work better. It is not always the glitziest subject, as you mentioned, but it is a very important subject. Your dedication to the improvement of Government operations is, indeed, critical, and your leadership in this area is really impressive. I thank you for it. The bill which is the subject of today's hearing, which is the first of a series on regulatory reform, is S. 1504, as you have mentioned. It contains what was once a novel proposal, a process to encourage agencies to use negotiated rulemaking. It was novel back in 1980 when I first introduced a similar bill. Today, it is no longer novel; the negotiated rulemaking process has been tried and proven effective. I hope that we will pass this bill, with any necessary improvements, of course, and thereby put the machinery in place that will encourage more agencies to try negotiated rulemaking. Negotiated rulemaking, or "reg neg" as the veterans of this process call it, is a rulemaking device designed to achieve consensus among competing interests in a controversial agency rulemaking. Reg neg is a process where the parties that will be significantly affected by an agency rule sit down together and try to negotiate in good faith to develop the elements of a rule that they can live with. If the parties are successful in reaching agreement on a draft rule, the draft is given to the agency with the expectation that the agency will use it as the basis for publishing a proposed rule in the Federal Register. The benefits of this process are readily apparent. Instead of affected parties spending their time and resources litigating a rule drafted and imposed by an agency, the affected parties and the agency spend their time and energies constructively developing a proposed rule together. The parties acquire a proprietary interest in that proposed rule and, as a result, are more likely to defend than to challenge it when it is published for comment. The rule may also be a better rule, substantively, since it will reflect the involvement of knowledgeable persons who are directly affected by it. Moreover, a negotiated rule is likely to become effective earlier than a rule developed through ordinary rulemaking procedures. S. 1504 lays out the basic framework for conducting a negotiated rulemaking when an agency decides to employ that process. It seeks to achieve the twin goals of providing sufficient guidance to agencies to encourage their use of the process, while building in mechanisms for the procedural flexibility which is the hallmark of the negotiated rulemaking process. The bill assigns to the Administrative Conference of the United States the responsibility to act as a clearinghouse for information and assistance. Under the bill, an agency decides whether to engage in a negotiated rulemaking. As I think we will hear today, the negotiated rulemaking process will not work in all or even a majority of rulemaking situations, and its success depends on the degree of care exercised in selecting the cases in which it is employed. S. 1504 requires consideration of such factors as whether there are a limited number of identifiable parties who will be significantly affected by the rule, the likelihood that consensus will be reached on a rule, and whether the agency is willing to use such consensus as the basis for publishing a proposed rule. I think we will hear testimony today about the importance of considering these and other factors in deciding whether to use negotiated rulemaking. If an agency decides to use the process, under the bill, it would establish a rulemaking advisory committee with representatives from the agency and the affected interests. The advisory committee would be chartered and operate under the provisions of FACA, the Federal Advisory Committee Act, to assure openness, proper record-keeping and cost controls. The rulemaking committee would conduct its negotiations under the auspices of an impartial mediator who would assist the parties in reaching consensus. If the parties achieve consensus on a draft rule, they would present their recommendations to the agency. The agency would then decide whether to publish in the Federal Register a proposed rule based on the committee's consensus, under existing procedures for public notice and comment. If the parties do not reach agreement on a rule, they would file a report describing any issues they were able to resolve, as well as the unresolved issues. As I mentioned earlier, S. 1504 is not the first bill this Committee has considered to foster negotiated rulemaking. A number of us first introduced a bill in September of 1980. Similar bills were introduced in the last three Congresses. Unfortunately, those bills did not get reported out of Committee because, I suspect, the process may have been considered too novel or unproven. In the meantime, EPA, FAA, OSHA and several other agencies have conducted negotiated rulemakings which demonstrate that, not only is the process feasible, it can be a viable and effective tool. I look forward today, as the Chairman and other members of the Committee do, to today's witnesses, to hear their testimony about their experience with this no longer novel process. Senator Sasser is unable to be here today and he has a statement for the record that will be inserted into the record at this time. [Senator Sasser's statement follows:] OPENING STATEMENT OF SENATOR SASSER Thank you, Mr. Chairman. I commend you holding this first hearing in a series conducted by the Committee on Governmental Affairs concerning regulatory reform. The hearing today examines the practice of negotiated rulemaking and legislation designed to formalize the process, S. 1504. The concept of negotiated rulemaking is an innovative one, especially for those agencies, like the Environmental Protection Agency, where rulemaking has become such an adversarial process, engendering significant numbers of costly and time-consuming lawsuits. The concept of the face-to-face negotiations that negotiated rulemaking entails may be far more productive than negotiations conducted through the Federal Register and in court. It would seem from the experience that we have with negotiated rulemaking that it can be more effective than the traditional rulemaking procedure that has evolved within the Federal Government. Indeed, negotiated rulemaking may have considerable promise in that it could eliminate needless controversy surrounding the rulemaking process. Even if a consensus is not reached as a result of the negotiations, they provide a valuable opportunity for an exchange of views and information on the proposed rule. And the process seems to pull both sides of an issue away from extreme adversarial positions, and more toward a compromise. The experience of the Environmental Protection Agency, the Federal Aviation Administration, and the Occupational Health and Safety Administration, among others, should serve as a guide for other agencies as they begin to attempt this alternative negotiations process. The delay that results from the litigation that often surrounds traditional rulemaking in some cases significantly interferes with the business of regulation, and, of course such litigation burdens the judiciary which finds it exceedingly difficult to make the sorts of technical determinations which are at the heart of these lawsuits. Of course, the Federal Government does not yet have extensive experience with this "reg neg" process, and therefore, agencies are understandably hesitant to conduct this important component of their business in a different and perhaps slightly unpredictable atmosphere. But I feel certain that as they gain experience in the process, it may come to be used more and more-and with good results. S. 1504 may well provide the support and guidance needed to encourage greater use of this process. S. 1504 proposes a constructive framework within which the negotiated rulemaking can occur. I look forward to hearing testimony on this procedure and the bill from such a diverse and distinguished group of witnesses. Thank you, Mr. Chairman. Senator LEVIN. Our first panel, as our Chairman mentioned, is Marshall Breger, Chairman of the Administrative Conference of the United States, accompanied by David Pritzker, and Thomas Kelly, Director of the Office of Standards and Regulations of the Office of Policy, Planning and Evaulation of the EPA. He is accompanied by Chris Kirtz, who is the Director of the Regulatory Negotiation Project of the EPA. We would appreciate your summarized testimony. You are all pros and experts at this process. We have a particular problem this morning because the defense bill is on the floor. Both the Chairman and I have to be on the floor this morning, not just to vote but to participate in an amendment. So it is going to be a little bit helter-skelter here this morning. So to the extent you are able to boil down your testimony, we would greatly appreciate it. Mr. BREGER, I guess we start with you. TESTIMONY OF MARSHALL BREGER, CHAIRMAN, ADMINISTRATIVE CONFERENCE OF THE UNITED STATES, ACCOMPANIED BY DAVID PRITZKER, ATTORNEY Mr. BREGER. Thank you very much, Mr. Chairman. I would ask that my written remarks be received in the record.1 Senator LEVIN. They will be. Mr. BREGER. I am accompanied by David Pritzker, a staff attorney, our resident expert on reg neg. I am delighted that this Committee is looking at the problem of reg neg as part of their series on regulatory reform because I think it takes into account the basic transformation of administrative law since the passage of the Administrative Procedure Act, the shift from adjudication to rulemaking as the main vehicle for policy articulation. As you know, when the APA was first passed, there was very little thought given to rulemaking. There were two kinds of rulemaking: formal rulemaking on a record, which allowed for full hearing rights, cross-examination rights, participation by anyone and everyone under the sun. This proved so cumbersome it is only used now when a statute requires it; and informal rulemaking, by which you would make rules through a notice and comment process. The notice and comment process, many people were concerned did not give sufficient opportunity for public participation and involvement, and often set up adversary situations is contexts where they might not ultimately have been necessary. 1 See p. 132. The exploration of reg neg, as one of a series of refinements and improvements on informal rulemaking, is evidence of the fact that the actions in policy articulation in the administrative law area is in rulemaking and is in the search for better ways to improve rulemaking. I think reg neg is an opportunity in many instances to improve the rulemaking process for two reasons: First, and this is almost tautological, you get a better rule when you bring together all of the affected and impacted parties for serious give and take. Even where the reg neg may fail, you still provide the agency with a great deal of valuable information and insight, which in a perfect world and in a perfect system, they would have been trying to secure in any event before moving forward with a rule. And, secondly, in many instances, you are able to prevent litigation after the rule is issued. I have to point out that the culture or the context of rulemaking now cannot be thought of without taking litigation into account. Over three fourths of the EPA rules, I understand, are litigated. So what is supposed to be the end of a rational, intelligent and complex process-the creation of a rule-is, in fact, only the opening salvo, the opening volley in a long litigation process. You must put together rulemaking and litigation now because litigation has become one of the mechanisms of impacting upon agencies and impacting upon the rulemaking process. Thirdly, the use of reg neg can reduce compliance costs, because once you have a better understanding throughout the affected community about a regulation and about its purposes and values, you are more likely to get voluntary, consensual compliance, and you will have a better ability to get compliance. So we think that the reg neg device is an important one for these reasons, and we think that this bill will assist in encouraging agencies to take advantage of reg neg where appropriate and, in fact, to be blunt, will assist in consciousness-raising in a bureaucratic culture which, at times, is resistant to change and at times is resistant to the notion of bringing in public participation and involvement at the very beginning. I am not a zealot. I recognize that reg neg will not always work. It should not be over-sold. It needs, in fact, continuous study to understand better the kinds of cases and situations where it will work. The process was, as you say, novel when you introduced your legislation in 1980. There have been a dozen or so, a few more reg negs tried since then. We still need a larger empirical base, and I am pleased that this legislation recognizes that it is a continuous process to understand where reg negs can be better made use of and implemented. Finally, I would point out that the reg neg process does not suggest that the agency is supposed to sit back passively and simply take the result of an agreement between the affected and impacted parties. It is not situation where if the consumer groups and the industry groups can get together and sign a concord that the agency automatically jumps up and says terrific. The agency has to be an active part of a reg neg, protecting the public interest as it sees it. And it is because of the fact that the agency will be such an active part that the likelihood for success over the long term is increased. Let me stop now, and I will be pleased to answer any questions you might have. Senator LEVIN. Thank you, Mr. Breger, very much. TESTIMONY OF THOMAS E. KELLY, DIRECTOR, OFFICE OF Mr. KELLY. Thank you, Senator Levin. As the Director of Standards and Regulations for EPA, I am Chairman of our Regulatory Steering Committee, which is sort of a Ways and Means Committee for our traditional rulemaking. But I also have the responsibility for fostering and promoting regulatory negotiation and other innovative ways of solving regulatory problems affecting the environment. I have with me Chris Kirtz, who has been Director of our Regulatory Negotiation Project for the past several years, and who was there at the wedding, so to speak, for each of the negotiations that we conducted so far. I am glad that he will be here to answer any specific questions you might have about our history in this area. I listened very carefully to your comments, and I think it is fair to say that we at EPA have been inspired by the leadership that you have taken in bringing this need for better, less litigious ways of rulemaking to the front of our policy-making agenda. I also recognize that you may have gained from the experience that we have had in the Environmental Protection Agency and from some of the lessons that we have learned over the years. You have my written testimony, and I am not going to take your time this morning to go back over that. But I do want to touch on a few points. We have worked in EPA according to criteria that we think will help us choose rules that are most likely to succeed as negotiated rulemaking. In the past year, we conducted an evaluation of our experience to date. Mr. Irwin Auerbach of our Program Evaluation Division did what I thought was an extremely fine and objective job of going back over our recent history without trying to romanticize the issue, nor to be overly critical of the potential of regulatory neogtiations. We have included that report as our first attachment, and I would call your attention to it. I think it is an extremely rich source of lessons learned. In listening to what you said, and from scanning some of the other testimony that has been prepared for today, it seems to me that we are in the process of negotiation here as we come back, year after year and we are beginning to form a consensus. Many of the points that Mr. Breger has just made to you and that I have read, quickly scanning some of the others, are points that I was prepared to make to you today. Regulatory negotiation is essential, 1 See p. 144 for Mr. Kelly's prepared statement. |