard is more rigorous than the arbitrary and capricious standard but still defers to agency expertise

Chevron deference

• Chevron deference is a two-step framework for judicial review of agency interpretations of statutes
• Under Chevron, courts first determine whether Congress has directly spoken to the precise question at issue
• If the statute is clear, courts must give effect to the unambiguous intent of Congress
• If the statute is silent or ambiguous, courts defer to the agency's interpretation if it is based on a permissible construction of the statute
• Chevron deference recognizes the expertise and policy-making role of administrative agencies in interpreting ambiguous statutes

Congressional oversight of rulemaking

Congressional Review Act

• The Congressional Review Act (CRA) allows Congress to review and disapprove agency rules
• Under the CRA, agencies must submit their final rules to Congress and the Government Accountability Office (GAO) before they can take effect
• Congress has 60 legislative days to pass a joint resolution of disapproval, which, if signed by the President, nullifies the rule
• If Congress does not act within the review period, the rule takes effect
• The CRA provides a mechanism for legislative oversight of agency rulemaking

Legislative veto

• The legislative veto was a congressional oversight tool that allowed Congress to invalidate agency rules without presidential approval
• The Supreme Court ruled legislative vetoes unconstitutional in the case of INS v. Chadha (1983)
• The Court held that legislative vetoes violate the Constitution's bicameralism and presentment requirements
• After Chadha, Congress has relied on other oversight mechanisms, such as the Congressional Review Act and appropriations riders, to influence agency rulemaking

Presidential oversight of rulemaking

Executive Order 12866

• Executive Order 12866, issued by President Clinton in 1993, establishes principles and procedures for presidential oversight of agency rulemaking
• The order requires agencies to assess the costs and benefits of significant regulatory actions and choose the approach that maximizes net benefits
• Agencies must submit significant rules to the Office of Information and Regulatory Affairs (OIRA) for review before publication
• The order also requires agencies to develop a Regulatory Plan and Unified Agenda of Federal Regulatory and Deregulatory Actions

Office of Information and Regulatory Affairs (OIRA)

• OIRA is a division of the Office of Management and Budget (OMB) that oversees the implementation of Executive Order 12866
• OIRA reviews significant agency rules to ensure they are consistent with presidential priorities, statutory mandates, and the principles of Executive Order 12866
• OIRA can return rules to agencies for further consideration or suggest modifications to improve their cost-effectiveness
• OIRA also serves as a coordinator for regulatory policy across the executive branch
• OIRA's role in the rulemaking process is controversial, with some arguing that it provides necessary oversight and others claiming that it unduly politicizes agency decision-making

Public participation in rulemaking

Submitting comments

• Public comments are a key way for interested parties to provide input on proposed agency rules
• Individuals, organizations, and industry groups can submit written comments during the notice-and-comment period
• Comments can support, oppose, or suggest modifications to the proposed rule
• Agencies must consider all relevant comments and respond to significant issues raised by commenters
• Well-reasoned and substantive comments can influence the content of the final rule

Attending public hearings

• Some agencies hold public hearings as part of the rulemaking process
• Public hearings provide an opportunity for interested parties to make oral presentations and engage in dialogue with agency officials
• Hearings may be required by statute or held at the agency's discretion
• Attending public hearings allows individuals and groups to directly express their views and concerns about proposed rules
• Hearings also enable agencies to gather additional information and perspectives on the issues

Petitioning for rulemaking

• The APA allows any interested person to petition an agency to issue, amend, or repeal a rule
• Rulemaking petitions must include the proposed rule or the substance of the requested action and the petitioner's interest in the matter
• Agencies must respond to rulemaking petitions within a reasonable time, either by initiating rulemaking proceedings or denying the petition with a brief explanation
• Petitioning for rulemaking allows the public to proactively suggest agency action on specific issues
• Successful rulemaking petitions have led to important regulatory changes in areas such as environmental protection and public health

Economic analysis in rulemaking

Cost-benefit analysis

• Cost-benefit analysis is a tool used to evaluate the economic effects of proposed agency rules
• The analysis compares the anticipated costs and benefits of a rule, both quantitative and qualitative
• Costs may include compliance costs, administrative burdens, and opportunity costs
• Benefits may include improvements in public health, safety, environmental quality, and economic efficiency
• Agencies use cost-benefit analysis to inform their decision-making and ensure that the benefits of a rule justify its costs
• Executive Order 12866 requires agencies to assess the costs and benefits of significant regulatory actions

Regulatory impact analysis

• Regulatory impact analysis is a broader assessment of the effects of proposed agency rules
• The analysis considers not only the costs and benefits but also the rule's impact on small businesses, state and local governments, and other affected parties
• Agencies must prepare a regulatory impact analysis for rules that have a significant economic impact or raise novel policy issues
• The analysis must include a description of the need for the rule, alternative approaches considered, and the anticipated costs and benefits
• Regulatory impact analyses are subject to public comment and review by OIRA
• The purpose of regulatory impact analysis is to ensure that agencies carefully consider the consequences of their rules and choose the most effective and least burdensome approach

Negotiated rulemaking

Collaborative process

• Negotiated rulemaking is a collaborative process in which an agency works with interested parties to develop a proposed rule
• The agency convenes a committee representing various stakeholders, such as industry groups, consumer advocates, and environmental organizations
• The committee meets to discuss the issues, share information, and seek consensus on the content of the proposed rule
• The agency participates in the negotiations and retains ultimate decision-making authority
• If the committee reaches consensus, the agency can use the agreement as the basis for its proposed rule

Consensus-building among stakeholders

• The goal of negotiated rulemaking is to build consensus among stakeholders on the substance of a proposed rule
• Consensus-building involves open communication, mutual understanding, and a willingness to compromise
• By engaging stakeholders early in the process, negotiated rulemaking can reduce adversarial tensions and improve the quality of the final rule
• Successful negotiated rulemaking requires skilled facilitation, well-defined issues, and a commitment to the process by all parties
• Negotiated rulemaking can lead to more creative solutions, increased buy-in from affected parties, and reduced litigation over the final rule
• However, negotiated rulemaking can also be time-consuming, resource-intensive, and may not always result in consensus

Retroactivity of agency rules

Presumption against retroactivity

• There is a general presumption against the retroactive application of agency rules
• Retroactive rules are those that attach new legal consequences to events completed before the rule's enactment
• The Supreme Court has held that agencies cannot promulgate retroactive rules absent clear congressional authorization
• The presumption against retroactivity is based on principles of fairness, due process, and the need for predictability in the law
• Agencies must provide a strong justification and statutory basis for any rule that has retroactive effect

Exceptions for procedural rules

• The presumption against retroactivity does not apply to procedural rules that govern agency practice and procedure
• Procedural rules can be applied retroactively because they do not change substantive rights or impose new obligations
• Examples of procedural rules include rules on filing requirements, hearing procedures, and appeals processes
• Agencies have more flexibility to adopt and apply procedural rules retroactively
• However, if a procedural rule has a substantive impact on the rights or interests of affected parties, it may be subject to the presumption against retroactivity

Rulemaking vs adjudication

Prospective vs retroactive effect

• Rulemaking and adjudication are two distinct methods by which agencies can make policy and interpret the law
• Rulemaking is a prospective process that establishes general standards and requirements for future conduct
• Agency rules have prospective effect and apply to all parties within their scope, not just the parties to a particular case
• Adjudication, on the other hand, involves the retroactive application of law to specific facts and parties
• Agency orders issued through adjudication have retroactive effect and bind only the parties to the proceeding
• The prospective nature of rulemaking provides greater notice and predictability, while the retroactive nature of adjudication allows for individualized decision-making

Policymaking through rules vs orders

• Agencies can choose to make policy through either rulemaking or adjudication
• Rulemaking allows agencies to establish general policies and standards that apply broadly to all regulated parties
• Rules provide clear guidance and promote consistency in agency decision-making
• Adjudication allows agencies to develop policy incrementally through case-by-case decisions
• Orders issued through adjudication can adapt policy to specific circumstances and provide more flexibility
• The choice between rulemaking and adjudication depends on factors such as the nature of the issue, the need for flexibility, and the agency's statutory authority
• Some agencies are required by statute to use rulemaking for certain types of policy decisions, while others have more discretion to choose between rulemaking and adjudication