1. Rulemaking
Part 2

2. Do You Have to Have Notice and Comment?

3. Why Have Public Participation?
Public participation has great political benefit in broadening the acceptability of the rules.
Public comments can identify technical and legal problems with the rules
Publication of proposed rules allows politicians to become involved to protect the interests of their constituents
Public participation limits executive power and makes it more palatable to the courts to have agencies making laws
While the agency may take comments at public hearings, it is usually done in writing.

4. APA 553 – Notice and Comment Rulemaking
Review the provisions of 553

5. (1) a military or foreign affairs function of the United States
Limiting the term of residence for Iranian nationals after the hostage incident
Extending asylum to persons subject to reproductive restrictions in China
Deporting young Muslin men with visa problems.
Changing international trade rules
Why exempt these?

6. Public Property
(2) a matter relating to agency management or personnel or to public property, loans, grants, benefits, or contracts.
This would exempt Social Security benefits, everything to do with public lands, and many other areas of regulation.
As the regulatory state developed, there was pressure to repeal this provision.
To defuse this, agencies adopted rules requiring notice and comment rulemaking in several of these areas.
Congress has suspended this section in many enabling laws.
You have to look at the agency’s own rules and enabling act to see if 553 has been waived.

7. (b)(3)(A) - Interpretative Rules/Guidance
They only explain the law or provide guidance on how to comply with the law.
Prosecution guidelines
IRS audit guidelines
Since they do not change the law, they have no legal effect.
Like commentary in the civil law?
Does that mean you can ignore them?
Interpretive rules may be published for comment.

8. Why Avoid Notice and Comment?
Notice and comment is time consuming and subject to long judicial delay.
What is the risk to the agency if it issues guidance without notice and comment, and the court finds the guidance to be a rule requiring notice and comment?
What is the benefit to the regulated parties of interpretive rules and guidance?
What if the agency is prevented from providing guidance documents?

9. Legislative v. Nonlegislative Rules
Agencies can only make legislative rules if the legislature delegates this power to the agency through statute.
Nonlegislative rules (guidelines, etc.) do not have legal effect. They only explain the agency’s view of the law.
Does an agency need statutory authorization to issue non-legislative rules?
(Some states have limited the use of non-legislative rules by state agencies.)

10. Can Nonlegislative Rules be Retroactive?
Why does the ban on retroactive rules not apply to interpretive rules?
How do judges change the law retroactively?
If interpretive rules cannot change legal rights, does retroactive really mean anything for nonlegislative rules?

11. Substantive Tests for the Status of a Rule

12. EPA Example
EPA says that the term “waters of the United States” (which defines the jurisdiction of EPA under the Clean Water Act) includes wetlands that potentially provide habitat to migratory birds.
This might include a pothole in a field, not otherwise connected to a waterway.
If the EPA has jurisdiction over the wetland, it will become expensive or impossible to drain or develop the area.

13. Is this an Interpretative Rule or a Legislative Rule?
Can we tell by just looking at the rule?
How might this definition affect the value of the wetlands?
Is this a “substantial impact”?
Assuming that it is a substantial impact, how can the agency defend not using notice and comment?
The substantial impact test has now been mostly abandoned in favor of the “legally binding” test.

14. The “Legally Binding” or “Force of Law” Test
Can the agency enforce the law without the rule?
Continuing with the previous wetlands example
Is the agency required to define wetlands before enforcing the statute?
Was the agency doing enforcement before this rule?
If so, does this change the enforcement?
What does tell us about whether it is legally binding?
Assume a statute allows the agency to define toxic substances that cannot be dumped into lakes.
Would a list of these substances need notice and comment?
Could the law be enforced without the list?

15. How High do I Build the Fence. Hoctor v. USDA, 82 F. 3d 165 (7th Cir
Statute requires the agency to adopt rules for the safe housing of dangerous animals
Agency uses notice and comment to promulgate a rule requiring that reasonable precautions be taken to prevent the escape of the animals.
Agency then issues guidance saying that a reasonable precaution would be an 8 foot fence.
Interpretation or legislation?
How does it change the proof of facts in the enforcement adjudication?

16. Junk in the Park: United States v. Picciotto, 875 F. 2d 345 (D. C. Cir
Can the agency use notice and comment to promulgate a legislative rule that says that the agency can add “additional ‘reasonable’ conditions and limitations” without notice and comment?
Why or why not?
What if the rule says that nothing can be brought to the park that would be disruptive or impede public access?
Would it need a specific list?
How does not having a rule affect enforcement?

17. Inconsistent with a Rule: Phillips Petroleum Co. v. Johnson, 22 F
Inconsistent with a Rule: Phillips Petroleum Co. v. Johnson, 22 F.3d 616 (5th Cir. 1994).
An agency cannot issue a rule that is inconsistent with a statute, and thus it certainly cannot issue guidance that is inconsistent with the statute.
What about guidance that is consistent with the statute, but not with a rule based on the statute?
This would change the rule without notice and comment.

18. Non-Substantive Indicators of the Status of a Rule or Guidance Document
Saying it is guidance/interpretative rule.
Publication in the Code of Federal Regulations (CFR).
Does the person signing the document have the authority to make a rule?

19. (a)(2) - General Policy Statements and Procedural Rules

20. Agency Procedures Like the code of civil procedure
Does not change the substantive rights of the parties
Does not change the regulated behavior, only the process in agency procedures
Thus no need for public participation.

21. General Policy or Specific Requirements?
Remember, 553(b) does not require notice and comment for general policy statements or procedural rules.
Assume the statute says that in licensing actions, a physician must reply to agency request for information in a reasonable time.
How would you argue that setting a 7 day answer period is a substantive change, not just a procedural requirement?
Why does the inclusion of specific factual information (deadline periods, fence heights) undermine the claim that it is a general policy statement?

22. Federal Mine Safety and Health Act Example
Secretary has the statutory right to sue both the mine owner and the mine operator for violations of the Act.
Secretary publishes a policy statement explaining that the agency can and will sue both of them for infractions, depending on the nature of the infraction.
Does this require notice and comment?
Why?

23. Enforcement Manual
The Coast Guard is authorized to investigate and enforce against certain types of oil pollution in the waters of the United States under the Clean Water Act.
To aid its officers engaged in these functions it has created a Marine Safety Manual.
That Manual gives guidance as to what appropriate penalties might be for various types of pollution incidents.
The range of penalties is specified in statutes.
Legislative rule or prosecution policy?
What is the key?

24. Corps of Engineers Example
Corps issues a guidance document providing examples of ways to mitigate wetlands damage.
One way is to promise to restore 2X as much wet land as you fill.
Does this need notice and comment?
Why or why not?
What if the Corps will only issue permits to people who agree to this?
How would you prove this?

25. Setting a Threshold for Prosecution
The FDA issues a policy statement that it will not take enforcement actions against candy bars unless they have more than 5 insect parts per bar.
There is no statutory standard.
You represent Consumers Disgusted by Bug Parts, Inc.
What is your argument that this is really a rule?
Community Nutrition Institute v. Young, 818 F.2d 943 (D.C. Cir. 1987)

26. Coercion: Chamber of Commerce v. U. S. DOL, 174 F. 3d 206 (D. C. Cir
DOL made a policy statement that it would reduce inspections of workplaces that adopted an OSHA suggested safety plan that exceeded federal minimums
Is this really voluntary?
What happens if you do not comply?
Does coercion make this a binding rule?
What about DOJ guidance that a corporate compliance plan will count as mitigation under the Sentencing Guidelines?
Does it affect law abiding companies?

27. Substantial Impact Test for Procedural Rules
The Department of Health and Human Services changed the method by which home health providers could obtain reimbursement for expenses under the Medicare Program. In particular it required that they submit their requests in a new format and to regional intermediaries, rather than to HHS directly.
How did plaintiffs argue that this was a legislative rule, rather than a procedural rule?
What is the impact on them of the change?

28. Inspection or Prosecution Guidelines
OSHA adopts a plan for deciding which employers to inspect.
A selected employer contests the rule, saying that OSHA inspections are expensive and time consuming, thus this has a substantial impact.
Is this a successful argument?
Why, or why not?
How is this different from the coercion case?

29. Procedural Rules and Policy Statements – Wrap-up
Same analysis as substantial impact or legally binding test for substantive rules.
What is the actual impact on your client?
Will compliance costs significantly increase – Medicare case?
Does it change their legal options – shortened period to reply to complaint?
Does it actually change substantive requirements – requiring new information for a benefit determination?
We will revisit this when we look at standing.

30. Publishing Legislative Rules that do not need Notice and Comment
APA 552(D) Publication in the FR
(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; and
What if the agency does not publish the document in the FR, but puts it on the Internet? (Which has become very common.)
“Except to the extent that a person has actual and timely notice of the terms thereof...”

31. Interpretive Rule or Legislative Rule Wrap Up
Does it force regulated parties to change their actions?
Does the agency treat it as binding?
Does it allow exceptions?
Is it necessary to enforce the statute?
List of pollutants, for example.
Does it provide specific details which limit the action of regulated parties?

32. Notice and Public Procedures Are Impracticable, Unnecessary, or Contrary to the Public Interest

33. Actions where Secrecy is Important
Wage and price controls
Bidding on contracts
Negotiations on land purchases and sales

34. Emergencies and Impracticality
Emergency Rules (see News)
Misused in LA
This GAO Report indicates that the feds may also misuse this exception.
Interim Final Rules
Published and in effect, but will be modified after comments are in.

35. Time Constraints
The GAO found that agencies frequently skip notice and comment when they have to make a rule with a short timeframe.
Usually statutory deadlines, or a version of emergencies.
Classic would be hunting seasons.
How would this have helped in the Regulators?
How did notice and comment improve the rule?
Should the agency be able to use this exception if it has delayed rulemaking until there is a deadline?

36. Technical Corrections
Calculations and other non-discretionary rules
Technical corrections
Can require notice and comment if the correction causes a different result.
Theory is that these are mechanical and thus notice and comment would not add any new information.

37. What is Formal Rulemaking?
A rulemaking conducted as a trial type hearing
The agency support for the rule must be presented at the hearing
Interested parties may present and cross-examine evidence
History - grew out of rate making in the early 20th century.
Rate making affects a small number of parties
The courts thought they should get due process

38. Why avoid formal rulemaking?
The peanut hearings (FDA must do formal rulemaking in some situations)
Should peanut butter have 87 or 90% peanuts?
10 years and 7,736 pages of transcript
What was the concern in Shell Oil v. FPC?
Formal rulemaking was impossibly time consuming to use for regulating something changeable such as natural gas rates.
Why does just getting the right to be heard at a formal hearing benefit parties that oppose a rule?

39. When is Formal Rulemaking Required?
Disfavored by the modern courts
Must have magic statutory language or be required by the agency's on rules
Only when rules are required by statute to be "made on the record after opportunity for an agency hearing"
Lawyering tip
When would you want to argue that formal rulemaking is required?
What do you have to do to support your request?

40. When Do You Need To Re-Notice a Revised Rule?

41. Chocolate Manufacturers Ass’n v. Block, 755 F.2d 1098 (4th Cir. 1985)
What is WIC?
What evil substance in what food did the proposed rules propose to regulate?
How was the final rule different from the proposed rule?
What new product was regulated?

42. The Notice Problem What was the CMA's claim?
What was the agency defense?
Does the rule have to be the same?
Why have notice and comment then?
What is the logical outgrowth test?
How would you use it in this case?
What did the court order in this case?
What will the CMA do if a new proposed rule includes them?

43. Limits on Logical Outgrowth - Arizona Public Service Co. v. E.P.A.
EPA publishes a proposed rule that gives Indian tribes the same regulatory rights as states.
State plans are subject to state court judicial review
Why did the tribes object to this in comments? (hint – what is the legal status of tribes)
How was the rule changed?
What was the claim by plaintiffs?
How did the court analyze the problem?
Why shouldn't the change have been a surprise?

44. Note on cases not in the book
While you should know the names of the iconic adlaw cases, this class is not about memorizing case names. When I can, I use real cases rather than hypotheticals as factual or legal examples. I give you case name to identify it as a real case, but I do not expect you to memorize the case name. You should learn the principle and perhaps remember the facts to help you remember the principle. For example, the junk in the park case.

45. What about Technical Information Underlying the Rule? (not in book)
Portland Cement v. Ruckelshaus, 486 F2d 375 (1973)
The agency must disclose the factual basis for the proposed rule, if it relied on scientific studies or other collections of information.
Connecticut Light and Power v. NRC, 673 F2d 525 (1982)?
The agency cannot hide technical information.
Why is this a big deal in environmental regs?
What are the potential downsides of this policy?

46. Additions to the Published Record
(not in the book)

47. Rybachek v EPA, 904 F.2d 1276 (1990) Gold mining under the CWA.
In a dubious reincarnation of the 1890's world of Yukon poet Robert Service, we deal here a century later with “strange things done in the midnight sun by the men who moil for gold.”, quoting The Cremation of Sam McGee
EPA added 6000 pages of supporting info when responding to comments
The agency may supplement the rulemaking record in response to comments asking for explanation.

48. Idaho Farm Bureau Federation v. Babbitt, 58 F.3d 1392 (9th Cir. 1995)
Endangered Species Act listing.
Agency added a report to the record when it replied to comments, then relied on it in the final rule.
The agency may not add new material and then rely on it without given an opportunity to comment on it.

49. Negotiated Rulemaking

50. Negotiated Rulemaking
What is this?
Why is often used in environmental rulemaking?
What are the advantages?
What are the public participation issues?
Assume you are regulating wood stoves
Which groups are most likely to be able to participate?

51. Negotiated Rulemaking and Notice and Comment
The negotiation happens before the rule is proposed in the FR.
The standards for publication and notice are the same as for all other notice and comment rules.
This solves any ex parte contacts problem because the rule must be fully justified by its published record.
Interested parties can still comment.

52. Ex Parte Communications in Litigation
What is an ex parte communication in litigation?
Why do we ban them in litigation?
If a party in a lawsuit wants to talk to the judge, how are ex parte contacts avoided?

53. Ex Parte Communications in Rulemaking
How does the notice provision in rulemaking change the issues in ex parte communications?
Why aren’t ex parte communications before the promulgation of the rule a problem?
When could ex parte communications be an issue?
How can you cure this?
The key is whether the published record supports the rule.

54. Bias and Prejudice
Why do we worry about bias and prejudice in litigation?
What was the trade off in adjudication, where we accept potential sources of bias that would not be acceptable in an Article III trial?
How does the process of rulemaking minimize the bias and prejudice problem?

55. Association of National Advertisers , Inc. v. FTC, 627 F.2d 1151 (D.C. Cir. 1979)
FTC is adopting rules on TV advertising directed at children.
Chairman has written and spoken at length on the evils of TV ads aimed at children
Plaintiffs seek to disqualify him because of bias
Court held that plaintiffs must show clear and convincing evidence that he has an unalterably closed mind on matters critical to the rulemaking
No rulemaking has ever been overturned on the basis that a decisionmaker was unlawfully prejudiced.

56. Sierra Club v. Costle, 657 F.2d 298 (D.C. Cir. 1981)
Rulemaking on coal fired power plants
Why is this controversial then and more so now?
Plaintiffs claimed that the president influenced the agency decision after the comment period.
Is that wrong?
Senator Bird also weighed in
What do plaintiffs need to show to establish undue influence?
Why is the outcome test, combined with the record, a good solution?

57. What is the President's Role in Rulemaking? (not independent agencies)
Controls and supervises executive branch decisionmaking
Traditionally expressed through OIRA/OMB
How is the role different in adjudications and executive orders?
When should the president's contacts be documented?
When the statute requires that they be docketed
If the rule is based on factual information that comes from such a meeting.

58. Congressional Mandates (Hybrid Rulemaking) at the FTC
issue an advance notice of proposed rulemaking, which describes the area of inquiry under consideration and invites comments from interested parties;
send the advance notice and, 30 days before its publication, the notice of proposed rulemaking to certain House and Senate committees;
hold a hearing presided over by a hearing officer at which persons may make oral presentations and in certain circumstances to conduct cross-examination of persons;
include a statement of basis and purpose to address certain specified concerns;
and conduct a regulatory analysis of both the proposed and final rules that describes the proposal and alternatives that would achieve the same goal and analyzes the costs and benefits of the proposal and the alternatives.

59. Should State Procedures Mirror Federal?

60. Should State Rules Differ from Federal Rules on Notice and Comment?
Limited staff
Greater reliance on the expertise of board members, rather than staff
Board may hear lots of testimony and review a lot of info - they cannot afford the time and effort to put together volumes of supporting info for regs
What about LA's 300+ tiny boards?
Should state agencies have a reduced publication requirement?
Should they be able to publish rules without explanation and only have to explain if asked?