THE PRESIDENT'S MANAGEMENT COUNCIL
D. Graham /s/
Review of Agency Rulemaking by OIRA
Federal regulations can provide cost-effective solutions to many
problems. If not properly developed, regulations can lead to an
enormous burden on the economy.
In this context, I call your attention to Executive Order No. 12866,
"Regulatory Planning and Review." Under this Executive Order, the
Administrator of the Office of Information and Regulatory Affairs
(OIRA) carries out a regulatory review process on behalf of the
President. The President's Chief of Staff, Andrew H. Card, Jr.,
has directed me to work with the agencies to implement vigorously
the principles and procedures in E.O. 12866 until a modified or
new Executive order is issued.
I want to stress that it is my goal to work with you to carry out
OIRA's regulatory reviews thoroughly and cooperatively. To help
us work together more effectively, I have attached a detailed description
of how OIRA carries out this regulatory review, summarizing the
principles we follow and the procedures we use. I request that you
send this attachment to the appropriate officials in your agency
that are responsible for regulatory development.
Working together to apply the regulatory principles in E.O. 12866,
I believe we will strengthen the country's regulatory structure.
I look forward to working with all of you and your staff.
REGULATORY REVIEW: PRINCIPLES AND PROCEDURES
describes the general principles and procedures that will be applied
by OMB in the implementation of E.O. 12866 and related statutory
and executive authority.
Review of Significant Regulations
"Regulatory Planning and Review,"(1)
governs OIRA's oversight of agency rulemaking, requiring OIRA review
of "significant" agency regulatory actions before they are proposed
for public comment, and again before they are issued in final form.
The Order defines "regulatory action" broadly to include all substantive
action by an agency that is expected to lead to the issuance of
a final rule. Over the past several years, OIRA staff have worked
with agencies to develop a common understanding of what is meant
by a "significant" regulatory action (see section 3(f)). While OIRA
does not formally review non-significant regulatory actions, agencies
are expected to ensure that they are consistent with the Order's
regulatory principles (section 1).
transmittal to OIRA of a draft rule, OIRA reviews the draft rule
for consistency with the regulatory principles stated in the Order,
and with the President's policies and priorities. The review determines
whether the agency has, in deciding whether and how to regulate,
assessed the costs and benefits of available regulatory alternatives
(including the alternative of not regulating). Specifically, E.O.
12866 states that, "in choosing among alternative regulatory approaches,
agencies should select those approaches that maximize net benefits...
." E.O. 12866 further states that, "Each agency shall assess both
the costs and the benefits of the intended regulation and, recognizing
that some costs and benefits are difficult to quantify, propose
or adopt a regulation only upon a reasoned determination that the
benefits of the intended regulation justify its costs."
prepare a Regulatory Impact Analysis (RIA) for each regulation that
OIRA or the agency designates as "economically significant." Section
3(f)(1) of the Order defines an "economically significant" rule
as one likely to "have an annual effect on the economy of $100 million
or more or adversely affect in a material way the economy, a sector
of the economy, productivity, competition, jobs, the environment,
public health or safety, or State, local, or tribal governments
or communities." This definition is functionally equivalent to the
definition of a "major" rule as that term is used in the Congressional
The RIA must
provide an assessment of benefits, costs, and potentially effective
and reasonably feasible alternatives to the planned regulatory action
(see section 6(a)(3)(C)). This is submitted to OIRA along with the
applicable draft regulatory action. Preparing RIAs helps agencies
evaluate the need for and consequences of possible Federal action.
By analyzing alternate ways to structure a rule, agencies can select
the best option while providing OIRA and the public a broader understanding
of the ranges of issues that may be involved. Accordingly, it is
important that a draft RIA be reviewed by agency economists, engineers,
and scientists, as well as by agency attorneys, prior to submission
OIRA also relies
on RIAs to meet its obligations (1) under the Congressional Review
Act, which directs the OIRA Administrator to determine if final
rules are "major"(3) and (2) under
another law,(4) which requires the
OMB Director to submit an annual report to Congress on the costs
and benefits of Federal regulation.(5)
As a result, agency submissions to OIRA of economically significant
rules shall include RIAs, regardless of the extent to which an agency
is permitted by law to consider risks, costs, or benefits in issuing
a regulation. RIAs should be prepared in a way consistent with OMB
also evaluates, on occasion in consultation with the Office of Science
and Technology Policy, whether the agency has, in assessing exposure
to a risk or environmental hazard, conducted an adequate risk assessment.
The risk assessment should be an objective, realistic, and scientifically
We note that
in 1996 the Congress, for health decisions under the Safe Drinking
Water Act, adopted a basic standard of quality for the use of science
in agency decisionmaking. Congress directed an agency, "to the degree
that an [a]gency action is based on science," to use "(i) the best
available, peer-reviewed science and supporting studies conducted
in accordance with sound and objective scientific practices; and
(ii) data collected by accepted methods or best available methods
(if the reliability of the method and the nature of the decision
justifies use of the data)."(7) We
further note that, in 1996 the Congress adopted a basic quality
standard for the dissemination of public information involving risk
effects. Congress directed the agency, "to ensure that the presentation
of information [risk] effects is comprehensive, informative, and
understandable." Congress further directed the agency, "in a document
made available to the public in support of a regulation [to] specify,
to the extent practicable - (i) each population addressed by any
estimate [of applicable risk effects]; (ii) the expected risk or
central estimate of risk for the specific populations [affected];
(iii) each appropriate upper-bound or lower-bound estimate of risk;
(iv) each significant uncertainty identified in the process of the
assessment of [risk] effects and the studies that would assist in
resolving the uncertainty; and (v) peer-reviewed studies known to
the [agency] that support, are directly relevant to, or fail to
support any estimate of [risk] effects and the methodology used
to reconcile inconsistencies in the scientific data."(8)
OMB recommends that each agency consider adopting or adapting these
basic Congressional standards for judging the quality of scientific
information about risk it uses and disseminates.
significant and major rulemakings, OMB recommends that agencies
subject RIAs and supporting technical documents to independent,
external peer review by qualified specialists. Given the growing
public interest in peer review at agencies, OMB recommends that
(a) peer reviewers be selected primarily on the basis of necessary
technical expertise, (b) peer reviewers be expected to disclose
to agencies prior technical/policy positions they may have taken
on the issues at hand, (c) peer reviewers be expected to disclose
to agencies their sources of personal and institutional funding
(private or public sector), and (d) peer reviews be conducted in
an open and rigorous manner. OIRA will be giving a measure of deference
to agency analysis that has been developed in conjunction with such
peer review procedures.
on State and Local Governments and Indian Tribal Governments
As part of
OIRA's regulatory review, OIRA staff will ensure that regulatory
clearance packages include, if applicable, the agency certification
required by two Executive orders, E.O. 13132, "Federalism,"(9)
and E.O. 13175, "Consultation and Coordination with Indian Tribal
Governments."(10) As OMB Director
Daniels has pledged to Congress, rulemaking proposals that were
not subjected to adequate State and local consultation will be returned
to agencies for reconsideration.
on Energy Supply, Production, and Consumption
OIRA will also
be reviewing agency "Statements of Energy Effects" and determining
whether the agency should have submitted one with its regulatory
clearance package. In order to ensure that agencies appropriately
weigh and consider the effects of the Federal Government's regulations
on the supply, distribution, and use of energy, E.O. 13211, "Actions
Concerning Regulations That Significantly Affect Energy Supply,
Distribution, or Use,"(11) requires
agencies to prepare and submit to OIRA a "Statement of Energy Effects"
whenever they submit a significant energy action for OIRA review
under E.O. 12866.
on Other Federal Agencies
aspect of OIRA's review of a draft rule is an evaluation of its
possible impact on the programs of other Federal agencies. This
evaluation often involves an interagency review by specialists from
affected agencies and the coordination of agency positions, as necessary.
on Small Business
as in the past, OIRA often seeks the views of the Small Business
Administration and the SBA Chief Counsel for Advocacy. We do this
for two reasons. First, E.O. 12866 directs each agency to "tailor
its regulations to impose the least burden on ... businesses of
different sizes ..." (section 1(11)). Second, the Regulatory Flexibility
Act(12) sets forth the regulatory
principle that Federal agencies endeavor, consistent with applicable
statutes, to fit regulatory requirements to the scale of entities
subject to the regulation, and designates the SBA Chief Counsel
for Advocacy as the official responsible for overseeing agency compliance
with that Act.
of Significant Regulatory Actions
In the course
of OIRA's review of a draft regulatory action (and accompanying
RIA and risk assessment, where applicable), the OIRA Desk Officer
will work closely with agency staff. When OIRA has completed its
review of a regulatory action, OIRA notifies the agency by telephone
that it has concluded review. After receiving notification from
OIRA that it has concluded review, the agency may issue the regulatory
In the case
of a proposed rule, we encourage each agency to provide the public
with at least 60 days to comment on proposals (section 6(a)(1)).
In the case of a rule subject to statutory or judicial deadlines,
OMB will not unilaterally delay publication beyond the deadline.
In such cases, the agency must submit the rule to OIRA in a timely
fashion, so as to provide a meaningful opportunity for Executive
Office review. In cases where time frames are particularly tight
due to a statutory or judicial deadline, agencies should consider
submitting the draft rule to OIRA for preliminary review at the
same time that it is being reviewed by senior agency policymakers.
Disclosure of OIRA Communications with Outside Parties
parties outside the Executive branch will meet with the OIRA Administrator
or his or her designee regarding a rule under review. OIRA will
invite representatives of relevant agencies to such meetings and
OIRA appreciates having agencies make senior regulatory policy officials
available to attend such meetings. In addition, written materials
received from those outside the Executive branch are retained for
public inspection in OIRA's public docket room and forwarded to
the rulemaking agency. It is the responsibility of each agency to
place these in the rulemaking docket. These communications are disclosed
to the public as described in E.O. 12866, section 6(b)(4).
course of OIRA's review of a draft regulation, the Administrator
may decide to send a letter to the agency that returns the rule
for reconsideration. Such a return may occur if the quality of the
agency's analyses is inadequate, if the regulatory standards adopted
are not justified by the analyses, if the rule is not consistent
with the regulatory principles stated in the Order or with the President's
policies and priorities, or if the rule is not compatible with other
Executive orders or statutes. As Director Daniels stated in an earlier
memorandum,"if OMB determines that more substantial work is needed,
OMB will return the draft rule to the agency for improved analysis."(13)
Since that memo was issued, OIRA has returned two agency draft rules,
in both cases due to analytical problems.
It is important
to understand that such a return does not necessarily imply that
either OIRA or OMB is opposed to the draft rule. Rather, the return
letter will explain why OIRA believes that the rulemaking would
benefit from further consideration by the agency.
prepare semi-annual regulatory agendas under E.O. 12866, section
4(b), outlining the agencies foreseeable regulatory priorities.
OIRA plans to send, as occasion arises, what will be referred to
as "prompt" letters. The purpose of a prompt letter is to suggest
an issue that OMB believes is worthy of agency priority. Rather
than being sent in response to the agency's submission of a draft
rule for OIRA review, a "prompt" letter will be sent on OMB's initiative
and will contain a suggestion for how the agency could improve its
regulations. For example, the suggestion might be that an agency
explore a promising regulatory issue for agency action, accelerate
its efforts on an ongoing regulatory matter, or consider rescinding
or modifying an existing rule. We will request prompt agency response
to "prompt" letters, normally within 30 days.
Related Statutory and Executive Obligations
OIRA has related
statutory and executive obligations that directly affect OIRA's
responsibility to review agency regulatory actions under E.O. 12866.
- Under the
Congressional Review Act,(14)
the OIRA Administrator determines if an agency final rule is "major"
(in general, having an annual economic effect of over $100,000,000),
and thus subject to special provisions of that Act.(15)
- Under another
law,(16) the OMB Director must
submit an annual report to Congress on the costs and benefits
of Federal regulation; OIRA prepares that report, based largely
on the regulatory impact analyses that agencies prepare in compliance
with E.O. 12866.
- Under the
Unfunded Mandates Reform Act,(17)
each agency must prepare a specific kind of benefit-cost analysis
for any proposed and final rule "that may result in the expenditure
by State, local, and tribal governments, in the aggregate, or
by the private sector, of $100,000,000 or more (adjusted annually
for inflation) in any one year." When preparing such an analysis,
the agency must also "identify and consider a reasonable number
of regulatory alternatives and from those alternatives select
the least costly, most cost-effective or least burdensome alternative
that achieves the objectives of the rule ...". OMB reports annually
to Congress on agency compliance with these requirements.
- Under an
appropriations rider,(18) OMB
is to issue government-wide guidelines that provide policy and
procedural guidance to Federal agencies for ensuring and maximizing
the quality, objectivity, utility, and integrity of information
(including statistical information) disseminated by Federal agencies.
Under these OMB guidelines, agencies are to issue their own implementing
guidelines that include administrative mechanisms allowing affected
persons to seek and obtain correction of the information. This
law affects the regulatory development process because Federal
regulations may be based on the findings of scientific or other
research studies disseminated by a Federal agency in the course
of the rulemaking.
- Under the
Paperwork Reduction Act,(19) OIRA
reviews and approves (or disapproves) each collection of information
by a Federal agency. This includes information collections contained
in agency regulations.
We are looking
forward to working cooperatively with you and your staff to meet
our respective statutory obligations and to move the President's
If there are
any questions concerning OIRA's regulatory review process, agency
staff should contact the appropriate OIRA Desk Officer, the OIRA
Deputy Administrator, Donald R. Arbuckle (395-5897), or the OIRA
Administrator, John D. Graham (395-4852).
58 Fed. Reg. 51735 (October 4, 1993).
5 U.S.C. 804(2).
5 U.S.C. 804(2).
Consolidated Appropriations Act of 2001 (H.R. 5658, section
624, P.L. 106-554).
See, OMB Memorandum M-00-08, "Guidelines to Standardize
Measures of Costs and Benefits and the Format of Accounting
Statements" (March 22, 2000).
See, OMB Memorandum M-01-23, "Improving Regulatory Impact
Analyses" (June 19, 2001).
42 U.S.C. 300g-1(b)(3)(A).
64 Fed. Reg. 43255 (August 10, 1999). See, OMB Memorandum
M-00-02, "Guidance for Implementing E.O. 13132, 'Federalism.'
65 Fed. Reg. 67249 (November 9, 2000). See, OMB Memorandum
M-01-07, "Guidance for Implementing E.O. 13175, 'Consultation
and Coordination with Indian Tribal Governments.' "
E.O. 13211 of May 18, 2001 (66 Fed. Reg. 28355 (May 22,
2001)). See, OMB Memorandum M-01-27, "Guidance for Implementing
E.O. 13211" (July 13, 2001).
5 U.S.C. chapter 6.
OMB Memorandum M-01-23, "Improving Regulatory Impact Analyses"
(June 19, 2001).
5 U.S.C. chapter 8.
See, OMB Memorandum M-99-13, "Guidance for Implementing
the Congressional Review Act" (March 30, 1999).
The Consolidated Appropriations Act of 2001, H.R. 5658,
section 624, P.L. 106-554.
P.L. 104-4, section 202 (March 22, 1995).
Section 515 of the Treasury and General Government Appropriations
Act for Fiscal Year 2001 (P.L. 106-554).
44 U.S.C. chapter 35.