In recent years, there have been greater agency efforts to evaluate more carefully the benefits and burdens of proposed regulations. This change is in part attributable to the courts, which have prodded the agencies into considering such issues. In part it is due to the efforts of the agencies themselves. The Environmental Protection Agency and the Federal Trade Commission have taken an important role in this effort, which has also been promoted by the Regulatory Council. However, I believe it highly desirable that Congress provide explicitly that, in major rulemaking proceedings having a significant impact on the economy or on health or welfare, agencies explicitly evaluate the effectiveness and the benefits of proposed regulations and, to the extent permitted by statute, the costs and burdens. This should encourage better decisionmaking on a case-by-case basis, just as proposals for performance monitoring and a Regulatory Commission would encourage improvement on an agency-by-agency basis.

I should like to turn to the procedural aspects of regulatory reform. Procedural changes alone are not sufficient to achieve the goal of substantive reform. But they can, in conjunction with efforts like those I have earlier described, play a vital role in assuring the public and affected interests of the basic fairness and rationality of agency decisionmaking and in encouraging better informed and considered agency decisions.

The Administration and the Senate Government Operations Committee have proposed regulatory reform legislation that would amend the Administrative Procedure Act. I should like to discuss two procedural issues that have not been fully addressed by those proposals. In doing so, I would like to caution the committee that these proposals, if enacted, would represent the most important modification of the original procedural provisions of the Administrative Procedure Act since the APA's enactment in 1946. Because occasions for basic amendment of an act like the APA are exceedingly infrequent, I would urge the committee to give the most careful consideration to any proposed changes. Undue haste in procedural change may have heavy costs if unsuitable or unwieldly provisions are locked into law for a long period.

One important topic that is not, in my view, adequately addressed in the proposals of the administration and the Government Operations Committee concerns procedures in rulemaking. The bulk of Government regulation today is accomplished through agency promulgation of general rules and regulations. This represents an important shift from earlier practice, when agencies placed far greater reliance on case-by-case formal adjudication to define and implement regulatory policy. The Administrative Procedure Act specifies two basic sets of procedures for rulemaking.

In formal rulemaking, the APA requires an agency to employ trial-type procedures and incorporate all relevant evidence and argument in a formal record. Formal rulemaking procedures have often resulted in lengthy, cumbersome, proceedings that put a premium on delay and are often ill-suited to deal with many of the general policy issues which permeate rulemaking. In several recent decisions, the Supreme Court has reacted to these shortcomings by rulings that sharply limit the number of proceedings subject to the APA's formal rulemaking provisions.

The second basic rulemaking procedure specified in the APA consists of informal notice and comment procedures that merely require the agency to publish a proposed rule in the Federal Register, receive written comments on the proposal, and publish a short explanatory statement together with the rule eventually adopted. The APA contains numerous exceptions from even these minimal requirements.

Agencies have increasingly turned to informal notice and comment rulemaking to adopt regulations with quite sweeping economic and health and welfare implications. As written, the APA does not require agencies to disclose the facts or analysis upon which they rely in promulgating informal rules. This has severely frustrated efforts by environmental groups, consumer groups, regulated firms, and other concerned interests to ascertain and challenge the basis for an agency's proposal or decision. The courts have been similarly frustrated when called on to review the ultimate validity of the regulations. In response, the courts have developed, through case-by-case decision, a series of "hybrid" rulemaking requirements designed to force agency disclosure of the underlying facts and analysis, permit all interested parties to comment upon and mutually evaluate that material, and prod the agencies into a more fully reasoned explanation of their ultimate decision in light of the data and analysis developed by the agency and interested parties.

While I believe these "hybrid" rulemaking developments to have been, on the whole, needed and desirable, reliance on case-by-case judicial decisionmaking to evolve new procedures has created a degree of confusion and uncertainty. In some cases courts may have gone too far in formalizing the rulemaking process. Moreover, the Supreme Court last term held in Vermont Yankee Nuclear Power Co. v. Natural Resources Defense Council that Federal courts generally lack the authority to require agencies to follow hybrid procedures going beyond current APA notice and comment minima. Accordingly, I believe that it is now Congress' responsibility to update the APA to the realities of modern agency decisionmaking by strengthening the procedural requirements in informal rulemaking in those cases where the rules would have a significant impact on the economy or on health and welfare.

I would suggest that Congress require that, in such proceedings, agencies maintain in a public file all of the documentary material and analysis upon which they have relied in deciding upon a rule. [The file would also include the proposed and final rules and relevant comments.] This would assure interested parties and the courts alike access to the basic materials which underlie the agency's decision. In particular, the file should contain the agency's analysis of the benefits and burdens of its proposed or final rule, and of alternative proposals. The legislation proposed by the administration and the Government Operations Committee would insulate such analysis from judicial review. I disagree, believing that any analysis by the agency of the benefits and burdens of regulations should be a part of the record that the public, the parties and the courts can review in evaluating the agency's proposed or final decision.

Where sharply disputed fact issues exist that should be resolved on the basis of procedures other than disclosure or submission of written documents, agencies should be encouraged to use additional procedures to resolve such issues. The alternatives could be quite broad, including oral hearings, the use of expert advisory committees, or mediation techniques. It should be clear that the agency enjoys wide discretion in choosing the appropriate procedure so long as disputed fact issues are fairly exposed for consideration by the public, by interested parties, and by reviewing courts.

I would also hope that the Congress could provide guidance to the courts on the troubling question of nonpublic communications between agency decisionmakers and outside parties or other governmental officials in informal rulemaking. The courts have struggled with this issue; and it is a difficult one to resolve, both because of the great variety of rulemaking proceedings and because the issue of nonpublic communications is highly controversial. But I believe that Congress should by legislation ensure disclosure of basic data and analysis submitted or utilized in rulemaking without excessive formalization of the rulemaking process.

Finally, the present APA exemptions from notice and comment rulemaking requirements should be sharply curtailed.

The second procedural issue that I would stress is the question of standing to secure judicial review: what persons or organizations may challenge the statutory validity of an agency's action in court in the absense of a specific statute identifying those parties who may seek review? The question of standing has been muddled by a number of recent Supreme Court decisions, and lower Federal courts have issued rulings that would block or limit access by public interest environmental or consumer groups to the courts to challenge agency action, often on the ground that they do not have voting members who themselves would meet standing requirements. These decisions represent a regressive and undesirable step. They may well tend to increase rather than reduce the burdens on the courts because the parties spend considerable time litigating the preliminary issue of standing. Even under the restrictive rules interposed by some courts, public interest groups or their members can often-after protracted litigation or amendment of the pleadings-eventually obtain standing. But the burdens of complying with restrictive or illogical standing rules involve time delays and resource costs that fall particularly hard on public interest groups with limited resources. In short, many of these court-created obstacles to standing by public interest representatives involve burdens that far outweigh their conceivable justifications. Congress should take corrective action.

Finally, I believe that appropriate steps should be taken to enhance and strengthen the participation of public interest groups in agency rulemaking proceedings. The record of the past 7 or 8 years demonstrates that such groups have a helpful and constructive role to play in agency proceedings. Reliance on private funding of such representation is desirable but not wholly adequate.

Proposals have been made to use a reorganized Administrative Conference in the intervenor funding process. A block appropriation to the Administrative Conference for funding of intervention before all Government agencies may well be preferable to funding such intervention agency-by-agency; the latter alternative invites legislative retaliation for an unpopular agency decision by cutting that agency's intervenor funding appropriation.

However, a system that would give the Administrative Conference authority to allocate funding among agencies and decide particular funding applications raises questions. Even under existing agency-by-agency arrangements, EDF and other public interest organizations have experienced long delays in receiving reimbursement for incurred expenses of intervention. Centralization of all decisions could create further delay and confusion. Allocation by the Conference of intervenor funding appropriations among agencies will inevitably be a lengthy and cumbersome process. The Conference may not be in a better position than individual agencies to determine whether funding one particular intervenor applicant rather than another will assist the agency in achieving its goals. A monitoring and oversight role for the Conference would be appropriate. But, at least initially, it might well be preferable to leave to individual agencies decisions on particular applications and allow agencies to draw on the block "umbrella" appropriation to the Conference on a first-come first-served basis, subject to a percentage ceiling on the appropriations that any one agency can draw upon.

Senator CULVER. I believe also, Senator Mathias submitted questions for the administration witnesses and without objection, they will be included in the record and submitted for their response.

I want to thank you very much again. The subcommittee will stand in recess until further call of the Chair.

[Whereupon, at 1:12 p.m., the hearing was adjoured, subject to the call of the Chair.]

[See appendix for additional material.]

REGULATORY REFORM

TUESDAY, MAY 15, 1979

U.S. SENATE,

SUBCOMMITTEE ON ADMINISTRATIVE PRACTICE AND

PROCEDURE OF THE COMMITTEE ON THE JUDICIARY,

Washington, D.C. The committee met, pursuant to notice, at 11:05 a.m., in room 2228, Dirksen Senate Office Building, Washington, D.C., Hon. Edward M. Kennedy (chairman of the committee) presiding.

Present: Senator Kennedy.

Also present: David Boies, chief counsel and staff director; Patti Saris, counsel, and Peter Chumbris, minority consultant. Senator KENNEDY. The hearing will come to order.

OPENING STATEMENT OF SENATOR KENNEDY

The Judiciary Committee resumes hearings this morning on various legislative proposals to reform the regulatory process. These hearings focus on the need to make "big" Government more responsive to the needs of the American people, and on ways to improve the effectiveness of regulatory agencies in achieving their goals. At our opening hearing last Thursday, we heard three distinct perspectives on the approaches to regulatory reform.

First, Judge Harold Leventhal of the D.C. Circuit Court of Appeals testified about the need for legislation which will increase public participation in agency rulemaking, but cautioned against requiring an agency to engage in procedures that are "so formalized that they clog the wheels of Government."

I fully agree with this perspective. My draft proposal increases public participation by providing flexible procedures to involve the public at the earliest stages of an agency rulemaking and by providing funds to those persons or groups that will represent a point of view which is critical to informed decisionmaking. I was glad to see that S. 262 and S. 755 also contain provisions for public participation funding.

Second, we heard from three administration witnesses about the need for improved agency decisionmaking. The administration's proposal, S. 755, requires an agency to explain why a rule attains its objectives with less adverse economic effects than other alternatives, or to explain why an approach entailing greater adverse economic effects was chosen.

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