Regulatory Negotiations: A Practical Perspective

Ellen Siegler

Ellen Siegler is a Senior Attorney in the Office of General Counsel of the American Petroleum Institute. Ms. Siegler was one of API's representatives in the reg-neg developing Clean Air Act regulations to reduce equipment leaks from chemical processes. The author thanks Dr. Janet Meyer and Ms. Deborah Dalton of the Environmental Protection Agency for providing EPA's perspective on issues discussed in this Dialogue. The views expressed in this Dialogue are solely those of the author. They are not necessarily shared by API, its members, or any other person.

[22 ELR 10647]

You have just received a telephone call from an U.S. Environmental Protection Agency (EPA) official asking whether your company or trade association is interested in participating in a regulatory negotiation to develop a new or amended regulation that the Agency will issue under an environmental statute. Or your client asks your advice on whether to participate. What will you say? It is increasingly likely that you may receive such a call.

Regulatory negotiation (reg-neg) is a process that developed years ago but has been slow to gain acceptance. Reg-neg is a negotiation in which representatives of a governmental agency and representatives of various interests affected by a regulatory initiative attempt to develop the initiative together in an open forum. In less objective terms, reg-neg may be viewed as one of the following: (1) a process by which representatives of different points of view try to reach a balanced resolution of complex regulatory matters; (2) a process in which a group of people, most of whom do not talk to each other routinely, engage in a seemingly endless effort to wear each other down to achieve self-interests of their constituents; or (3) a messy, time-consuming process that can produce an outcome that all interests can live with.

While an interested party might enter into a reg-neg with a preconceived notion that one of these processes will prevail, it is likely that, during and after participation, the party's perspective will change with the ebbs and flows that are inevitable in negotiating mechanisms. Ideally, an agreement is reached that results in a reasonable regulation that is less likely to be the subject of a lengthy comment process or a legal challenge than a regulation that is developed through the normal notice-and-comment rulemaking process.

Recently, reg-neg has gained popularity, especially within EPA. William Rosenberg, EPA's Assistant Administrator for Air and Radiation, has expressed a desire to make greater use of the process in the future. EPA's Office of Air and Radiation has conducted a number of reg-negs over the last several years. For example, in 1986 participants successfully concluded a reg-neg on new source performance standards under the Clean Air Act for residential wood heaters.¹ Another reg-neg that began in September 1989, is expected to result in a regulation pursuant to Clean Air Act § 112(d), to reduce emissions of hazardous air pollutants from equipment leaks at chemical facilities (equipment leaks reg-neg). Although the equipment leaks reg-neg is still technically in progress, agreement on the regulatory language has been reached.² A reg-neg on implementation of the reformulated gasoline, antidumping, and oxygenated gasoline provisions of Clean Air Act § 211(k) and (m) (fuels reg-neg) resulted in an agreement on the principles of a regulation in August 1991.³ And a reg-neg to develop regulations, pursuant to Clean Air Act § 112, restricting coke oven emissions from by-product and nonrecovery coke oven batteries is currently in progress.⁴

These reg-negs, in part, have led parties to greater confidence in the process and a greater willingness to participate in reg-negs. In addition, the Administrative Conference of the United States has promoted the reg-neg process for many years.⁵ Finally, Congress gave momentum to the acceptance of reg-negs by enacting the Negotiated Rulemaking Act of 1990, discussed below.

Published articles on reg-negs have typically been brief theoretical descriptions of the process or scholarly coverage addressing such issues as whether the reg-neg process produces regulations that are in the public interest and meet statutory requirements, and whether the courts should give greater deference to regulations resulting from reg-negs differently than other regulations.⁶

This Dialogue is intended to give readers a practical perspective on the reg-neg process and assumes that the reg-neg process will increasingly be used in the future — especially by EPA. First, the Dialogue briefly describes the reg-neg process. Next, it identifies matters to consider in evaluating whether your client or organization should participate in a reg-neg. Finally, the Dialogue describes what to expect, and recommends ways to most effectively participate if your organization or client decides to participate.

Reg-neg Fundamentals

How Does a Reg-neg Begin?

There is no set pattern for initiating a reg-neg. The decision to convene a reg-neg to enhance promulgation of an upcoming regulation may originate with EPA, or with one of the parties interested in the regulation. If a party you represent is likely to be directly affected by the regulation under consideration, your client may first receive an informal inquiry regarding tentative interest in the process. The contact may be made by an agency official or by a facilitator who may assist in conducting the reg-neg if it proceeds. All entities believed to have a direct interest in the regulation will be contacted to determine whether those likely to participate represent a balanced mix of viewpoints. If the subject [22 ELR 10648] of the reg-neg involves environmental issues under EPA's jurisdiction, EPA or the facilitator probably will call representatives of the regulated community, states, environmental groups, and other companies and trade associations who might have an interest in the issues.⁷

If sufficient interest is shown, EPA may publish notice in the Federal Register of one or more public meetings to further explore whether it would be fruitful to conduct a reg-neg and, if so, what specific issues the reg-neg should address. If the preliminary meetings reveal that enough entities who represent a balance of the major interests potentially affected by the regulation to be negotiated are sufficiently interested, EPA will publish another Federal Register notice announcing its intent to begin a reg-neg and invite the public to participate.

Statutory Framework

Reg-neg procedures must comply with the requirements of the Federal Advisory Committee Act⁸ and the Negotiated Rulemaking Act.⁹ Further, the procedural requirements of the statute under which the regulation is to be promulgated and the relevant portions of the Administrative Procedure Act¹⁰ must be satisfied.

When enacted, the Negotiated Rulemaking Act did not represent a new grant of authority to the agencies. Rather, it encouraged — but did not require — the use of reg-negs, and it established specific procedures for conducting reg-negs by federal agencies.

Most of the procedures established in the Act are those that EPA previously followed. The Act requires a determination that negotiated rulemaking is in the public interest¹¹ and requires EPA to publish a notice in the Federal Register announcing the formation of a committee and allowing members of the public to apply for membership.¹² The Act specifies that representatives of a federal agency in a reg-neg "shall participate … with the same rights and responsibilities as other members of the committee…."¹³

Among other things, the Negotiated Rulemaking Act provides that an agency may "pay for a [negotiating committee] member's reasonable travel and per diem expenses, expenses to obtain technical assistance, and a reasonable rate of compensation" under prescribed circumstances.¹⁴ Moreover, the Act makes it clear that an agency's decision to establish or terminate a negotiating rulemaking committee is not subject to judicial review.¹⁵

The Negotiated Rulemaking Act also resolves a question that has been debated by several commentators: whether courts reviewing a regulation that was the product of negotiated rulemaking should give greater deference to the validity of that rule on review.¹⁶ The Act provides:

A rule which is the product of negotiated rulemaking and is subject to judicial review shall not be accorded any greater deference by a court than a rule which is the product of other rulemaking procedures.¹⁷

How Are Reg-negs Conducted?

Once a reg-neg has begun, it is conducted in formal meetings open to the public, in which the participants sit as a panel and a facilitator presides over the sessions. The federal agency involved is one participant, just like the other parties. The Federal Advisory Committee Act requires that these formal sessions be open to the public and that minutes be taken.¹⁸ Although members of the public who are not formal participants are often encouraged to ask questions or provide pertinent data and viewpoints, this may not always be the case. However, Federal Advisory Committee Act § 10(a)(3) requires that, with four exceptions prescribed by the administrator of General Services, interested persons must be given some opportunity to express their views.

During the formal sessions, the facilitator encourages participants to brainstorm on pertinent issues, and to suggest ideas to the rest of the group even if the ideas have not been thought through completely, documented carefully, or cleared with clients. The idea is to create an atmosphere in which ideas flow freely.

Much of the work of a reg-neg takes place outside of the formal sessions. Generally, coalitions are formed, and members of these coalitions communicate before, after, and at breaks in the negotiating sessions. Coalitions may consist of representatives of affected industries, environmental groups, states, or others.

What Are the Ground Rules for a Particular Reg-neg?

Reg-neg ground rules are organizational protocols to which the participants agree during the first reg-neg session after any preliminary sessions for soliciting general interest and scoping of issues. Although the facilitator may provide copies of protocols that have been used in other reg-negs as useful examples, the participants adopt rules that will govern their reg-neg. These rules are procedural and encompass such issues as how often, and where, reg-neg meetings will occur; which documents used in the reg-neg will be placed in a public record or records; how it will be [22 ELR 10649] determined whether a consensus has been reached (i.e., will agreement of every participant be required, or will agreement of all interests represented be sufficient?); and when negotiations will be concluded.

The Dynamics of Reg-neg Sessions

Compared to normal notice-and-comment rulemaking, reg-neg is a messy process. The reasons for this are many. First, most participants in a reg-neg have never participated in one before and do not know either the ground rules or how to conduct the reg-neg most effectively on behalf of their constituents. Second, it is a process in which parties with great cultural differences not only must present their views, but must be prepared to defend them against a perceived enemy. A third difficulty is that the reg-negs are unpredictable.

At the inception of a reg-neg, it is not always clear exactly what issues are amenable to reg-neg solutions. Therefore, initial concepts as to what issues will be addressed and what general approach should be taken will need to be reevaluated during the process and, possibly, replaced by other issues and approaches. Moreover, at the outset some participants may not have identified their key interests and concerns. No one knows at the outset what the end result will look like or how it will be achieved. A reg-neg is a negotiation that will fluctuate between periods of harmony and cacophony, simplicity and complexity, and relative organization and disorganization. It is difficult to say at the beginning, and sometimes well into the process, whether the negotiations will progress to completion.

Objective evaluations of the parties' interests are an important factor in whether the reg-neg process will reach completion. If the parties keep their overall objectives in mind and feel that they can achieve many of them, even though they recognize that compromise on other issues will be necessary, this will help sustain the effort.¹⁹ In other words, focus on the package as a whole should be maintained. Also, participants must be open and willing to identify the real issues and to look for creative approaches to resolving these issues. Other, less objective factors also can be influential. For example, if the negotiations have continued for a long time, participants may feel a personal stake in reaching an agreement. They may begin to fear that they will be unable to justify — to themselves, to the home office, or to the client — the expenditure of considerable amounts of time, energy, and money that have been devoted to the process unless there is a resulting product.

What Happens Outside of the Negotiating Room?

The short answer is: a great deal. Before and after the formal negotiating sessions, and during breaks in the negotiations, the participants meet with their constituents and allies to collect data and prepare position papers, proposals, or counterproposals. In the days or weeks between sessions, the participants whose interests are allied prepare, exchange, and revise written documents in an effort to provide a united front during the next session. During these periods, some participants — particularly trade associations — must spend time and effort getting the necessary approvals from constituents because multiple oversight committees may be involved and members' views may vary widely.

How Does a Reg-neg End?

One way a reg-neg can end is if negotiations reach an impasse and the participants agree that it is unlikely that the impasse will be broken. Another way a reg-neg can end is if one interest or, in some cases, a single participant decides to withdraw.

Another conclusion is for the reg-neg to be a success. Successful conclusions can take one of several forms, which generally will be incorporated into an agreement signed by the parties at the end of the process. The end-point may be an agreement that the language of a regulation and/or preamble to be incorporated into a proposed regulation is agreeable. In the equipment leaks reg-neg, for example, final agreement will not be reached until the preamble is satisfactory to all participants. Agreement on the regulatory language was reached in 1991, and the parties entered into an interim agreement.²⁰ Or it may be that a regulatory framework or set of principles will be the end product, as occurred in the fuels reg-neg.

The Agreement

The typical agreement ending a successful reg-neg²¹ will involve the signatories making commitments to each other. For example, EPA may agree to propose a regulation consistent with an agreement in exchange for the remaining participants' agreement not to submit adverse comments on the proposal. Also, the agreement may state that, if EPA promulgates a final rule consistent with the agreement, the other parties will not bring legal challenges to the rule.²²

Only those entities whose representatives have signed the agreement are bound by the agreement. If a trade association participates on behalf of its members and only the association signs the agreement, then only the trade association is bound. The association's members may submit adverse comments and challenge the final rule.²³ Similarly, an environmental group that has participated and signed the agreement binds only itself, not other environmental groups whose interests may be the same or related. The expectation is that a trade association or an environmental group will represent adequately the interests of its members or constituents. Thus, even though the association and group members or constituents maintain their individual rights, they should have little reason to challenge the outcome if their organizations have been effective.

If members or constituents wish their organization to [22 ELR 10650] retain bargaining power for future reg-negs or other negotiations, they may choose not to challenge an outcome that they do not believe is completely satisfactory, even though they retain the rights to do so. If EPA perceives that a trade association or other group cannot be relied on to represent the interests of its members or constituents in a way that minimizes comments and litigation, the Agency or other parties may decide not to participate with that group in a future reg-neg or other negotiation.²⁴ Similarly, a reg-neg participant's efforts outside the reg-neg process to effect changes in elements contained in the reg-neg agreement, such as by legislation or through the Executive Branch, are likely to be viewed as acts of bad faith, even if the actions are not necessarily precluded by the language of the agreement.²⁵

How to Decide Whether to Participate in a Reg-neg

Participating in a reg-neg is resource-intensive, time-consuming, and stressful. Thus, interested parties need to determine whether there are likely to be sufficient offsetting benefits to make participation worthwhile.

Identifying the Available Options

The first step in deciding whether to participate in a reg-neg is to identify the range of options that are available to your client or organizations.²⁶ The most obvious option to reg-neg participation is waiting for EPA to issue a proposed rule and then commenting, thus reserving the right to bring a legal challenge if the final rule is unacceptable. Other options that may be available include meeting with EPA officials and presenting your views prior to the Agency's proposal of a rule, and participating in focus groups that EPA may convene to solicit opposing views, in an informal setting, before proposal. These options are not necessarily mutually exclusive.

Identifying whether some of these options are available may require discussing them with EPA, and will vary depending on how important the Agency believes the issues are, whether sufficient time is available, and other factors. For example, when EPA solicited interest in the fuels reg-neg, it made it clear to potential participants that the officials who were responsible for developing the regulation within 12 months of enactment of the Clean Air Act amendments of 1990²⁷ would not have time to meet privately with every organization having an interest in the issues involved. This may have induced some entities to participate in the reg-neg.

Evaluating Reg-neg Against Other Options

After identifying the available options, it is useful to analyze them by asking several questions. If you choose an option other than reg-neg: (1) Is EPA more, or less, likely to propose a regulation favorable to your organization or client's position than if you participated in a reg-neg? (2) If EPA's response is likely to be favorable to your organization or client's position, is it likely to be challenged by environmental groups or others whose interests are adverse to your constituent's? (3) And, if a challenge is likely, will EPA be able to support its decision well enough to withstand judicial review? If the answers to these questions lead to the conclusion that a favorable regulation will be proposed, made final (in the absence of, or despite, adverse comments), and probably will withstand legal challenge in the event that litigation occurs, there may be little to be gained by participating in a reg-neg. However, if there is considerable uncertainty, give further consideration to participating in a reg-neg.

First, attempt to determine whether there is a reasonable expectation that a reg-neg will be successful. Is there sufficient information for resolution of the issues? Is there a manageable group of parties who have an interest in negotiating and are likely to negotiate in good faith? Is there a statutory or other deadline that will help to produce a successful result? These are the same questions that EPA will be asking itself before initiating a reg-neg; but your conclusion may be different from EPA's.²⁸ If indications to these preliminary matters point to a reasonable probability of success, consider the aspects of reg-negs described below to help you decide whether the reg-neg is right for your client or organization.

Possibility of a More Workable, Reasonable Regulation. The nature of the reg-neg process, in comparison with the usual notice-and-comment process, can lead to a more workable regulation. In the context of a series of thoughtful discussions among interested parties and EPA officials responsible for developing a regulation at the pre- proposal stage, EPA gains a better understanding of the practical, legal, and policy issues involved in a regulation before the Agency's positions have hardened. This should lead to a better rule and, in EPA's view, is likely to enhance voluntary compliance.²⁹

In developing a regulation through the usual process, EPA may not be aware of aspects of a regulation that will present serious practical problems and, thus, may overlook them. If they are identified in comments, it may be more difficult to address them than it would be prior to proposal. These issues also may be amenable to reg-neg solutions [22 ELR 10651] because parties whose general interests are adverse to industry's interests may not care how such issues are resolved or may be willing to trade them for favorable resolution of other issues. Finally, there is the possibility that reg-neg discussions may reveal that parties may have misunderstood the issue or each other's positions and, accordingly, that no real disagreement exists between them.

An example of an issue in the fuels reg-neg that was resolved in this manner was the inclusion of an option for compliance with fuel specifications by averaging, rather than by gallon-for-gallon compliance.³⁰ At first, other participants did not appear to realize that this was a significant issue for the petroleum industry. After the importance of the issues was understood, the other parties agreed to an averaging option in exchange for other provisions.

A reg-neg also can produce a more reasonable result, even if no less stringent, than the results from the usual notice-and-comment process. This arises from the exchange of views among the parties. Participants are forced to deal directly with others' interests and points of view, respond to questions, and support others' views. This latter feature may be viewed as both an advantage and a disadvantage of the process. If your organization or client's position will not stand up well to skeptical probing by other participants, you may not achieve as much through a reg-neg as you might through a more traditional process.

Opportunity for Creative Solutions. Another advantage of the reg-neg process is its brainstorming aspect. A variety of conceptual approaches to an issue can be explored before proposal, because participants may initially present different approaches and the ideas may build on themselves and evolve during the negotiations. This generally does not occur in the usual notice-and-comment process. Also, it is less likely to occur in a focus group setting. In focus groups, participants seem to talk to EPA representatives, not to each other.

The opportunity for creative solutions can be valuable to all participants. In some situations, EPAmay feel that it does not have sufficient information or understanding of the relevant issues to formulate a regulatory initiative, or may believe that past approaches have not been successful. Thus, the Agency may wish to search for innovative ideas. Similarly, industry, environmental groups, or states may feel that new technical, policy, or legislative developments necessitate the replacement of old approaches.

These are some of the reasons EPA decided to initiate a reg-neg for equipment leaks. EPA believed that prior approaches — leak detection and repair alone — did not achieve optimal emissions reductions, nor did they provide industry with sufficient flexibility.³¹ An example of a creative solution to a specific issue that emerged during the equipment leaks reg-neg was the concept of the quality improvement program. The negotiating committee wrestled with what would happen to a facility that had been unable to achieve the benchmark two-percent leaking valve level at the 500 parts per million (ppm) leak definition once that benchmark becomes applicable. One solution was to require that leak detection and repair (LDAR), which is the fundamental approach to reducing equipment leaks under this and other regulations, would have to be conducted every month.

Industry representatives believed that it would be virtually impossible to perform monthly LDAR and attempted to develop another solution based on actual plant experience. After discussing the issue from several perspectives, including what a plant technical expert would do if presented with this problem, it was decided to offer a facility in that situation a choice between doing monthly LDAR and embarking on a quality improvement program. A quality improvement program would consist of an analysis of the technical reasons for failure to achieve the benchmark levels and a program of maintenance or equipment upgrades designed to improve performance to the benchmark level.³² This framework provided incentives for emission reduction and continuous improvement.

Increased Certainty of the Outcome. A strong incentive for EPA to conduct a reg-neg is the hope that the process will produce a regulation that will proceed more quickly from proposal to promulgation, and that will not be tied up in litigation after it is promulgated. Other benefits to EPA are that the resulting rule will be more practical, while still meeting environmental goals and statutory requirements. Moreover, the rule will be less likely to require correction or amendment after it is promulgated. These also are advantages for industry, environmental, and state participants, because they assist in planning for future requirements and offer the opportunity to move to other issues.

There is a price to pay for the increased certainty that reg-neg parties expect to achieve, however. It is often difficult, from both industry and environmental viewpoints, to relinquish the right to submit adverse comments and legally challenge the final rule when the proposed and final rules are consistent with the agreement. But, since adverse parties also relinquish rights, this disadvantage has substantial offsetting benefits. Moreover, the outcome of a reg-neg is never completely certain, even if it culminates in an agreement that is honored by all participants. First, comments by persons other than the reg-neg participants can influence the shape of the final rule. Thus, the final rule may not be consistent with the negotiated agreement. To the extent that this is true, the parties to the reg-neg retain the right to bring legal challenges. Second, organizations that participated in the reg-neg will relinquish the right to comment and to litigate if the final rule is consistent with the agreement. However, as noted above, members of trade associations generally do not relinquish these rights, nor do others, such as environmental groups that did not actually participate in the reg-neg.

Resource Demands. A major disadvantage of the reg-neg process is that it can be extremely resource-intensive and stressful. Creative solutions to complex problems do not come easily to a group composed of representatives of diverse viewpoints. For each moment of inspiration, there are countless moments of turmoil and tedium. This is reflected in the length of time it takes to complete a reg-neg. For example, the first negotiating session of the equipment leaks reg-neg was held in September 1989. Agreement on regulatory language was not announced until 18 months later, and agreement on the preamble language has yet to be achieved. In the interim, there were two-day meetings [22 ELR 10652] approximately every month, with subcommittee meetings to address critical issues. Aside from the meetings, a considerable amount of time was spent collecting data, building consensus positions, and drafting proposals and counterproposals for subsequent meetings.

These resource demands can be particularly acute for environmental groups, companies, or associations without large staffs or adequate funds. Such entities must weigh carefully whether the issues involved are significant enough to warrant the expenditure of limited resources. Once one agrees to be a participant, it is difficult to bow out due to other priorities or because of a lack of resources.³³

Evaluating the resource demands of reg-negs, however, is not complete without considering the resource demands of pursuing other options. While reg-negs require substantial up-front resources, preparing comments and, if necessary, engaging in litigation after a rule is promulgated may be equally resource-intensive, even though expenditures would occur over a longer period of time. And if your company or organization conducts a reg-neg with in-house personnel, rather than engaging outside counsel to prepare comments or to litigate under one of the other options, there might be overall cost savings in choosing a reg-neg. These potential savings may be eliminated, however, if a reg-neg is followed by significant adverse comments and substantial changes in the final rule. In such a case, the ultimate costs may include litigation expenses as well as the expenses consumed by the reg-neg.

There are ways to reduce the resource demands of a reg-neg in appropriate situations. One is for the reg-neg participants to limit the duration of the reg-neg and to adhere to that limit. Another way to reduce the resource demands is to restrict the issues to be negotiated. A third approach is to limit the degree to which consensus must be reached. If the number of issues is great and agreement on every word in the regulation and preamble is necessary, the upfront resource demands obviously will be great. There may be drawbacks to such limitations, however. The reg-neg may end earlier than expected, with greater efforts required afterward. If agreement is limited to principles — as was true in the fuels reg-neg — there may be a long road between reg-neg agreement and a final rule. As EPA has attempted to implement the fuels agreement, controversial issues have emerged that were not foreseen during the reg-neg. As a result, a final rule is not likely until the end of 1992, and the parties have remained actively at work on the issues.

[] The Balance of Power May Shift. In a normal notice-and-comment rulemaking, industry participants generally outnumber environmentalists by a wide margin. Industry interests are also likely to be better funded. Although a regulatory agency does not let a head or page count determine the outcome of an issue, industry may feel that there is strength in numbers.

However, environmental groups may have greater power in the reg-neg process. It is especially difficult for consensus organizations, such as trade associations, to participate effectively in reg-negs. Often, elaborate and cumbersome processes and limitations on the authority of the formal representatives reduce maneuverability and flexibility. In contrast, although environmental participants may represent large constituencies and report on a reg-neg's progress to their own and other environmental groups, their representatives in reg-negs do not have the same obligation to consult frequently with constituents during the course of negotiations. Another advantage for environmental groups is that they have the opportunity to gain expertise in issues more quickly than they otherwise could by listening to EPA and industry participants, and by reviewing documents the other parties prepare for the negotiations. Finally, some environmental representatives have participated in a number of reg-negs, and thus, have developed considerable expertise in these negotiations. This gives them an advantage over most industry or state participants, who have not had the opportunity to develop this expertise.

Deborah Dalton of EPA's Office of Regulatory Management and Evaluation, who oversees EPA reg-negs, agrees that "some environmental groups may have greater influence in a reg-neg than they do in a normal rulemaking process, and EPA views reg-negs as a way of leveling the playing field."³⁴

[] Potential Long-term Effects of Participation in a Reg-neg. Participation in a reg-neg can affect long-term relationships with other parties. If the reg-neg results in agreement and is considered successful, it is likely that the respect participants gain for one another can produce benefits in future rulemakings or issues in which some of the same parties will have interests. Even an unsuccessful reg-neg can improve relationships between or among participants. Of course, if the reg-neg is not successful, or if negotiations have been acrimonious, the opposite can happen. Even relationships between participants whose interests are similar can suffer erosion. Further, if an organization is responsible for the collapse of the reg-neg by withdrawing in the midst of the process, there may well be adverse consequences in future endeavors. Similarly, an organization or client may decide to participate in a reg-neg partly because EPA or other parties have exerted pressure to participate, and the fear that refusal to do so may foster ill will with the agency, other parties, or the public.

[] The Need to Protect Your Interests. In some situations, the reg-neg will not proceed without your organization or client's participation. In others, however, your organization or client's participation may not be considered essential, and the reg-neg will proceed without you. If the latter situation exists, it may be wise to participate, particularly if it is likely that an agreement reached among other parties will have an impact — even indirect — on your group. For example, the equipment leaks regulation³⁵ to be proposed pursuant to the recent equipment leaks reg-neg is directed principally at the synthetic chemical industry. However, the regulation was among the first regulations to be proposed pursuant to § 112(d) of the amended Clean Air Act, and equipment leaks in the refining industry will be the subject of future § 112(d) regulations. Thus, the American Petroleum Institute (API) expected that the synthetic chemical equipment leaks regulation would establish precedents for the [22 ELR 10653] subsequent regulation of refineries. Accordingly, API decided to participate in that negotiation to ensure that the views of its members would be considered before a regulatory precedent was established that might not be acceptable to refiners.

How to Conduct a Reg-neg Effectively

If your organization has decided to participate in a reg-neg, you can make the most of the experience with the proper approach. A few suggestions are presented below.

Have Reasonable Expectations

It is not reasonable to enter into a reg-neg expecting a one-sided outcome. Expect the other participants to be knowledgeable about the issues, to a greater or lesser extent, and to be skeptical of many of the positions you will advance, as you will be of theirs. In all probability, if the reg-neg is concluded successfully, the eventual rule will be more workable than it would have been otherwise. However, it probably will not be significantly more or less stringent than a regulation that EPA would have issued on its own.

For example, the equipment leaks regulation that EPA expects to propose is stringent because it seeks a benchmark level of control that will be tough for many chemical companies to achieve. It defines a "leak" at a low level (500 ppm for valves), and a low benchmark leak rate (two percent for valves). This level of stringency was satisfactory to EPA, the Natural Resources Defense Council, and the state participants. In fact, it may be more stringent than EPA expected at the outset of the negotiations. However, it is workable from industry's standpoint because these levels, by themselves, are not enforceable. Rather, if a facility does not achieve them, it may achieve compliance either by increasing the frequency of its monitoring or by developing and implementing a program designed to achieve these levels.

Similarly, in the fuels reg-neg, industry was able to obtain the right to use a simple model to certify appropriate fuel content for the first two years of the program. This model considers only three parameters and provides certainty, ease of implementation, and flexibility that might not otherwise have been obtained.³⁶

Other aspects of workability that can be important to industry are recordkeeping and reporting requirements, and timetables for achieving compliance. It may be that EPA, states, and environmental representatives will be willing to compromise on these issues in order to obtain a regulation that they believe is relatively stringent. For example, with respect to timing, the two- percent leak rate at 500 ppm described above in the equipment leaks rule will apply only after a phase-in period, during which the control methods that many chemical plants now employ will be gradually tightened.³⁷

Even if negotiations break down before an agreement is reached, the reg-neg can be a qualified success. You may have been able to persuade EPA — if not the states and environmentalists — that some of your ideas are worth pursuing. They may find their way into EPA's proposal after the breakdown of negotiations.

Appoint an Effective Negotiating Team and Give It the Authority It Needs

Your client or group generally will have one representative sitting at the negotiating table. Other members of the negotiating team may be present during negotiations as observers and may participate in caucuses. Effective participation during a reg-neg will involve the efforts of these persons, and possibly others who will develop and review proposals between negotiating sessions.

Negotiating skills, technical knowledge, and credibility are necessary for effective participation. Reg-negs are not technical symposia — they are negotiations. Thus, an attorney or other experienced negotiator can be effective. However, technical presentations are most often likely to be accepted by other parties if they are delivered by a technical expert with plant-level experience, rather than an attorney. The formal representative can be an attorney or other experienced negotiator with a technical adviser who sits close by, or in some cases a technical expert with an attorney nearby. Or you may decide that two persons should share the responsibility of being the official representative by taking turns, depending on what types of issues are under discussion, or simply by placing two people at the table. There are no fixed rules. An effective representative should be knowledgeable, articulate, assertive (but not overbearing), patient, and able to keep his or her organization or client's main objectives in mind in the midst of distractions and the multitude of issues that may arise during the reg-neg process.

To be an effective negotiator on behalf of a trade association or other organization representing a broad spectrum of viewpoints, it is essential that one possess considerable consensus-building skills. Even if one is successful inside the negotiating room, the value of what has been accomplished there may be lost if the negotiator is unable to convince the organization's members that the compromises made during the negotiating sessions were worthwhile. One person who assisted API on behalf of a member company in the equipment leaks negotiation observed:

It is hard for member companies to understand the interplay of forces that occurs during the negotiations. Conveyinga sense of this to the members is one of the most challenging aspects of the negotiator's role.³⁸

Negotiators cannot be effective if they must constantly seek authorization from clients or constituents during the negotiations. Thus, it is well worthwhile to streamline internal approval processes to the greatest extent possible, and to give the negotiating representative the authority to make quick preliminary decisions. In a reg-neg, all parties understand that no real agreement can be reached until all participants obtain the approvals of their constituents. Proposals placed on the table are not binding and can be withdrawn any time prior to an agreement by the parties. If your clients or constituents understand this, it may be possible for representatives to be less constrained during the negotiations.

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Speak With One Voice

In a reg-neg, there is weakness in numbers. Although members of the public may be invited to express their views during the formal negotiating sessions, it can be detrimental to your group's interests to encourage individual group members to voice theirs. Unless someone has a particular piece of useful data or information to contribute, it is preferable to ask for caucus time to discuss issues than to have individual members of your group express their views during the public discussion.

Weakness in numbers also may be evident if there is insufficient coordination among participants whose overall interests are similar. Groups whose overall interests are similar should inform each other of proposals they are developing and key positions they wish to take before introducing proposals or taking positions during the negotiating sessions. It may not be possible to reach agreement on all issues, but communication and coordination among similarly situated participants can help avoid the possibility that parties with adverse interests will be able to take advantage of divisions between persons or groups whose interests are similar.

Have Relevant Data and Analyses to Present

You are at a serious disadvantage if you cannot bring relevant data and analyses to support your positions. If you develop data, it is essential to review it critically to ensure that it does, in fact, support your position before you present it. If you do not have data, however, all may not be lost. If you have a credible technical representative who can speak from personal experience with respect to a technical issue, you may be able to persuade the other participants that you have a valid point. This is an opportunity that generally does not exist in the normal notice-and-comment process.

Identify Priority Issues and Issues You Can Trade

If a reg-neg has any chance of success, it will involve enough issues so that participants from different perspectives can obtain concessions from others on some issues in exchange for making concessions on other issues. It is of obvious importance to identify your key issues and to bear them in mind as negotiations proceed. It also is useful to review them periodically. But the likelihood of achieving your key objectives will depend, in part, on your ability to identify issues of lesser importance to your group that can be the basis for concessions to other parties. As is evident from examples from the equipment leaks and fuels reg-negs described earlier, industry may be willing to accept additional control requirements in exchange for benefits in flexibility, simplicity, or compliance time.

Conclusion

The reg-neg process has come of age. It is trendy and appears to be here to stay. Reg-negs can achieve reasonable, workable regulations, if participants can withstand the stress and resource demands of a contentious, tedious, and time-consuming process. It is best reserved for situations in which either: (1) your client or organization believes other options are not likely to yield the desired results; or (2) increased certainty of the outcome is especially important. If you become a reg-neg participant, be prepared for a rollercoaster experience. And you probably will not wish to participate in several reg-negs in rapid succession.

1. 51 Fed. Reg. 34672 (1986) (to be codified at 40 C.F.R. pt. 60) (notice of results of rulemaking negotiation Sept. 30, 1986).

2. 56 Fed. Reg. 9315 (1991) (to be codified at 40 C.F.R. ch. I) (notice of agreement on negotiated regulation Mar. 6, 1991).

3. 57 Fed. Reg. 13416 (1992) (to be codified at 40 C.F.R. pt. 80) (Regulation of Fuels and Fuel Additives; Standards for Reformulated and conventional Gasoline, Supplemental Notice of Proposed Rulemaking, Apr. 16, 1992).

4. 57 Fed. Reg. 1730 (Jan. 15, 1992).

5. In 1982 and 1986, the Administrative Conference adopted recommendations intended to encourage the use of reg-negs by federal agencies.

6. One compilation of articles on the reg-neg process is DAVID M. PRITZKER & DEBORAH S. DALTON, NEGOTIATED RULEMAKING SOURCEBOOK (1990).

7. Facilitators are used to encourage prospective participants to express their views and concerns more openly than they might to an EPA representative.

8. 5 U.S.C. app. § 10(a) (1988). For example, prior to EPA's Federal Register notice of the beginning of a reg-neg, the negotiating group must be chartered under § 9(c), and will have been approved by the Office of Management and Budget. Id.

9. 5 U.S.C.A. § 581 (West Supp. 1992).

10. 5 U.S.C. § 500, ELR STAT. ADMIN. PROC. 001 (1988).

11. 5 U.S.C.A. § 583(a) (West Supp. 1992).

12. Id. at § 584(a).

13. Id. at § 586(b).

14. Id. at § 588(c). The prescribed circumstances are that:

(1) such member certifies a lack of adequate financial resources to participate in the committee; and (2) the agency determines that such member's participation in the committee is necessary to assure an adequate representation of the member's interest.

15. Id. at § 590.

16. See, e.g., Patricia M. Wald, Negotiation of Environmental Disputes: A New Role for the Courts?, 10 COLUM. J. ENVTL. L. 1, 22 (1985), reprinted in PRITZKER & DALTON, supra note 5 at 762. In her article, Judge Wald disagrees that judicial review of negotiated rules should be limited. She also responds to contrary views expressed in Philip J. Harter, Negotiating Regulations: A Cure for Malaise, 71 GEO. L.J. 1, 102-103 (1982), reprinted in PRITZKER & DALTON, supra note 5, at 431, 532-533.

17. 5 U.S.C.A. § 590 (West Supp. 1992).

18. 5 U.S.C. app. § 10(a) (1988).

19. Whether this will occur depends, to some extent, on the existence of a variety of issues that the parties can trade.

20. See supra note 2.

21. In some cases, EPA and other parties may consider that a reg-neg is successful even if no agreement is reached. For example, if the process has narrowed the number of issues that may be litigated, then the expenditure of time and resources may be outweighed by a reduction in uncertainty of the outcome.

22. The Administrative Procedure Act (APA) precludes EPA from making commitments with respect to the content of the final rule. 5 U.S.C. § 553(c), ELR STAT. ADMIN. PROC. 004 (1988). Otherwise, the Agency would deprive persons not involved in the reg-neg of a meaningful opportunity to have their comments considered.

23. See Philip J. Harter, The Role of Courts in Regulatory Negotiation — A Response to Judge Wald, 11 COLUM. J. ENVTL. L. 1, 60 (1985), reprinted in PRITZKER & DALTON, supra note 5 at 776.

24. EPA is likely to realize, however, that a consensus organization cannot identify and resolve issues specific to every member. Thus, a member's comments on such an issue, or even a subsequent legal challenge, will not necessarily be viewed as bad faith or ineffective negotiation.

25. Such efforts by ethanol interests in connection with the fuels reg-neg have generated anger in the environmental community. At a public hearing conducted by EPA on June 9, 1992, the Natural Resources Defense Council (NRDC) accused the ethanol industry of violating the fuels reg-neg agreement in letter and spirit. Written statement of David D. Doniger, NRDC, on EPA's Supplemental Proposed Rules for Reformulated Gasoline (June 9, 1992). EPA Docket A-91-02, Document No. IV-F-33. It remains to be seen whether this will affect the willingness of environmental groups or EPA to participate with the ethanol industry in future negotiations.

26. For this Dialogue, the assumption is that an agency will engage in rulemaking, and the range of options relate to participation in a rulemaking. In some cases, other options may be available, such as suggesting that the agency address an issue through guidance rather than a regulation, or attempting to convince the agency that no rule is necessary. This Dialogue does not discuss these latter options.

27. Pub. L. No. 101-549, 104 Stat. 2399 (1990) (codified as amended at 42 U.S.C. §§ 7401 to 7671q).

28. A frank discussion with the facilitator that EPA has engaged to explore these issues during the convening period will be helpful to you in resolving these issues.

29. See supra note 3.

30. Personal conversation with Deborah S. Dalton, EPA, July 21, 1992.

31. See supra note 2 at 9316.

32. Id. at 9317.

33. To ease the resource burden for some participants, it may be possible to obtain reimbursement for expenses pursuant to Negotiated Rulemaking Act § 588(c), 5 U.S.C.A. § 588(c) (West Supp. 1992).

34. Telephone conversation between author and Deborah S. Dalton, July 21, 1992.

35. See supra note 2.

36. See supra note 3 at 13416-417.

37. At each of the phases, the applicable requirements will be deemed to have satisfied the standards of Clean Air Act § 112(d).

38. Personal conversation between author and Richard C. Russell, formerly of Exxon Company USA, July 21, 1992.