24 ELR 10070 -- Executive Order 12866: An Analysis of the New Executive Order on Regulatory Planning and Review

24 ELR 10070 | Environmental Law Reporter | copyright © 1994 | All rights reserved

Executive Order 12866: An Analysis of the New Executive Order on Regulatory Planning and Review

Ellen Siegler

Ellen Siegler is a Senior Attorney at the American Petroleum Institute (API). The author thanks Mary Ellen Joyce, a Senior Regulatory Analyst at the API, for her contributions to this Dialogue. The views expressed in this Dialogue are the author's and do not necessarily represent the views of the API.

[24 ELR 10070]

On September 30, 1993, President Clinton signed Executive Order 12866,1 a new executive order (E.O.) on regulatory planning and review to replace E.O.s 122912 and 12498.3 At the signing ceremony, he identified several objectives of the new E.O., including "get[ting] rid of useless, outdated and unnecessary regulations"; implementing a regulatory review process that would be "fair, streamlined, responsive, and much more straightforward"; eliminating "the days of back-door access to undermining the regulatory process"; and "let[ting] ordinary regulations be done in a more timely fashion, where the people who are going to be affected by them have more front-end involvement."4 He added, "This order will lighten the load for regulated industries and make government regulations that are needed more efficient."5

Consistent with these objectives, E.O. 12866 announces broad policies intended to make the regulatory process more efficient, establishes procedures for coordination of federal agencies' regulatory planning, and sets forth new procedures for the review of regulatory actions by the Office of Management and Budget's (OMB's) Office of Information and Regulatory Affairs (OIRA) and by the Office of the Vice President. E.O. 12866 does not change dramatically the function of the OMB as coordinator of federal agency regulatory actions. Nor does it ostensibly reduce OIRA authority to review administrative actions as the OIRA retains responsibility for reviewing agency regulatory agendas and all "significant" regulatory actions.

E.O. 12866 expresses support for the elimination of inconsistency and duplication among agency regulations; the development of cost-effective regulations that use mechanisms, such as the market, to accomplish desired ends; the consideration of risk and alternatives in setting regulatory priorities; the consideration of the environment and public health and safety in regulatory actions; the reduction of unnecessary federal intrusion into state, local and tribal governmental activities; and greater public accountability. The extent to which these values will actually be incorporated into regulatory planning and regulations will depend on, among other things, specific statutory and judicial requirements, because E.O. 12866 itself is unenforceable.6

This Dialogue compares E.O. 12866 to its antecedent, E.O. 12291, and highlights the important differences between them. It also explains the new procedures E.O. 12866 establishes and other unique features of E.O. 12866.

Overall Principles

The first section of E.O. 12866, entitled the Statement of Regulatory Philosophy and Principles,7 sets forth the general concept that agencies should develop only necessary regulations, evaluating on a cost-benefit basis whether and how to regulate. This section emphasizes the need for agencies to assess all costs and benefits, both quantifiable and qualitative, and to "select those approaches that maximize net benefits,"8 incorporating potential economic and distributive impacts and equity into the analysis. Agencies are expected to adhere "to the extent permitted by law and where applicable"9 to the stated regulatory principles, which include the need to regulate "in the most cost-effective manner,"10 the need to ensure that "the benefits of the intended regulation justify its costs,"11 and the need to ensure that decisions are based "on the best reasonably obtainable scientific, technical, economic, and other information[.]"12

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These principles bear a great resemblance to the principles set forth in the General Requirements section13 of E.O. 12291. However, unlike E.O. 12291, E.O. 12866 specifically mentions the need to consider equity14; explicitly mentions the need to consider economic incentives as a substitute for direct regulation15; and requires that when setting priorities, agencies should "consider, to the extent reasonable, the degree and nature of the risks posed by various substances or activities within its jurisdiction."16

The cost-benefit analysis urged by E.O. 12866 should provide some comfort to industry, as should the "principle" that the agency "propose or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify its costs."17 But because so few U.S. Environmental Protection Agency (EPA) regulations are subject to a cost-benefit test, and the E.O. contains a caveat that the above principles apply only "to the extent permitted by law and where applicable," the practical impact of these principles is unclear. E.O. 12291 also required that "[r]egulatory action shall not be undertaken unless the potential benefits to society for the regulation outweigh the potential costs to society[.]"18 This did not stop EPA from issuing many regulations whose benefits, in industry's view, did not exceed their costs.

Another change from E.O. 12291 is that E.O. 12866 broadens the kinds of factors to be included in the cost-benefit calculus. Agencies are to "tak[e] into account, among other things and to the extent practicable, the costs of cumulative regulations."19 This is intended to further the administration's goal of streamlining regulations by limiting the number of regulations with which individuals, companies, and industries must comply and minimizing inconsistencies among regulations.

Specific procedural requirements for communications with the OMB, regulatory agencies, and the Office of the Vice President during the review process are established to "ensure greater openness, accessibility, and accountability in the regulatory review process."20

Roles of the OMB, the Vice President, and Others in the Administration

Many of the OMB's and the Vice President's roles remain unchanged under E.O. 12866. The OMB retains a central role as coordinator and reviewer of regulatory agency activities. The Vice President is designated as the principal advisor to the President on regulatory policy and, among other things, has the role of resolving conflicts between agencies and between the agencies and the OMB.21

New activities involving the OMB, the Vice President, and others in the administration include the following:

* A new review process for annual regulatory plans submitted by federal agencies to the OIRA. The OIRA will review the annual plans and circulate them to other affected agencies, to the regulatory policy advisors,22 and to the Vice President. Based on the submitted plans, the OMB will identify potential conflicts among agencies. The Vice President will be responsible for attempting to resolve these conflicts. The plans will be published annually in the October Unified Regulatory Agenda.23 Written comments from the public may be sent to the responsible agency with a copy to the OIRA.24

* A regulatory working group. The OIRA Administrator will chair the group, which will include representatives of agencies with "significant domestic regulatory responsibility."25 This group is to "serve as a forum to assist agencies in identifying and analyzing important regulatory issues," including "innovative regulatory techniques" and "comparative risk assessment in regulatory risk assessment."26

* Conferences. E.O. 12866 directs the OIRA Administrator to "convene, from time to time, conferences with representatives of businesses, nongovernmental organizations, and the public to discuss regulatory issues of common concern."27 The first of these conferences was held on December 6, 1993, with representatives of the intergovernmental community. At that time, OIRA Administrator Sally Katzen promised to convene sessions with representatives of state, local, and tribal governments on a quarterly basis.

OIRA Review of Regulatory Actions

E.O. 12866 is similar to E.O. 12291 in that E.O. 12866 requires agencies to submit to the OIRA for review regulatory assessments of "significant" regulatory actions,28 while E.O. 12291 required agencies to submit to the OMB for review regulatory impact analyses of "major" regulatory actions.29 There is a substantive difference between the [24 ELR 10072] terms "significant" and "major," however, in that E.O. 12866 defines "significant" somewhat more broadly than E.O. 12291 defined "major."30

Under E.O. 12866, a significant regulatory action is one that "may" (rather than one that "is likely to") have an annual effect on the economy of $ 100 million or more, or "may adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or state, local or tribal communities."31 The phrase "is likely to" in E.O. 12291 established a higher threshold of probability than the term "may" in E.O. 12866. If there is some possibility that a regulatory action will exceed the $ 100 million impact, the OMB or the agency could conclude that the action is "significant" even though the possible impact is not likely to occur. Additional significant actions under this definition that would not have fallen within the definition of "major" in E.O. 12291 include actions that would "create a serious inconsistency or otherwise interfere with an action taken or planned by another agency,"32 and actions that would "raise novel legal or policy issues.…"33 The last category could be construed to encompass many EPA actions that would not have triggered OMB review under the E.O. 12291 definition of "major."34

E.O. 12866 provides the OIRA with some power to determine which regulatory actions are significant. For example, the requirements for significant actions must be satisfied "for each matter identified as, or determined by the Administrator of OIRA to be, a significant regulatory action.…"35 Further, the "OIRA may review only actions identified by the agency or OIRA as significant.…"36 E.O. 12291 provided similar authority, but in a somewhat more direct manner. E.O. 12291 provided that each agency would make an initial determination regarding whether a regulation was "major" but that the Director of OMB "shall have the authority … to order a rule to be treated as a major rule."37

E.O. 12866 has also changed the definition of "regulatory action" from that used by E.O. 12291. Under E.O. 12866, regulatory action includes advance notices of proposed rulemaking, notices of inquiry, and any other action that "promulgates or is expected to lead to the promulgation of a final rule or regulation."38 Under E.O. 12291, the OMB reviewed only proposed and final rules.39 This change could, in some cases, delay changes in existing rules by requiring OMB's involvement much earlier and more profoundly in the rulemaking process. In the past, EPA sometimes issued notices, instead of reproposals, as a means of avoiding the need for OMB review and thereby expediting a final rule. It remains to be seen how this change will play out, however, as EPA may contend that few of these notices are significant.

For significant regulatory actions, the issuing agency is required to submit to the OIRA an analysis similar to the regulatory impact analysis (RIA) required by E.O. 12291.40 Specific issues to be included in the analysis that were not required for an RIA include: (1) an assessment of an action's benefits, including "promotion of the efficient functioning of the economy and private markets, the enhancement of health and safety, the protection of the natural environment …"41; (2) an assessment of economic costs, including both governmental administrative costs and industrial compliance costs42; (3) an assessment of adverse effects on the efficient functioning of the economy and private markets, including productivity, employment, and competitiveness43; and (4) an assessment of costs to health, safety, and the natural environment.44

Timetable and Procedure for OIRA Review of Significant Regulatory Actions

Timetable

One of the purposes of E.O. 12866 may have been to expedite OIRA review of regulations. E.O. 12866 provides that the OIRA "shall waive review or notify the agency in writing of the results of the review" within 10 days of submission of preliminary actions45 and, generally, within 90 days of submission of proposed and final regulations with a single 30-day extension available.46

These timetables, if adhered to, will prevent the OIRA from holding regulations in abeyance for many months or years. However, E.O. 12866's language requires an active waiver from the OIRA or completion of the review to terminate OIRA's involvement.47 It is not clear what will happen if the OIRA does not issue a waiver and does not complete the review by the deadline. Will the agency simply issue the rule; or will the agency appeal to the Vice President? The answer to this dilemma will depend more on the political climate at the time than on the precise wording of E.O. 12866.

It would seem, too, that expedited review may occur as a result of OIRA's reviewing only regulatory actions that are significant. Under E.O. 12291, the OMB reviewed both major and nonmajor rules.48

[24 ELR 10073]

Procedure for Open Interchanges

* OIRA Review. E.O. 12866 imposes restrictions on contacts between the OIRA and interested persons while an action is under OIRA review. These include: (1) a prohibition against the initiation of oral communications by nongovernmental persons with OIRA representatives, other than with the OIRA Administrator or a particular designee; (2) an opportunity for representatives of the agency responsible for the regulation to attend meetings between OIRA personnel and nongovernmental persons; (3) a requirement that the responsible agency receive copies of all written communications between the OIRA and nongovernmental persons; and (4) public disclosure of information relating to communications received during review.49 It should be noted that E.O. 12866 does not restrict communications with the OIRA before or after OIRA review. After the issuing agency has published its regulation in the Federal Register, the OIRA must make available to the public all documents exchanged between the OIRA and the agency during OIRA review.50

* White House Resolution of Conflicts. Once an issue has been submitted to the White House for resolution of a conflict between two agencies or between the OIRA and an agency, external parties must submit all comments in writing and to the responsible agency for inclusion in the public docket.51

Review of Existing Significant Regulations

E.O. 12866 requires agencies to review their existing significant regulations.52 Plans for such reviews must be submitted to the OIRA within 90 days of the issuance of E.O. 12866, by December 29, 1993. Among the purposes of this review are the reduction of the "regulatory burden on the American people … and their industries"53 and the affirmation that regulations are not "duplicative or inappropriately burdensome in the aggregate."54 The OIRA is directed to work with the regulatory working group "and other interested entities"55 to implement this section.

The requirement that agencies submit plans for carrying out these responsibilities may perhaps result in greater activity than has occurred previously in reviewing existing regulations. Yet, it appears unlikely that agencies such as EPA, which cannot keep up with their obligations to issue new regulations, will expend much effort reviewing existing regulations.

Conclusion

The policies expressed in E.O. 12866 include sound bites for almost everybody. There will be many opportunities for all interested parties to refer to E.O. 12866 in comments on actual and potential regulatory actions. However, since E.O. 12866 is unenforceable, its actual effect on regulations remains to be seen and may be quite limited.

It remains to be seen whether the new features in E.O. 12866 will have a substantive impact on EPA regulations. One such feature that appears well on its way to having an impact on EPA is the requirement to consider "equity."56 The requirement that agencies set priorities based on, among other things, risks "to the extent reasonable"57 may lead EPA to channel its efforts toward regulations that can be shown to achieve demonstrable risk reductions. The impact of this requirement, however, will remain constrained by statutory and court deadlines that apply to the issuance of regulations that do not consider risk -- such as the technology-based requirements to be imposed under the authority of Clean Air Act § 112(d).58

Only future experience with E.O. 12866 will reveal whether the new procedures it establishes will accomplish the objectives expressed in President Clinton's signing address of expediting the rulemaking process, and "lighten[ing] the load for regulated industries and mak[ing] government regulations that are needed more efficient."59

1. 58 Fed. Reg. 51735 (1993).

2. 3 C.F.R. 127 (1982), ELR ADMIN. MATERIALS 45025. This Dialogue compares E.O. 12866 only to E.O. 12291 as representative of the regulatory planning and review policies in place before President Clinton signed E.O. 12866.

3. 50 Fed. Reg. 1036 (1985).

4. President William J. Clinton, Remarks at the Signing of Executive Order on Regulatory Review (Sept. 30, 1993).

5. Id.

6. E.O. 12866 provides that it is "intended only to improve the internal management of the Federal Government and does not create any right or benefit, substantive or procedural, enforceable at law or equity.…" Exec. Order No. 12866, supra note 1, § 10.

7. Id. § 1.

8. Id. § 1(a).

9. Id. § 1(b).

10. Id. § 1(b)(5).

11. Id. § 1(b)(6).

12. Id. § 1(b)(7).

13. Exec. Order No. 12291, supra note 2, § 2.

14. Exec. Order No. 12866, supra note 1, § 1(b)(5).

15. Id § 1(b)(3).

16. Id § 1(b)(4).

17. Id § 1(b)(6).

18. Exec. Order No. 12291, supra note 2, § 2(b).

19. Exec. Order No. 12866, supra note 1, § 1(b)(11).

20. Id. § 6(b)(4).

21. Id. § 7.

22. E.O. 12866 establishes a team of regulatory policy advisors that will include the Director of OMB, the Administrator of OIRA, the Vice President's Chief of Staff, and a broad array of other executive branch officials. Exec. Order No. 12866, supra note 1, §§ 2(c), 3(a).

23. In accordance with § 4(b), each agency must prepare an "agenda of all regulations under development or review at a time and in a manner specified by the Administrator of OIRA." Exec. Order No. 12866, supra note 1, § 4(b). The agenda must include, "at a minimum, a regulation identifier number, a brief summary of the action, the legal authority for the action, any legal deadline for the action, and the name and telephone number of a knowledgeable agency official." Exec. Order No. 12866, supra note 1, § 4(b).

24. Exec. Order No. 12866, supra note 1, § 4(c)(7). Comments are invited if they indicate conflicts with other regulations or identify the imposition of "any unintended consequences on the public." Exec. Order No. 12866, supra note 1, § 4(c)(7).

25. Id. § 4(d).

26. Id.

27. Id. § 4(e).

28. Id. § 6(a)(3).

29. Exec. Order No. 12291, supra note 2, § 3. E.O. 12291 defines a "major rule" as one that is likely to result in:

(1) An annual effect on the economy of $ 100 million or more;

(2) A major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions; or

(3) Significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based enterprises to compete with foreign-based enterprises in domestic or export markets.

Exec. Order No. 12291, supra note 2, § 1(b).

30. Exec. Order No. 12866, supra note 1, § 3(f).

31. Id. § 3(f)(1) (emphasis added).

32. Id. § 3(f)(2).

33. Id. § 3(f)(4).

34. Although E.O. 12291 also required the OMB to review nonmajor rules, it did not require agencies to prepare regulatory impact analyses for them, and it allowed the OMB only 10 days to review them. Exec. Order No. 12291, supra note 2, § 3(c)(3), (e)(2)(C).

35. Exec. Order No. 12866, supra note 1, § 6(a)(3)(B) (emphasis added).

36. Exec. Order No. 12866, supra note 1, § 6(b)(1) (emphasis added). E.O. 12866 designates the Vice President to resolve any disputes between the agency and the OIRA as to whether a regulatory action is significant. The resolution process could take 60 days or more. Exec. Order No. 12866, supra note 1, § 7.

37. Exec. Order No. 12291, supra note 2, § 3(b).

38. Exec. Order No. 12866, supra note 1, § 3(e).

39. Id. § 1(a).

40. Exec. Order No. 12291, supra note 2, § 3(d); Exec. Order No. 12866, supra note 1, § 6(a)(3)(C).

41. Exec. Order No. 12866, supra note 1, § 6(a)(3)(C)(i).

42. Id. § 6(a)(3)(C)(ii).

43. Id.

44. Id.

45. Id. § 6(b)(2)(A).

46. Id. § 6(b)(2)(B), (C).

47. In contrast, E.O. 12291 provided that the OMB "shall be deemed to have concluded review unless the Director advises an agency to the contrary.…" Exec. Order No. 12291, supra note 2, § 3(e)(2).

48. See supra note 34.

49. Exec. Order No. 12866, supra note 1, § 6(b)(4).

50. Id. § 6(b)(4)(D).

51. Id. § 7.

52. Id. § 5.

53. Id.

54. Id.

55. Id. § 5(b).

56. Id. § 1(b)(5).

57. Id. § 1(b)(4).

58. 42 U.S.C. § 7412(d), ELR STAT. CAA § 112(d).

59. Clinton, supra note 4.

24 ELR 10070 | Environmental Law Reporter | copyright © 1994 | All rights reserved