The House of Representatives has passed the Regulatory Accountability Act (RAA) and sent it to the Senate.  If it becomes law, the RAA would result in major changes in administrative procedure for regulations that have a significant impact on the economy.

The bill defines a “major rule” as one likely to impose (1) an annual cost to the economy of $100,000,000 or more; (2) a major increase in the cost of goods or services; (3) significant adverse effects on competitiveness, employment, investment, productivity or innovation; or (4) significant impact on multiple areas of the economy.  It defines a “high impact rule” as one likely to impose annual costs in excess of $1,000,000,000.  The dollar figures are adjusted annually for inflation.

For all rules, agencies must base factual determinations on evidence.  In addition, agencies must identify:

  • The legal authority for the proposed rule, and whether it is mandatory or discretionary.
  • Other statutory provisions that bear on the wisdom of the proposed rule.
  • The risks addressed by the proposed rule and the countervailing risks that it may create.
  • The degree to which existing rules have caused the problem and whether amendments or rescission of those rules can ameliorate it.
  • Reasonable alternatives, such as leaving the matter to state or local authority, providing information to the public, using economic incentives to encourage behavior, or specifying objectives rather than methods of compliance.
  • A comprehensive cost-benefit analysis, direct and indirect, on jobs, wages, economic growth, innovation, competitiveness and incentives to improve efficiency.

For all proposed rules with major or high impact, negative-job-or wage potential, or novel legal or policy issues, the agency must give 90 days’ advanced notice before publication in the Federal Register.  The notice must identify:

  • The nature and significance of the problem the agency proposes to address, together with the evidence on which the agency proposes to rely.
  • The legal authority for the proposed rule.
  • Preliminary information on the factors the agency must consider.
  • For novel potential rules, the reasons why the agency believes it should address them.
  • Achievable objectives and the metrics by which the agency will measure progress toward that objective.

The agency must solicit information about these topics from interested persons and allow them at least 60 days to comment.   

The RAA contains much more extensive notice provisions than existing law.  After consulting with the Office of Information and Regulatory Affairs (OIRA), the agency must provide notice of proposed rulemaking, including the time and place of a hearing and the information that the agency is required to consider in promulgating the proposed rule.  It must provide a reasoned preliminary determination of the need for the proposed rule and that its benefits exceed the costs.  The comment period is a minimum of 60 days, 120 for major or high impact proposed rules.

If the agency ultimately decides not to enact the proposed rule, it must publish notice of that course.  If it proposes a different new rule, it must comply with the notice procedure described above.  If the agency merely amends or repeals an existing rule, it need not comply with those procedures before publishing notice of proposed rulemaking.

Once an agency has proposed a rule, neither it nor any person acting in an official capacity may lobby for or against the rule.  No person or entity receiving federal funds may use those funds to lobby for or against passage.

For high impact rules, unless waived by all concerned, the agency must conduct a public hearing to consider evidence about the proposed rule.  The agency must determine, on the basis of the hearing, whether:

  • Whether the evidence supports the factual predicate of the proposed new rule.
  • There are less costly means to achieve the agency’s objective.
  • If several alternatives to achieve the agency’s objective, which is least costly.
  • If the agency has selected an alternative other than the least costly, whether the extra costs are worth the extra benefit.

The agency may promulgate a final rule only on the basis of the best available evidence.  It must adopt the least costly alternative that meets the agency’s objectives.  It may adopt a more costly alternative only upon concluding that the additional benefits warrant the additional cost.

Upon final adoption the agency must publish notice.  The notice must contain a reasoned determination that the final rule satisfies the requirements the agency must consider.  It must also certify that existing regulations have not caused or contributed to the problem, or, if they have, why the agency is not rescinding or amending those regulations.  It must also provide a reasoned determination that the agency will use appropriate metrics to evaluate the rule.

For any major, high impact or negative-jobs-or-wages rule, the agency must explain its plan to review at least every ten years whether the rule is achieving its objectives and if so, whether the cost is worth it.  For a major rule, the agency must publish in the Federal Register every five years a cost-benefit report.

These provisions generally do not apply to interpretive rules or general statements of policy.  When necessary, the agency may promulgate an interim rule without complying with the notice and comment provisions, but it must complete final action within 270 days except for major or high impact rules, which are allowed 18 months.  Except for national security issues, any party may seek immediate judicial review of an interim rule.

The RAA requires OIRA to issue and periodically update guidelines for conducting the cost-benefit analyses required of each agency.  OIRA must issue guidelines across agencies to avoid inconsistent or duplicative regulations.  It must also issue guidelines on how agencies should conform to the RAA when enacting regulations pursuant to other statutory authority.  Finally, OIRA must issue guidelines for the conduct of the required hearings, including meaningful cross-examination.

If the agency decides that the cost of a major regulation outweighs its benefit, it must report to Congress within 90 days.  The report must address whether the rule is accomplishing its objective and whether it has been rendered unnecessary either by state or local regulations or by alternative federal regulations.

Historically, courts have generally deferred to administrative agencies on interpretation of the statutes and regulations they administer.  If a statute is ambiguous and the agency’s interpretation is reasonable, it is binding on the courts under the Chevron-deference standard.  The agency’s informal interpretations are due deference under Skidmore to the extent they are persuasive.

The RAA changes all that.  It defines major guidance under the same criteria as a major rule.  If an agency decides to issue major guidance, or guidance involving a novel legal or policy issue, it must accompany it with a reasoned determination that:

  • Assures the guidance is understandable and complies with the relevant statutes.
  • Summarizes the evidence on which the guidance is based.
  • Identifies all costs and benefits.
  • Describes all alternatives and explains why the agency rejected them.

Contrary to Skidmore, no agency guidance (major or otherwise) is legally binding and an agency may not rely on it as legal grounds for any action.

The RAA also overturns Chevron deference.  It provides for de novo review of all questions of law, whether constitutional, statutory or rule.  If there is a gap or ambiguity, the courts shall not treat that as a delegation of interpretive authority to the agency nor defer to the agency’s interpretation.

Finally, no high impact rule may take effect until all judicial challenges have been resolved or the time to file same has elapsed without challenge.