The Public as Enemy Number One: Rulemaking in the Federal Highway Administration

"You must remember that since 1916 the way we conduct our business obviously was not a matter in which the public was ever given the knowledge to comment on … We are being pried open."

-Office of the Chief Counsel

Federal Highway Administration¹

The Federal Highway Administration (FHWA), despite the best efforts of a number of its officials, is still operating on the principle that the best way to deal with opposition is to pretend that it does not exist. In an important rulemaking action in May 1974,² FHWA overrode the advice of the General Counsel of the Department of Transportation and issued the new regulation as a final rule without providing interested persons an opportunity to comment on the regulation in proposal form.

In a number of previous articles and comments, ELR has reported on the refusal of FHWA to publish its regulations and to recognize an obligation to allow interested persons to participate in FHWA decisions affecting them.³ In a major ELR article in 1972, Peterson and the late Robert Kennan found FHWA procedures "virtually inaccessible," and reported that only eight pages of FHWA procedures had been published as formal egulations.⁴ Subsequently, in June 1973, the National Wildlife Federation brought suit against Secretary of Transportation Claude S. Brinegar, seeking to compel FHWA to publish those of its procedures which fit the definition of "rule" set forth in the Administrative Procedure Act (APA).⁵ Now, more than a year later, this action is still pending, and the FHWA continues to resist the idea of publication, even in the face of unequivocal and mandatory language in the APA directing agencies to publish their rules and regulations in the Federal Register.⁶

Two distinct points are at issue.The first, which this Comment discusses only in passing, is the obligation of FHWA to publish in the Federal Register "rules" which it has already promulgated or adopted internally and continues to issue from time to time. It is this question which [4 ELR 10161] the National Wildlife action seeks to resolve. Beginning before the action was filed, and continuing to the present, FHWA has directed some effort at sorting through the voluminous memoranda, guidelines and orders generated over the years to determine which to publish and how to arrange them, but progress has been slow. In the past FHWA's footdragging has included the contention that its rules are not "rules," and do not have the legal force of regulations, but the courts have consistently rejected this assertion.

The second issue, which the balance of this comment explores, is the question of whether FHWA has a further obligation to publish proposed rules in the Federal Register, and to allow interested persons to participate before rules are issued in final form. This requirement is the subject of § 553 of the APA, but as FHWA readily reminds all challengers, this section expressly exempts matters "relating to agency … grants."

Among those challenging FHWA's use of this exemption is the Center for Auto Safety, a public interest group in Washington, D.C., which monitors FHWA.⁷ This group recently questioned at the administrative level FHWA's refusal to publish rules in proposed form,⁸ and plans action in the courts, if necessary, to resolve the issue.

The Center's challenge came as a part of its comments to FHWA on the recently issued "Certification Acceptance" Regulations, whose substantive aspects are the subject of an article in this month's ELR and of an August, 1974 ELR Note.⁹ The stated objective of the certification acceptance scheme is to lighten the administrative burden on federal and state highway officials responsible for approving various aspects of the federal-aid highway projects. The regulations leave the details of these approvals to state officials and reserve for federal officials the right to approve or disapprove the process used by each state in reaching its own determinations. In this way, federal officials may discharge their responsibilities relating to federal-aid projects (other than projects in the Interstate System), by "accepting" the state's "certification" that its highway agency will perform those responsibilities in accordance with laws and standards "at least equivalent" to federal standards.¹⁰

These regulations will have wide impact on the administration of the federal-aid highway program. While the concept of self-certification has applied to federal-aid secondary roads for a number of years, the certification acceptance program extends the concept to primary, urban, and other systems and allows the states a greater measure of self-direction for all systems covered, including secondary roads. Because of this significance, the regulations are bound to stir up considerable interest, and will continue to be the subject of some controversy. In view of this interest, the normal course for a federal agency might well have been to take particular care to broaden public participation, if for no other reason than to diminish the interests of dissenters in subverting a rule, by encouraging them to vent their objections prior to promulgation.

Avoiding the normal course, FHWA chose to issue its certification acceptance regulations in a manner calculated to minimize and discourage public participation in formulating the rule. In mid-1973, a draft of the regulation was drawn up within FHWA. Beginning in September, the proposed rule was circulated in draft form to state officials and to other individuals and organizations selected by FHWA,¹¹ but was never published in the Federal Register. After comments received from state officials and from these privileged parties were taken into account, FHWA published the rule in final form.¹² FHWA betrays its sensitivity to the issue of publishing proposed rules in the following language from the preamble of the Certification Acceptance regulation, as finally published:

In that this material is a matter relating to a grant program, the relevant provisions of the Administrative Procedure Act (5 U.S.C. 553), requiring notice of proposed rulemaking, opportunity for public participation and delay in effective date are inapplicable. However, since these changes were substantial and because of interest in this matter, FHWA will be receptive to further comments and suggestions after issuance of this regulation.¹³

The Center for Auto Safety, in commenting on the final rule, offered the following observations:

FHWA itself recognizes that the present regulation is of such interest when it says in the preamble, "Since these changes were substantial and because of interest in this matter, FHWA will be receptive to further comments and suggestions after the issuance of this regulation."

We are aware the FHWA did circulate a draft of the CA regulation to those persons who are known to have traditional interests in the Federal-aid highway program and who are affected most directly by the promulgated regulations. Those individuals and organizations have [4 ELR 10162] had an unfair opportunity to shape the substance of this regulation.

The opportunity for comment prior to the effectivedate must be extended to other interested parties. A high-level DOT official shared our views and advised FHWA to publish the proposed CA regulation in the Federal Register for comments. His advice was rejected when Governor Tiemann "OKed" the publication of the regulation in final form with an immediate effective date. [Memo from Rodney E. Eyster, General Counsel, DOT, to Governor Tiemann, dated April 15, 1974.] FHWA must abandon its traditional approach of operating in close cooperation with but a narrow segment of the individuals, groups, and organizations with interests in the issues raised by the agency's actions.¹⁴

The views of DOT's General Counsel were stated even more forcefully than indicated in the Center's comment. The memo reads in pertinent part: "I would strongly recommend that you publish the regulations for notice and comment in the Federal Register."¹⁵ The FHWA response to the recommendation appears as a handwritten note at the close of the memo, and reads: "Governor Tiemann [FHWA Administrator] says OK to publish effective immediately, asking for comment. If serious criticism we can consider it and change regs just as if we had used Notice procedure. — D.E. Wells, [FHWA Chief Counsel] 4/18" Tiemann's novel suggestion was followed to the letter, an impressive show of the power of FHWA within the DOT, and an indication of FHWA's aversion to public participation.

To the public, FHWA states its standing policy as follows:

Proposed Federal-aid highway regulations are not normally published in the Federal Register, in accordance with the exemption provided in 5 U.S.C. 553. However, the FHWA has and will continue to publish for comment those proposed regulations which will have a significant impact on the public.¹⁶

In fact, FHWA's actual practice appears to be just the opposite — the wider the impact, the narrower the participation in rulemaking.

Under analysis, FHWA's broad claim of exemption under 5 U.S.C. § 553 (a)(2) is dubious at best. That section reads, in pertinent part:

(a) This section applies, according to the provisions thereof, except to the extent there is involved —…

(2) a matter relating to agency management or personnel or to public property, loans, grants, benefits, or contracts.

Initially, FHWA might observe that this exemption is narrowly drawn, reflecting the "obvious intent of Congress" when it passed the Act in 1946 that the exempted matters should not be interpreted broadly.¹⁷ The Senate Judiciary Committee Report on its version of the Act states: "It should be noted … that the exemptions apply only 'to the extent' that the exempted subjects are directly involved."¹⁸ (Emphasis added.) Thus in two respects, the exemption as drawn fails to support the apparent FHWA position that all of its rulemaking is exempt from the requirements of publication in proposal form, comment, participation, and delay of effective date. First, the exemption applies only where agency grants are "directly" involved, so that in matters such as Certification Acceptance, dealing with blanket policy governing a broad category of grants, use of the exemption would seem less appropriate then, for instance, in the case of agency action dealing with the amount of a particular grant or restrictions on its use.Second, it applies only "to the extent" that agency grants are involved, so that in proposals where grants and other matters are dealt with concurrently, it would apply only to the extent of the grant-related portions.¹⁹ One court, commenting on the contracts aspect of the exemption, stated: "… an expansive reading of the exemption clause could easily carve the heart out of the notice provisions of Section 553."²⁰

A further reading of the legislative history suggests that the concern of Congress was directed at protecting administrative agencies from interference in the day-to-day administration of on-going grant, contract, and other programs. The exemption for public contracts, for instance, seems to have developed "from a concern to avoid having the notice section applied to minimum wage determinations of the Department of Labor in connection with public contracts."²¹ This concern reflects the holding of a 1940 Supreme Court decision which asserts that the government must be free from "vexatious and dilatory restraints" interfering with the management by the executive branch of its own internal affairs.²² Such interference is easily distinguishable from public participation in the formulation of a broad public policy of the type reflected in the establishment of the Certification Acceptance program. [4 ELR 10163] Certification Acceptance is in effect a one-time decision which, once reached, governs agency behavior over a long time-span, and removes the question from the arena of day-to-day agency functioning.

The legislative history, moreover, indicates that the exemptions are directed only at matters in which the government has a "proprietary" or other unique interest.²³ For instance, under the Housing Act, if a local housing authority fails to adhere to its obligations under a federal contract with the Department of Housing and Urban Development, HUD can reduce or terminate the annual contribution payable under the contract, or even assume management of the project.²⁴ Here, matters directly related to such contracts are exempted from APA's notice provisions. No comparable continuing proprietary interest in highways exists, once they are constructed. Federal funds are not available, as one indication, even for maintenance of highways built with 90 percent federal funding.²⁵ In fact, the penalty assessed against astate if it fails to maintain a federal-aid highway is withholding of approval for federal funding on future projects within the state, rather than a reassertion of federal control over the highway in question.²⁶

FHWA maintains its opposition to public participation in rulemaking in the face of criticism of its position from a number of sources. A major study undertaken in 1968 on the subject of exemptions from the APA's rulemaking requirements for the Administrative Conference of the U.S. by law professor Arthur Earl Bonfield concluded:

Serious proposals for the elimination of the section 553(a) (2) exemptions for rulemaking … have been made at least since 1955 … This study demonstrates that the 1955 Task Force Report of the Hoover Commission and the bills since introduced into Congress were correct. The unqualified exemptions for all rulemaking relating to "public property, loans, grants, benefits, or contracts" should be repealed.²⁷

Following the study, the Administrative Conference itself issued a formal recommendation that the APA should be amended to eliminate the exemptions.²⁸ The recommendation, dated October 1969, also pointed out that use of the exemptions by federal agencies is discretionary, and urged federal agencies directly "to employ the rulemaking procedures provided by the Administrative Procedure Act, whenever appropriate, without awaiting a legislative command to do so."

The recommendation of the Administrative Conference was subsequently communicated directly to the Department of Transportation (and to all federal agencies engaged in rulemaking) with some urgency by Congressman William S. Moorhead (D-Pa.) in a letter dated April 23, 1971. The letter asked voluntary abandonment of use of the exemptions, and requested agencies to announce the policy change in the Federal Register. A number of federal agencies, including HUD, Interior, and Treasury complied in full or in part with Moorhead's request. HEW had previously instituted the change.²⁹ The DOT reply, dated May 20, 1971, and signed by Acting Secretary James M. Beggs, cited examples of DOT's compliance with the request, but made no reference to the Federal Highway Administration. It did promise an examination of all areas of DOT rule making to determine if changes were needed.

Because a large number of federal agencies discontinued their use of the exemptions following the Moorhead letter, action on a bill pending in the Senate to eliminate the exemptions was dropped.³⁰ FHWA, with a few exceptions,³¹ continues the practice to this day. Ironically, it draws considerable aid from agencies which discontinued their use of the exemptions; their cooperativeness with the Congress took the heat off the issue.

The fundamental principle at stake is the obligation of a federal agency to make decisions with the consent of the governed, rather than simply by fiat. Whether or not a program is a grant program, or has aspects of a grant program, is a minor consideration compared to this overriding principle, FHWA has never produced a convincing rationale for exempting grant-related rulemaking from the usual requirements of public participation. It appears that [4 ELR 10164] FHWA found itself blessed with an inadvertent exemption, and has rested content to mouth the language of the exemption each time the issue has arisen. If the exemption is to remain applicable to the grant programs of FHWA, more cogent reasons for it will necessarily have to be advanced.

1. Interview with Norman MacPhee, FHWA attorney, in Washington, D.C., June 17, 1974. (Transcript on file at ELR). Mr. MacPhee is among those FHWA officials favoring increased public participation.

2. Certification Acceptance Regulations, 39 Fed. Reg. 17309 (May 15, 1974).

3. Comment, Federal Highway Administration Considers Publishing Procedures, 3 ELR 10088 (June 1973); Kennan, The Settlement Agreement in National Wildlife Federation v. Tiemann, 3 ELR 50085 (Aug. 1973); Peterson & Kennan, The Federal-Aid Highway Program: Administrative Procedures and Judicial Interpretation, 2 ELR 50001 (1972).

4. Peterson & Kennan, supra at 50001.

5. National Wildlife Federation v. Brinegar, No. 1269-73 (D.D.C.), filed June 25, 1973. See also Comment, National Wildlife Federation Files Suit Challenging Federal Highway Administration Regulations, 3 ELR 10109 (July 1973).

6. 5 U.S.C. § 552 reads in pertinent part:

(1) Each agency shall separately state and currently publish in the Federal Register for guidance of the public —

(D) substantive rules of general applicability adopted as authorized by law, and statements of general policy or interpretations of general applicability formulated and adopted by the agency.

FHWA recently agreed with the Federal Register to publish a lengthy supplement containing a compilation of FHWA rules and regulations currently in effect. The supplement is scheduled to appear during October, 1974. It will serve as an appropriate measure of FHWA's willingness to comply.

7. Another recent challenger is the National Wildlife Federation, which brought suit seeking to void an FHWA regulation on the ground that it was not issued pursuant to the rulemaking provisions of § 553 of the APA. A final opinion has not been rendered in the case. National Wildlife Federation v. Tiemann, No. 1270-73 (D.D.C.). See also Comment, supra, n. 5, at 10110.

8. Center for Auto Safety Comments on FHWA Docket No. 74-4, July 5, 1974.

9. Wells & Abramson, Cutting the Red Tape on Federal-Aid Highways:A Move Toward Responsive Federalism, 4 ELR 50059 (Oct. 1974); and, Morgenthaler, On the Road Again: Certification Acceptance Forces NEPA to Adopt, 4 ELR 50023 (Aug. 1974).

10. These standards are set forth generally in Title 23 of the U.S. Code. Authority for the Certification Acceptance program is grounded in 23 U.S.C. § 117.

11. FHWA unabashedly lists some of those selected in its preamble to the final rule. (39 Fed. Reg. 17309 (May 15, 1974)).

12. 39 Fed. Reg. 17309 (May 15, 1974).

13. Id. at 17309-10.

14. Center for Auto Safety Comments, supra, n. 7, at 3.

15. DOT Memorandum to the Federal Highway Administrator, April 15, 1974 (Copy on file at ELR).

16. Letter from Laurence S. Casazza, Deputy Associate Administrator for Administration, FHWA, to Arthur C. Delibert, Acting Director, Center for Auto Safety, July 24, 1974.

17. Housing Auth. of City of Omaha v. United States, 468 F.2d 1 at 9 (1972).

18. Senate Report 752, 79th Cong., 1st Sess. 13 (1945). The House Report (No. 1980, May 3, 1946) is silent on this point.

19. In practice it may be difficult to sever such portions, however.

20. Housing Auth. of City of Omaha v. United States, supra at 9.

21. Id.

22. Perkins v. Lukens Steel Co., 310 U.S. 113, at 127, 60 S. Ct. 869, 84 L.Ed. 1108 (1940). In this case, a government supplier challenged a wage determination made by the Secretary of Labor in connection with a contract. Since the passage of APA, no cases have dealt directly with the grants aspect of the exemption in § 553.

23. Senate Document 248, 79th Cong., 2nd Sess. (1946), at 358, 92 Cong. Rec. 5650 (1946).

24. 42 U.S.C. § 1415 (3) and § 1413 (a).

25. 23 U.S.C. § 116 (a).

26. 23 U.S.C. § 116 (c).

27. Bonfield, Public Participation in Federal Rulemaking Relating to public Property, Loans, Grants, Benefits, or Contracts, 118 Univ. of Pa. L. Rev. 1, at 69 (Feb. 1970).

28. Administrative Conference of the U.S., Recommendation No. 16, "Elimination of Certain Exemptions From APA Rulemaking Requirements," made at its Third Plenary Session, Oct. 1969.

29. 36 Fed. Reg. 2532 (February 5, 1971).

30. The Bill, S. 3569 was introduced by Sen. Edward Kennedy (D-Mass.) in the 91st Congress on March 9, 1970. See the Cong. Rec. of that date at page S3260. The identical bill was reintroduced as S.1413 in the 92nd Congress (1971).

31. FHWA asserts that it makes use of the notice procedure when issuing controversial regulations in the environmental area. In reply to an ELR inquiry, FHWA Office of Chief Counsel cited the following examples: Public Hearings regulations, 33 Fed. Reg. 15663 (Oct. 22, 1968), 34 Fed. Reg. 727 (Jan. 17, 1969), 38 Fed. Reg. 27233 (Oct. 1, 1973), and 38 Fed. Reg. 30192 (Nov. 1, 1973); Air Quality regulations, 38 Fed. Reg. 23969 (Sep. 5, 1973) and 38 Fed. Reg. 31677 (Nov. 16, 1973); Noise standards, 39 Fed. Reg. 32616 (Sep. 10, 1974); Segmentation on Interstate Highway routes, 39 Fed. Reg. 9522 (Mar. 11, 1974) and 39 Fed. Reg. 20658 (June 2, 1974); and diversion of urban system funds for mass transit, 39 Fed. Reg. 32298 (Sep. 5, 1974). These are but a small fraction of the regulations issued by FHWA. While publishing notices in these cases, FHWA jealously guards its discretionary power not to permit public participation whenever it so chooses.