Encourage Consensus-Based Rulemaking

Encourage Consensus-Based Rulemaking

Background

The traditional model for rulemaking is that of agency experts deciding
the best way to regulate, offering the public an opportunity to comment
on the agency's proposed rule or to object to its adoption, and then
issuing binding rules telling regulated entities what to do. Even if the
agency experts choose wisely, the traditional model has very little
buy-in from outside the agency, which undermines the rule's
effectiveness. This traditional process encourages adversarial,
uncooperative behavior on the part of private industry or others who
might be affected by an agency's decisions, which frequently leads to
protracted litigation. Agencies routinely find themselves under attack
from various private parties who are unhappy with the rule. This has
been particularly true in controversial areas such as environmental
regulation or the health and safety of workers.

The traditional process rarely leads to cooperative efforts to resolve
problems. On the contrary, a barrage of written critical comments
followed by litigation in the federal courts is frequently inevitable,
accompanied by long delays and excessive costs. These costs include the
direct costs of pursuing or defending the court case and the cost to
industry and society of long periods of uncertainty about the final
outcome. The expectation of litigation usually sharpens the divisions
between parties during the rulemaking process and may eliminate any
willingness to recognize others' legitimate views. The parties have
little incentive to focus on finding constructive, creative solutions
that address differing legitimate needs. [Endnote 1]

NEED FOR CHANGE

A small number of federal agencies have successfully pioneered a
consensus-based approach to drafting regulations--negotiated rulemaking
(sometimes called regulatory negotiation or "reg neg"). Reg neg brings
together representatives of the agency and the various affected
interests in a cooperative effort to develop regulations that not only
meet statutory requirements, but also are accepted by the people who
ultimately will have to live with the regulations[Endnote 2]

Since 1982, approximately 35 federal agency negotiated rulemakings have
taken place or are currently under way. Almost half have been at the
Environmental Protection Agency (EPA), which is the only federal agency
with a small office assigned specifically to assist other parts of the
agency in doing reg negs. Other users include the Departments of
Agriculture (Animal and Plant Health Inspection Service), Education
(required in certain programs by statute), Labor (Occupational Safety
and Health Administration), and Transportation (Office of the Secretary,
Federal Aviation Administration, Federal Highway Administration,
National Highway Traffic Safety Administration, Coast Guard), Farm
Credit Administration, Federal Communications Commission, and Nuclear
Regulatory Commission[Endnote 3] The Negotiated Rulemaking Act of 1990
establishes a statutory framework for agency use of reg neg.[Endnote 4]

HOW DOES REG NEG WORK? First, an agency would normally ask one or more
"conveners"--either outside contractors or government employees who are
not otherwise involved in the proceeding--to determine whether the rule
is appropriate for reg neg. (As discussed below, reg neg is not
appropriate for all rules.) If the convener recommends reg neg and if
the agency head determines that use of reg neg is in the public
interest, a reg neg committee would be chartered under the procedures of
the Federal Advisory Committee Act.[Endnote 5]

A reg neg committee must be composed of representatives of all affected
interests. The agency and the convener must make reasonable efforts to
ensure that all relevant interest groups and others affected by the rule
are aware of the proceeding. The agency must also publish a notice
explaining the proposed reg neg and offering the opportunity to apply
for participation by interests not already adequately
represented.[Endnote 6]

Meetings of the negotiating committee are conducted by a mediator or
facilitator (often the convener), who may be a government employee or an
individual from the private sector. The agency should participate fully
in the negotiations, making sure that at all times the participants are
aware of what action the agency is likely to take if the committee does
not reach an agreement.

The goal of the negotiators is to reach consensus on the text of a
"proposed" regulation or rule through a process of evaluating their own
priorities and making trade-offs to achieve an acceptable result. In
this way, the competing interests try to work out a practical solution
to the problem necessitating regulatory action. Through the
give-and-take of the negotiating process, participants try to obtain a
favorable outcome on the issues of greatest importance to them, while
recognizing and accommodating the legitimate needs of others.
Throughout the process, the agency's function is to protect the public
interest by implementing all applicable statutory and other legal
requirements.  The public may observe the procedure, and public comments
are invited before, during, and after the negotiations.

If consensus is reached, the agency ordinarily would publish the
consensus draft rule in a notice of proposed rulemaking. If consensus is
not reached, the agency ordinarily publishes its own proposal for a
rule, often making good use of the information it has obtained through
the course of the negotiations.

BENEFITS OF NEGOTIATED RULEMAKING. The long-term benefits of negotiated
rulemaking include:

--more innovative approaches that may reduce compliance costs,

--less time, money, and effort spent on developing and enforcing rules,

--earlier implementation,

--higher compliance rates, and

--more cooperative relationships between the agency and other affected
parties.[Endnote 7]

These benefits flow from the broader participation of the parties, the
opportunity for creative solutions to regulatory problems, and the
potential for avoiding litigation.

If the parties reach consensus, the resulting rule is likely to be
easier to implement and the probability of subsequent litigation is
diminished. Negotiations that do not result in consensus on a draft rule
can still be very useful to the agency by:

--narrowing the issues in dispute,

--identifying information necessary to resolve issues,

--ranking priorities,

--finding potentially acceptable solutions, and

--improving the agency's understanding of the real-world impact of
alternative regulatory options.

Negotiation sessions provide all participants with an opportunity to
have their assumptions and data questioned and tested by parties with
other perspectives. The dynamic nature of negotiating forces each party
to participate in crafting solutions to issues that are on the table for
resolution. In short, the process fosters creative activity by a broad
spectrum of interested persons, targeted at producing better, more
acceptable rules.

In regulatory programs with a history of adversarial rulemaking, it is
not unusual for parties to negotiate a settlement under the supervision
of a court after the rule has been published. Particularly in such
programs, negotiation of a rule prior to the agency's publication of a
proposed rule can save the agency and other parties both time and
resources. By avoiding litigation, programs become effective sooner and
regulated businesses can plan capital expenditures or production changes
earlier than if they faced years of litigation and uncertainty about the
outcome. Moreover, at EPA (which is the most frequent user of the
technique) regulatory negotiations, on average, take less time than
other rulemakings.[Endnote 8]

Time savings can translate into both monetary savings for industry and
greater satisfaction all around. For example, because of a reg neg,
EPA's wood-stove emission standards went into effect as much as two
years earlier than expected. The participant from the Natural Resources
Defense Council was quoted as expressing satisfaction on behalf of
environmental interests that over 1.5 million wood-stoves sold during
the 2-year period would be covered by the new regulation. Manufacturers
were spared 2 years of uncertainty and could begin re-tooling for the
new standards.[Endnote 9]

There can also be important intangible benefits. Even in programs with
no history of adversarial rulemaking, the agency may obtain a better
factual basis for the regulation and a better understanding of the
practical consequences of different regulatory choices--whether or not
consensus is attained.  Regulatory negotiations can help enfranchise
parties with important interests at stake, who may otherwise feel
relatively powerless. Rules drafted with assistance of persons who must
ultimately be governed by them are more likely to be practical, and
therefore more acceptable.

LIMITS ON REG NEG. Negotiated rulemaking is not appropriate for all
rules. Certain characteristics of rulemaking proceedings favor using reg
neg.

--The number of distinct interests concerned with the proposed rule,
including any relevant government agencies, must be small enough so that
they can be fairly represented by not more than 20 to 25 negotiators.

--There should be a number of diverse issues that participants can rank
according to their own priorities, so that there will be room for
compromise on some of the issues as an agreement is sought.

--It is essential that the issues to be negotiated not require
compromise of principles so fundamental to the parties that productive
negotiations are unrealistic.

--Parties must be willing to negotiate in good faith, and no single
interest should be able to dominate the negotiations.

--The parties cannot have an incentive to stall; therefore, they must
believe that the agency itself will issue a rule if consensus is not
reached. A statutory requirement that the agency issue some type of rule
is often helpful.

In rulemakings where reg neg is inappropriate for these or other
reasons, agencies should consider using policy discussion groups.

The most significant deterrent to using negotiated rulemaking is its
up-front cost.The process can be resource-intensive in the short term
for both the agency and the other participants. While there are likely
to be considerable long-term savings in total resources required, the
concentrated investment of effort and expense in the short term may be a
serious obstacle. This is particularly true if the savings and the costs
appear in the budgets of different operating components of the agency.
Additional costs may include services of mediators and conveners,
research conducted on behalf of the negotiating committee,
administrative support for the committee, expenses of participation for
some of the negotiators, and some training costs.


Cross-References To Other Npr Accompanying Reports

Department of Labor, DOL03: Expand Negotiated Rulemaking and Improve
Up-front Teamwork on Regulations.

Department of Transportation, DOT03: Use a Consensus- Building Approach
to Expedite Transportation and Environmental Decisionmaking.

Endnotes

1. See Harter, Philip J., "Negotiating Regulations: A Cure for Malaise,"
Georgetown Law Journal, vol. 71 (1982), p. 1.

2. Administrative Conference of the United States, Recommendations 82-4
and 85-5, "Procedures for Negotiating Proposed Regulations," 1 C.F.R.
305.82-4 and 305.85-5 (1993); and Pritzker, David M., and Deborah S.
Dalton, eds., ACUS, Negotiated Rulemaking Sourcebook (Washington, D.C.,
1990).

3. Administrative Conference of the United States, "Federal Agency
Experience with Negotiated Rulemaking," (March 1, 1993), staff paper
updating Chapter 10 of Pritzker and Dalton, Negotiated Rulemaking
Sourcebook.

4. 5 U.S.C.A.    561-570 (1993 Supp.).

5. 5 U.S.C. App. (1988).

6. For a recent notice, see Environmental Protection Agency, Notice of
Wood Furniture Manufacturing Negotiated Rulemaking Committee, 58 FR
34011 (June 23, 1993).

7. It is difficult to obtain reliable data about the costs of regulatory
proceedings. However, some information is available that may give an
indication of potential savings from using regulatory negotiations.
Speaking in 1984, former EPA Administrator William Ruckelshaus estimated
that more than 80 percent of EPA's major rules were challenged in court
and that approximately 30 percent of the rules were changed
significantly as a consequence.  Ruckelshaus, W., "Environmental
Negotiation: A New Way of Winning," address to the Conservation
Foundation's Second National Conference on Environmental Dispute
Resolution 3, October 1, 1984, cited in Susskind and McMahon, "The
Theory and Practice of Negotiated Rulemaking," vol. 3, Yale Journal on
Regulation (1985), p. 133. Ruckelshaus also estimated that the annual
effort to handle this litigation took 50 person-years from EPA's Office
of General Counsel, 75 person-years from EPA program offices, 25
person-years from the Department of Justice, and 175 person-years on the
part of plaintiffs' counsel.  Administrator Lee Thomas, in a 1987
address to a colloquium of the Administrative Conference of the United
States, pegged the level of litigation at more than 75 percent. Thomas,
Lee, "The Successful Use of Regulatory Negotiations by EPA," vol. 13,
Admin Law News (Fall, 1987), p. 1. By contrast, of the first 10
negotiated rulemaking proceedings brought to completion by EPA, only two
were challenged in court, and both rules were essentially upheld. See
Safe Buildings Alliance v. EPA, 846 F.2d 79 (D.C. Cir.  1988); and
Natural Resources Defense Council v. EPA, 907 F.2d 1146 (D.C. Cir.
1990). Reduction of litigation rates from 75 percent to 20 percent
obviously would produce great savings if this level of improvement were
maintained.

8. Kerwin, Cornelius M. and Scott R. Furlong, "Time and Rulemaking: An
Empirical Test of Theory," Journal of Public Administration Research and
Theory, vol. 2 (1992), p. 124. In a study of 150 rules completed between
October 1, 1986, and September 30, 1989, the rulemaking process (from
development of the proposal to issuance of the final rule) took an
average of 26 months for the four negotiated rulemakings in the sample
and 37 months for all rules in the sample. The article does not contain
sufficient information to determine whether regulatory negotiations
would be quicker for rules with similar resources, complexity and
prioritization. Based on a sample of seven reg negs, EPA estimates a
saving of 6 to 18 months as compared to the normal rulemaking process.
Telephone interview with Chris Kirtz, Director, Consensus and Dispute
Resolution Program, EPA, August 13, 1993.

9. McClintock, Mike, "Regulating Wood-Stove Emissions," Washington Post
(September 25, 1986), Home Section, p.5.