This post is part of the Regulatory Reform in Congress Series, which highlights and analyzes legislative proposals to reform the federal regulatory state. All posts in this RegReform Series can be found here.
What to Make of the Regulatory Accountablity Act’s Public Hearing Right for >$100M Rules?
Perhaps the most controversial provisions of the Portman-Heitkamp Regulatory Accountability Act of 2017 concern the availability of a public hearing for rules that have an economic impact of $100 million or more. The legislation would amend the Administrative Procedure Act to allow interested parties to petition for a public hearing and require the agency to include in the rulemaking record an explanation for any denial of such petition. The public hearing would be limited to the disputed factual issues raised in the granted petition(s) as well as other factual issues the agency so designates. The burden of proof would be on the rule’s proponent, evidence would be admitted unless the agency determines it is “immaterial or unduly repetitious evidence,” an agency official would preside over the hearing, there would be a reasonable and adequate opportunity for cross-examination, and a full record of the hearing would be maintained.
If this process sounds somewhat familiar, that is because it is a slimmed-down version of formal rulemaking—a procedural device that still exists on the books yet has virtually disappeared in administrative practice. The Regulatory Review this week has published a nice point/counterpoint on the public hearing provisions.
First, Dick Pierce pulls no punches in calling the public hearing provisions the worst part of the legislation. Here’s a taste from his essay:
Despite having many characteristics consistent with Senator Portman’s claims, the bill contains one glaring error.
Section 3(e) of the bill requires an agency to conduct an oral evidentiary hearing, including cross-examination, with respect to “genuinely disputed” “specific scientific, technical, economic, or other complex factual issues” in any rulemaking expected to have an annual effect on the economy of $100 million or more. More than 100 rulemakings a year have such an impact and each of those rulemakings raises many issues that could trigger the Section 3(e) right to cross-examination.
Section 3(e) is a variant of “formal rulemaking,” a procedure that requires agencies to add a limited right of cross-examination to the already time-consuming, demanding, and resource-intensive process of notice and comment rulemaking. Formal rulemaking has a long and disastrous history.
And here’s a snippet from the counterpoint essay by Kent Barnett,* which was published today:
Formal, on-the-record rulemaking is the platypus of administrative law. Unlike the common notice-and-comment rulemaking process, formal rulemaking involves adjudicatory-like hearings with an administrative law judge, testimony, cross-examination, and an exclusive record. Formal rulemaking prioritizes participation by affected parties, reasoned decision-making with a closed record, and transparency over notice-and-comment rulemaking’s preference for increased agency flexibility. Scholars, policy makers, and other interested parties have advocated for killing this gawky beast. Indeed, in the 1970s, the U.S. Supreme Court, in United States v. Allegheny-Ludlum Steel and United States v. Florida East Coast Railway, strapped formal rulemaking to the gurney. But formal rulemaking still has its uses, and it should be considered on its merits in particular regulatory situations.
. . .
[A]lthough a full consideration of when formal rulemaking can be helpful might take much more space than this essay can provide, as a preliminary matter it would seem that formal rulemaking would make the most sense when some combination of the following circumstances exists: where facts, instead of discretionary decisions, are determinative; where the rules at issue are significant and will receive priority from the agency; where particular parties are especially affected, such as in ratemakings; and where regulatory capture is likely. The key point is that these circumstances dovetail with some of the same considerations called for by the RAA in deciding when to hold a public hearing. Instead of questioning formal rulemaking’s very existence, scholars and policymakers should recognize that formal rulemaking still can be useful, even if its domain is limited.
Despite its unconventional appearance, formal rulemaking remains one of administrative law’s four key forms of agency action—along with formal and informal adjudication and informal rulemaking. It may still have some appropriate uses, even if those are relatively rare. As more scholars, policymakers, and interested parties grapple with formal rulemaking’s domain, we might collectively determine that public hearings do not make sense even under the conditions that the RAA would demand. But we should evaluate formal rulemaking on its merits in each situation—and not succumb to its myths.
For what it’s worth, in my forthcoming Administrative Law Review essay Modernizing the Administrative Procedure Act, I reach a conclusion similar to Kent’s [paragraph breaks added]:
In sum, the major/high-impact rule provisions in the Regulatory Accountability Act will no doubt find a fair number of critics, bemoaning, among other things, a foolish return to formal rulemaking. To be sure, reasonable minds can disagree on whether the legislation strikes the right balance between expediency and efficiency, on the one hand, and accountability and effectiveness, on the other. But such criticisms may be overstated for three main reasons.
First, if we are going to make federal agencies more transparent and publicly accountable for their regulatory activities, it makes sense to draw a line between highest-impact rules (the top half percent of regulations) and the regular rules and then only require agencies to be more deliberate for the highest-impact rules.
Second, aside from the public hearing requirement, OIRA/OMB already require agencies to engage in these good governance activities—i.e., rigorous cost-benefit analysis per OMB Circular A–4. The proposed legislation merely codifies many of these best practices, and such procedures would apply to both high-impact regulation and deregulation alike.
Finally, the public hearing requirement is not a return to full-fledged formal rulemaking. It is more narrowly tailored to be available upon request for the highest-impact rules, and then only for issues of disputed fact.
* I should note that the three of us are not strangers. Kent and I have been coding Chevron deference circuit courts decisions together for years now, and Dick has penned a very nice review of the first paper from our dataset.