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House of Representatives Passes Bill to Amend Administrative Procedure Act

Michael Connolly, Helgi Walker and Elbert Lin
February 15, 2012

On December 2, 2011, the U.S. House of Representatives passed the Regulatory Accountability Act of 2011 (RAA).  If approved by the Senate and signed by the President, the Act would make the first significant changes to the Administrative Procedure Act (APA) since its enactment in 1946. 

The RAA is a bill that any regulated or potentially regulated business or entity will want to watch closely, as it would alter the existing regulatory process in a number of important ways.  Under the Act, agencies would be statutorily obligated to consider several factors in adopting a new regulation, including the cost and necessity of any proposed regulation.  For regulations that would have a "major" or "high impact" on the economy, the Act would impose additional procedural requirements, providing more notice and opportunities for the public to participate.  The Act also would subject agencies issuing non-binding "guidance" documents to new requirements.  And finally, the Act would, in certain circumstances, do away with the deference traditionally afforded by reviewing courts to agencies.

The RAA is particularly important to those businesses or entities under the jurisdiction of independent agencies such as the Federal Communications Commission, the Federal Trade Commission, the Consumer Product Safety Commission and the Securities and Exchange Commission.  In many respects, the RAA would simply codify requirements that have previously been imposed through Executive Orders.  But Executive Orders are not ordinarily phrased in a way that binds independent agencies.  The Act would ensure that the requirements are enforceable by a court and apply with full force to independent agencies.

After passing the House, the RAA was sent to the Senate and has been referred to the Senate Committee on Homeland Security and Governmental Affairs.  Given the current political climate and the impending election, the chances of the bill's success in the Senate are unclear.  Wiley Rein will continue to monitor the bill's progress and report on any significant developments.    

Some of the specific changes that the RAA would impose include:

Factors that must be considered before adopting any new rule

  • The legal authority of the agency to adopt the rule.
  • Whether alternative avenues to regulation exist, such as rescinding regulations or relying on state or local action.
  • The impact of the regulation on jobs, economic growth and economic competitiveness.

Restrictions on all new rules

  • Must be based on the best reasonably obtainable scientific, technical and economic evidence.
  • Must be the least costly rule, unless the additional benefits of a more costly rule justify the additional costs.

Additional process for "major" rules, "high-impact" rules, or rules involving novel legal or policy issues

  • "Major" rules are those likely to impose an annual cost on the economy of $100 million or more, or otherwise significantly affect the economy; "high-impact" rules are those likely to impose an annual cost on the economy of $1 billion or more.
  • Agencies must provide advance notice of proposed rulemaking 90 days before an agency can propose a "major" rule, a "high impact" rule, or a rule involving novel legal or policy issues, and allow 60 days for written comment.
  • Upon request, agencies must hold a hearing for a "major" rule unless the agency reasonably determines that a hearing is unnecessary or would result in unreasonably delay; agencies must hold a hearing for a "high-impact" rule unless the hearing is waived by all participants in the rulemaking.

Requirements for non-binding agency guidance

  • Agency guidance is not legally binding and may not be relied upon as legal grounds for agency action.
  • Agencies must ensure that the benefits of the guidance outweigh the costs, and also explain why any alternatives were rejected.

No deference by reviewing courts in certain cases

  • No deference to an agency's interpretation of a rule if the agency did not comply with APA requirements, as amended by the RAA.
  • No deference to an agency's cost-benefit analysis if the agency did not comply with Office of Management and Budget guidelines.
  • No deference to an agency's determinations made in the adoption of an interim rule.
  • No deference to agency guidance.

For more information, please contact Michael Connolly at 202.719.7374 or mconnolly@wileyrein.com.


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