    [Senate Hearing 114-84]
    [From the U.S. Government Publishing Office]

                                                             S. Hrg. 114-84

                    REVIEWING THE OFFICE OF INFORMATION AND
               REGULATORY AFFAIRS' ROLE IN THE REGULATORY PROCESS

    =======================================================================

                                    HEARING

                                   BEFORE THE

                                SUBCOMMITTEE ON
                   REGULATORY AFFAIRS AND FEDERAL MANAGEMENT

                                     OF THE

                                  COMMITTEE ON
                             HOMELAND SECURITY AND
                              GOVERNMENTAL AFFAIRS
                              UNITED STATES SENATE

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 JULY 16, 2015

                                   __________

                       Available via http://www.fdsys.gov

           Printed for the use of the Committee on Homeland Security
                            and Governmental Affairs

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                              U.S. GOVERNMENT PUBLISHING OFFICE
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            COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                        RON JOHNSON, Wisconsin, Chairman
    JOHN McCAIN, Arizona                 THOMAS R. CARPER, Delaware
    ROB PORTMAN, Ohio                    CLAIRE McCASKILL, Missouri
    RAND PAUL, Kentucky                  JON TESTER, Montana
    JAMES LANKFORD, Oklahoma             TAMMY BALDWIN, Wisconsin
    MICHAEL B. ENZI, Wyoming             HEIDI HEITKAMP, North Dakota
    KELLY AYOTTE, New Hampshire          CORY A. BOOKER, New Jersey
    JONI ERNST, Iowa                     GARY C. PETERS, Michigan
    BEN SASSE, Nebraska

                        Keith B. Ashdown, Staff Director
                  Gabrielle A. Batkin, Minority Staff Director
               John P. Kilvington, Minority Deputy Staff Director
                         Laura W. Kilbride, Chief Clerk
                         Lauren Corcoran, Hearing Clerk

           SUBCOMMITTEE ON REGULATORY AFFAIRS AND FEDERAL MANAGEMENT

                       JAMES LANKFORD, Oklahoma, Chairman
    JOHN MCCAIN, Arizona                 HEIDI HEITKAMP, North Dakota
    ROB PORTMAN, Ohio                    JON TESTER, Montana
    MICHAEL B. ENZI, Wyoming             CORY A. BOOKER, New Jersey
    JONI ERNST, Iowa                     GARY C. PETERS, Michigan
    BEN SASSE, Nebraska
                         John Cuaderess, Staff Director
                      Eric Bursch, Minority Staff Director
                          Rachel Nitsche, Chief Clerk
                                C O N T E N T S

                                     ------
    Opening statement:
                                                                       Page
        Senator Lankford.............................................     1
        Senator Heitkamp.............................................     2
        Senator Ernst................................................     5
        Senator Enzi.................................................     6
        Senator Portman..............................................    10
    Prepared statement:
        Senator Heitkamp.............................................    33

                                   WITNESSES
                            Wednesday, July 16, 2015

    Hon. Howard Shelanski, Administrator, Office of Information and
      Regulatory Affairs, Office of Management and Budget
        Testimony....................................................     3
        Prepared statement...........................................    35

                                    APPENDIX

    Statement submitted for the Record from 60 Plus Foundation.......    39
    Responses to post-hearing questions for the Record from Mr.
      Shelanski......................................................    54

                      REVIEWING THE OFFICE OF INFORMATION.
             AND REGULATORY AFFAIR'S ROLE IN THE REGULATION PROCESS

                                  ----------

                            WEDNESDAY, JULY 16, 2015

                                     U.S. Senate,
                            Subcommittee on Regulatory,
                          Affairs and Federal Management,
                        of the Committee on Homeland Security
                                      and Governmental Affairs,
                                                        Washington, DC.
        The subcommittee met, pursuant to notice, at 2:34 p.m., in
    room SD-342, Dirksen Senate Office Building, Hon. James
    Lankford, Chairman of the Subcommittee, presiding.
        Present: Senators Lankford, Portman, Enzi, Ernst, Sasse,
    and Heitkamp.

                 OPENING STATEMENT OF SENATOR LANKFORD

        Senator Lankford. Good afternoon. It is always nice to
    start a hearing on government efficiency 30 minutes late. We
    had a series of votes and I apologize we were delayed a little
    bit in getting started for that.
        This is the fourth in a series of hearings and roundtables
    in which the Subcommittee continues to examine the issues and
    solutions surrounding today's regulatory state. Today we will
    hear about the Office of Information and Regulatory Affairs
    (OIRA), and the essential role that it plays in the Federal
    regulatory process.
        OIRA was created by Congress in 1980. It is an agency
    situated in the White House's Office of Management and Budget
    (OMB). At that time OIRA's primary role was to review
    government collections of information under the Paperwork
    Reduction Act (PRA). Since then, however, under various
    Executive Orders (EOs), OIRA's role has expanded to include
    reviewing drafts of significant regulations at their proposal
    and final stages, as well as significant guidance, documents,
    and retrospective review plans.
        OIRA is also charged with coordinating interagency
    compliance with laws to better ensure the quality of
    information use, such a broad array of duties. One may assume
    OIRA's office may be as large as those agencies it oversees.
    After all, the office reviews between 500 and 700 rules
    annually. But OIRA is a very small shop with around 47
    employees. Am I right on that? Those employees are highly
    skilled with advanced degrees in their fields and are greatly
    respected by Congress for what they do.
        Due to its centralized role in overseeing agency
    rulemaking, OIRA has been called the Executive Branch's
    information aggregator and the gatekeeper to the regulatory
    process. Indeed, OIRA is uniquely positioned to ask agencies
    tough questions to ensure that the regulations it reviews are
    as nimble as possible and meet agencies objectives in the least
    costly manner and build consensus within the Federal
    Government's regulatory process.
        The helm of OIRA is its Administrator, Howard Shelanski,
    who is here with us today. I want to welcome Mr. Shelanski. I
    look forward to speaking with him about OIRA's many and varied
    functions which prove to be integral to the efficiency and the
    quality of the regulatory process. First I would like to
    recognize Ranking Member Heitkamp for her opening remarks.

                 OPENING STATEMENT OF SENATOR HEITKAMP

        Senator Heitkamp. Thank you, Mr. Chairman, and in the
    interest of time, I am going to ask that the text of my opening
    comments be submitted to the record.\1\ But I want to welcome
    the Office of Information and Regulatory Affairs. I think you
    are probably one of the most important offices no one has ever
    heard of.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Senator Heitkamp appears in the
    Appendix on page 33.
    ---------------------------------------------------------------------------
        And as we in this Subcommittee begin a razor-like focus on
    what we can do to improve the regulatory process, the role of
    your agency and of your employees in making that happen will be
    absolutely critical. And so one of the issues that I am very
    concerned about and hope we can have a more extended dialogue
    when we get to questioning is resources, the resources of OIRA
    and actually being able to perform the functions that you have
    today and that you may have expanded under other kinds of
    regulatory reform provisions.
        I do want to point out, just because we do this quite a
    bit, Chairman Lankford and I, that this might be the first time
    in congressional history that the only witness, and the
    Chairman and Ranking Member are all redheads. So we are
    expecting really good things, really important things. Thank
    you, Mr. Chairman.
        Senator Lankford. History is being made today. [Laughter.]
        At this time, we will proceed with testimony from our
    ginger witness, Howard Shelanski. He is the current
    Administrator of the Office of Information and Regulatory
    Affairs, a post he has held since confirmation in June, 2013.
    From 2009 to 2011, Mr. Shelanski served as the Deputy Director,
    Federal Trade Commission's Bureau of Economics, served as the
    Director there from 2012 to 2013.
        Mr. Shelanski has also served as the Chief Economist of the
    Federal Communications Commission (FCC) and Senior Economist on
    President Obama's Council of Economic Advisers. If I remember
    correctly--I do not have it in your bio--he also served and
    clerked with one of our Justices of the Supreme Court as well,
    Scalia, if I remember. Is that correct?
        Mr. Shelanski. That is correct.
        Senator Lankford. That gives you a decent, varied
    background, I would say. I would like to thank Mr. Shelanski
    for appearing before us today. It is the custom of this
    Subcommittee to swear in all witnesses. I would ask that you
    would rise, raise your right hand.
        Do you swear that the testimony you are about to give
    before this Subcommittee will be the truth, the whole truth,
    and nothing but the truth, so help you, God?
        Mr. Shelanski. I do so swear.
        Senator Lankford. Thank you. You may be seated. Let the
    record reflect the witness answered in the affirmative. We
    would be glad to receive your opening statement. We typically
    do a 5-minute time period. You have a little bit of extra time
    on that today, but I would like you to get as close as you can
    at 5 minutes and then we will pepper you with questions after
    that.

    TESTIMONY OF HON. HOWARD SHELANSKI,\1\ ADMINISTRATOR, OFFICE OF
     INFORMATION AND REGULATORY AFFAIRS, OFFICE OF MANAGEMENT AND
                                 BUDGET

        Mr. Shelanski. Thank you very much. Chairman Lankford,
    Ranking Member Heitkamp, Members of the Subcommittee, it is
    great to be part of history today, but I am also very grateful
    for the invitation to appear before you today and to discuss
    the work of the Office of Information and Regulatory Affairs.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Shelanski appears in the Appendix
    on page 35.
    ---------------------------------------------------------------------------
        OIRA has a broad portfolio. For example, under the
    Paperwork Reduction Act, as Chairman Lankford noted, OIRA is
    responsible for reviewing collections of information by the
    Federal Government to ensure that those collections are not
    unnecessarily burdensome. OIRA also develops and oversees the
    implementation of governmentwide statistical standards and
    policies and has a role in international regulatory cooperation
    under some Executive Orders. The largest area of OIRA's work,
    however, is the review of regulations promulgated by Executive
    Branch departments and agencies.
        A set of Executive Orders establishes the principles and
    procedures for OIRA's regulatory reviews. Executive Order
    12866, implemented across Administrations of both parties, sets
    forth standards and analytic requirements for rulemaking by
    departments and agencies and calls for agencies to regulate
    only when the benefits of a rule justify its cost to the extent
    permitted by law.
        OIRA works with agencies to continually improve the review
    process and the quality of government regulation. OIRA, first
    and foremost, upholds the standards of review that the
    Executive Orders establish while remaining mindful that
    unnecessary delays in reviews are harmful across the board.
    They are harmful to those wishing to comment on proposed rules,
    to those who must make plans to comply with the rules, and to
    those denied the benefits of regulation. Both rigor and
    efficiency in regulatory review are essential to improving the
    clarity and quality of our regulatory environment. OIRA does
    not review all Executive Branch regulations, nor would it make
    sense for the office to do so. Each year agencies issue many
    regulations which are minor and very technical.
        OIRA review applies only to what are called significant
    regulatory actions. Those may include guidance documents,
    notices or other actions in addition to those actions formally
    designated as rules. The most fundamental category of
    significant regulations are those that are economically
    significant, which is to say those that have an annual effect
    on the economy of $100 million a year or more.
        And I would note that that threshold is the same one that
    Congress has used to define rules as major under the
    Congressional Review Act (CRA). There are other factors that
    may lead a rule to be deemed significant beyond economic
    impact. Under Executive Order 12866, rules are also potentially
    significant and subject to interagency review through OIRA if
    they create a serious inconsistency or otherwise interfere with
    an action taken or planned by another agency if they materially
    alter the rights or obligations related to entitlements,
    grants, user fees, or other kinds of government programs.
        And finally, they may be significant if they raise novel
    legal or policy issues. Once a rule is under review, OIRA plays
    two basic roles. The first of those roles is to coordinate
    interagency review of regulations. OIRA circulates the rule to
    other agencies beyond the rulemaking agency around the Federal
    Government to ensure that other agencies whose own policies and
    responsibilities may be affected in some way have an
    opportunity to comment and to talk about that.
        The second main role that OIRA plays is to ensure that the
    rule complies with the Executive Order principles for sound
    regulation and to review the analysis underlying the rule. OIRA
    has long-standing guidelines for how agencies should analyze
    economically significant rules and OIRA reviews those analyses
    for consistency with these guidelines as a standard part of our
    review process.
        When reviewing a rule, OIRA's job is to review the
    reasonableness of the underlying analysis and to identify areas
    where the regulation potentially could be improved or be more
    consistent with the principles set forth in the Executive
    Orders. Often the focus of a regulatory review is to help the
    agency hone and sharpen its arguments and to identify areas
    where more evidence or discussion will strengthen or clarify a
    regulation.
        I would note that existing rules as well warrant scrutiny
    to ensure that they achieve their benefits and goals without
    imposing unnecessary costs. Ensuring flexibility in new
    regulations and looking retrospectively at existing regulations
    is, therefore, an important part of OIRA's function.
        Retrospective review, which the President has advanced
    though his own series of Executive Orders, is a crucial way to
    ensure that our regulatory system is modern, streamlined, and
    does not impose unnecessary burdens on the American public. As
    President Obama made clear at remarks at the Business
    Roundtable this past December, retrospective review is a
    critical part of this Administration's regulatory agenda moving
    forward.
        Finally, I would note that under Executive Order 13609,
    OIRA has important responsibilities related to international
    regulatory cooperation. We have made progress in a number of
    areas with our international partners through regulatory
    cooperation councils with Canada and with Mexico. We also
    further our international regulatory mission through work in
    coordination with the Department of State and through
    activities in support of the United States Trade
    Representative's trade negotiations.
        In conclusion, regulatory activities can bring great
    benefits to Americans, but they also carry costs. It is
    critical to ensure that Federal agencies base their regulatory
    actions on high-quality evidence and sound analysis. Beneficial
    regulation must remain consistent with the overarching goals of
    job creation, economic growth, and public safety.
        We look forward to continuing our efforts to meet these
    challenges. Thank you for your time and attention and I would
    be happy to answer any questions you may have.
        Senator Lankford. Thank you, Mr. Shelanski. I have chosen
    to defer my questions--Senator Heitkamp has chosen to do the
    same--toward the end. I recognize Senator Ernst for questions.

                   OPENING STATEMENT OF SENATOR ERNST

        Senator Ernst. Thank you, Mr. Chairman and Ranking Member
    Heitkamp. Thank you very much for being here today, Mr.
    Shelanski. I appreciate it very much. I do think your office
    has a very important role in the regulatory process. Just a
    pretty significant question, I think. Has the Environmental
    Protection Agency (EPA) sent its final rule on the ozone
    standard to your office for review?
        Mr. Shelanski. No, Senator. That rule has not yet reached
    our office for review.
        Senator Ernst. And then because of that, do you expect to
    be given the customary 90-day review period for this rulemaking
    since, the EPA is under a court order to issue a final rule by
    October 1?
        Mr. Shelanski. We do recognize that the court order is in
    place and we have been working with the EPA so that they will
    be able to submit this rule as quickly as possible so that we
    will have as much time as possible given the court order to do
    our review.
        Senator Ernst. What are the challenges that you will have
    then in reviewing this rule and implications to the States?
        Mr. Shelanski. Thank you. I think we will be able to meet
    the challenges of reviewing this rule. The time it takes us to
    review a rule is often very dependent on how high a priority
    the rule is with the agency. So we circulate the rule for
    interagency review, we assemble those comments, we do our own
    analysis of the agency's underlying justification for the rule,
    we pass back our comments, and when the agency has completion
    of the rule as a high priority, we tend to get fairly fast
    responses and the process really moves much more quickly.
        Nothing sits for periods of time back at the agency. So I
    would expect that we will be able to conduct a high-quality and
    rigorous review of both the rule and the underlying evidence in
    the time that we have under the court order.
        Senator Ernst. OK. Under the court order. Do you ever feel
    pressure within your agency coming from the Administration on
    such big rules as this?
        Mr. Shelanski. I think there certainly is an eagerness to
    have us conduct our review and to keep forward progress, but I
    think everybody understands, and certainly in my 2 years as
    Administrator, I feel like I have always been given the time
    that I need to do a good analysis and to make sure that our
    office does its job.
        Senator Ernst. Well, and I appreciate that, and I always am
    very hopeful that your views will always be impartial
    regardless of the pressures that are coming from the outside
    agencies or from the Administration as well. Would you say that
    is correct or that is accurate?
        Mr. Shelanski. Yes, that is certainly accurate, Senator.
    The OIRA staff are a bunch of super smart and very dedicated
    folks who really are focused on the evidence underlying a rule,
    on the rule's justifications, and in carrying out the mandates
    of the Executive Orders.
        I think that they are very good at focusing on the analytic
    issues. They speak truth even when it is inconvenient, and I
    have always found them to be people of the highest honesty and
    integrity and it is a pleasure to work for them and carry their
    message and their work forward.
        Senator Ernst. OK. Well, great. I do appreciate that very
    much. We always want, of course, an impartial review and, of
    course, the utmost integrity in those reports coming forward.
    So I appreciate it. Thank you for your testimony today. Thank
    you, Mr. Chairman.
        Mr. Shelanski. Thank you, Senator.
        Senator Lankford. Senator Enzi.

                   OPENING STATEMENT OF SENATOR ENZI

        Senator Enzi. Thank you, Mr. Chairman, Ranking Member.
    Thank you, Mr. Shelanski, for being here. From your testimony,
    I had a couple of questions. Who determines that $100 million
    threshold?
        Mr. Shelanski. That is an excellent question. Thank you,
    Senator. Often we receive from the agencies their own view of
    whether or not a rule is economically significant accompanied
    by some analysis to bolster the point. But the determination in
    the end lies with OIRA. And so, when we receive a rule, we
    actually have the final word on the significance determination
    and we will tend to push hard when we have questions or, I
    might even say, suspicions that we need more evidence.
        Senator Enzi. Thank you. And you mentioned that you do
    retrospective reviews, too. When you do the retrospective
    reviews, do you compare what you estimated the cost to be to
    what it actually comes out, or are you just looking to see if
    they administered the rule the way they were supposed to?
        Mr. Shelanski. Typically the way a retrospective review is
    that it is carried out by the agency, and the question that is
    really asked is, is the rule, standing here today, still
    accomplishing what it was established to accomplish and do the
    costs and benefits going forward still make it worthwhile to
    keep that rule on the books?
        We take a rule that is already on the books and then the
    agency asks whether, under current facts and circumstances, is
    it worth keeping a rule in place.
        Senator Enzi. Do you have any capability to do anything if
    the cost far exceeds what you thought and the benefits are far
    less than what you thought?
        Mr. Shelanski. So after we complete review of a rule, the
    rule goes back to the agency for publication and for
    implementation. And the right place to go when the predictions
    underlying a rule turn out to be wrong and a rule turns out to
    be having harmful effects or not achieving good effects is the
    agency. So it is typically the agency that has those tools and
    is charged with undertaking that.
        Senator Enzi. Thank you. You may know that the Homeland
    Security Committee and the Budget Committee did a joint
    hearing, I think it has been about a month ago now, on
    measuring the cost of regulation. One of the witnesses was
    Canada's Treasury Board member Tony Clement, and he told us how
    their regulatory process works and about their one-for-one
    policy to minimize the red tape growing in business and their
    mechanism for getting people to go back and look at old rules
    to see if they still operate.
        He mentioned that the two countries have a cooperative plan
    for sharing approaches to reduce that regulatory burden on
    small businesses. Have those joint discussions resulted in
    anything and what do you think about that one-for-one burden
    reduction?
        Mr. Shelanski. Thank you. So the joint regulatory process
    that we have with Canada is where agencies work together to try
    to come up with the elimination of unnecessary differences in
    regulation. We have, however, had some ongoing discussions with
    Canada to try to learn more about their policies and about
    their one-for-one.
        We have some general concerns and I have some general
    concerns about a one-for-one policy, what is often called
    regulatory PAYGO. To be sure, there are some rules that need to
    be promulgated for the benefit of the public for health and
    safety. I am thinking about the Department of Transportation's
    (DOT) recent crude oil by rail rule, for example.
        I think that it would be troublesome if such rules were
    delayed by the need to find a rule to cut and eliminate before
    the new rule could be promulgated. When we talked to Canada
    about that, they did suggest that they have a large number of
    exceptions and areas where their one-for-one rule does not
    apply.
        Senator Enzi. They also, though, have a mechanism for going
    back to old ones and having a ledger credit so that when
    something comes up, they already have the money in place, and
    that is the only mechanism that I have seen for us to encourage
    government to look at any old rules. They really do not have
    much interest in that. I thought that was quite a step forward.
        Now, the joint hearing also discussed the idea of a
    regulatory budget, and that fits in with this idea of having
    prior credit so you could have a carefully designed and
    implemented regulatory budget. They said that their scoring was
    all done on an internationally accepted standard. Are you
    familiar with their standard? Is it the same as our standard?
        Mr. Shelanski. We are still looking into exactly how they
    do their scoring and their accounting. This is something we are
    in the process of learning more about. We have some
    reservations about having in place a rigorous budget of the
    type that they are talking about and we do not fully understand
    how their system works, so we are learning more from them as we
    continue these discussions.
        I would note, though, that our retrospective review process
    is one that has been, I think, increasingly successful over
    time. Agencies have several hundred initiatives right now that
    are in place and actually occurring. We are tracking a large
    number of those where they are going back and looking at rules
    on the books that are worthy of reform or even possibly repeal
    or, in some cases, strengthening.
        So the retrospective review process is one that the
    Administration has emphasized quite strongly and that we are
    seeing good response on from the agencies. I would be very
    willing, however, and would find very interesting the idea of
    having discussions with any of your offices about ways to
    improve or strengthen that process or ways to provide stronger
    incentives on the agencies. I think we can always do better
    than we are doing.
        Senator Enzi. Thank you. My time is expired.
        Senator Lankford. Senator Enzi, thank you for that. Let me
    just pick up where Senator Enzi was leaving off on that, and
    that is with respect to retrospective review and this issue.
    How do you ensure agencies are periodically doing a
    retrospective review that is thorough and is rigorous?
        The reason I can give you this example, this Committee has
    started asking the question of several agencies to say, How do
    you pick what you are going to do a retrospective review on?
    For instance, the Department of Labor (DOL) has 676 rules. They
    are doing four retrospective reviews this year.
        So we are just asking the question, How did you pick the
    four out of 676 rules that are out there? I understand some of
    them are going to be significant. That is going to eliminate
    some of them. So let us get past the significant issue. How do
    you make sure that the agencies are actually doing this in a
    rigorous way?
        Mr. Shelanski. Thank you, Chairman Lankford. I think that
    is a very important issue, to try to get the agencies to
    properly prioritize the retrospective review efforts. One of
    the things that we have been working with the agencies on doing
    is developing a more robust and thorough outreach process so
    that they hear from stakeholders, the people who actually have
    to comply with rules, or the State and local partners who have
    to operate rules on the ground, and from the folks who are
    supposed to benefit from rules so that they can hear what is
    working and what is not working.
        And we indeed at OIRA have been holding outside stakeholder
    meetings with different groups of folks, whether it is State
    and local governments, or business groups or advocacy groups,
    labor unions, folks like that.
        Senator Lankford. So what is the standard then? Is the
    standard then for the review of a rule, if they get a lot of
    complaints or a lot of praise on something, that they may try
    to do the review at that time? Is there a certain standard
    based on the length of time or the size and the significance to
    rules? What is the basic standard of which rules they should
    pick and the order that they should go through this and be able
    to do the priority for the review?
        Mr. Shelanski. What we would like to see the agencies do is
    look at those rules where the greatest savings and the greatest
    benefit from the retrospective review and for what results. And
    so trying to get them to rank and prioritize rules based on
    what will give--to use a colloquial term--the biggest bang for
    the buck would be the first principle.
        Senator Lankford. What would you expect that they would do?
    What percentage or number that you would expect that they would
    do on a regular basis or is there a certain age to look at it
    and say, This rule is 30 years old and maybe it needs to be
    reevaluated? There does not seem to be a standard. It just
    seems to be an Executive Order saying, We believe that this
    should be done, but we cannot find a pattern for how it is
    being done in agencies nor a requirement that it really is
    done.
        It just seems to be a suggestion and I am not sure, and you
    can answer this question if you choose to on it. I am not sure
    that OIRA has the authority to step into an agency and say,
    Hey, you did one regulatory review this year. Maybe you should
    do at least two. You are really not being thorough in this.
        Mr. Shelanski. The way that agencies have to prioritize
    their resources leaves them overwhelmingly to focus on the
    rules and the policies, the new rules and policies that they
    have to implement going forward. They have a number of new
    problems that come up that they have to address. They have a
    number of statutory obligations in terms of rulemaking, court-
    ordered obligations.
        So that is typically, especially in a period of time when
    agencies' resources are very tight, where they are going to
    prioritize, and retrospective review that looks at rules on the
    book is very often going to take a backseat. In some sense,
    that is warranted.
        What we have learned from a lot of our stakeholder groups
    is the 30-year-old rules, they may not be doing much good, but
    there is not much value in repealing them either. There may be
    a lot of rules that we could look at that have piled up that
    are sitting on the shelf not terribly functional, but either
    they are not costing anybody anything or, we have heard often
    from stakeholders, once they fully absorb the cost of complying
    with the rules, those kind of costs, repealing the rule or
    removing the rule might not do them a lot of good.
        So it is hard to come up with sort of a systematic
    criterion like rules of a certain age or something like that
    should be reviewed. That is why the outside stakeholder process
    is so important.
        Senator Lankford. Do you feel like you have the authority
    to be able to step into an agency and say, This is really
    important, this has to be done, or do you feel like that needs
    to be someone else or it is just really the agency that is
    going to make that call on their own?
        Mr. Shelanski. Right now I feel like we do have that
    authority. In fact, we have a very clear mandate from the
    Administration.
        Senator Lankford. So if an agency does not do a
    retrospective review, you feel like you can come in and compel
    them to do that?
        Mr. Shelanski. We cannot compel them, but what we can do is
    push them to explain why they have not done more, and often
    they have good explanations for that. But they do not deny us
    an answer.
        Senator Lankford. Right. So the challenge of this--and I
    understand that budgets are tight on it and so it is difficult
    for agencies to prioritize their budgeting to go do a
    retrospective review because they are working on new rules on
    it.
        The problem is the companies that they regulate, their
    budgets are tight as well and they are raising their hand and
    saying, Because your budget is tight, you are not reviewing a
    rule, we are suffering waiting for you to review this rule, and
    our budgets are tight on it across the entire country.
        And so, somehow we have to be able to balance that out, and
    if there is a need for additional authority or responsibility,
    we have discussed 12866. That is been an Executive Order for
    20-plus years at this point and it may be time to codify some
    of those things and say, Congress believes in what multiple
    Administrations have done on this and to step in and say, Some
    of these things actually need to be put in statute rather than
    into Executive Order suggestions.
        Mr. Shelanski. We at OIRA think that we have the tools that
    we need under the Executive Orders to achieve what we need to
    achieve. I do think one of the things that would help and one
    of the reasons we focus a lot on pushing agencies not just to
    give us lists, but to conduct formalized and further developed
    outreach projects is so that we can get the specific
    suggestions from the very companies you say who have tight
    budgets and who have to comply with rules to get constructive
    suggestions about where to look for good retrospective review
    efforts.
        Senator Lankford. Right. And we are trying to help with
    that process as well. Senator Heitkamp.
        Senator Heitkamp. I would defer my time to Senator Portman
    if he has someplace else he needs to be.
        Senator Lankford. Where else would you rather be at?
        Senator Heitkamp. Right. Well, that is a good question.

                  OPENING STATEMENT OF SENATOR PORTMAN

        Senator Portman. There is no place I would rather be, but I
    want to thank my colleague from North Dakota for giving me the
    chance to speak. I do have a flight to catch, as I am sure she
    does, and others, and she kindly asked me that.
        First of all, it is great to have this hearing. Thank you,
    Mr. Chairman and Senator Heitkamp, for encouraging us to keep
    focus on this regulatory issue. There is so much that can and
    should be done. We have already had some of these discussions
    in the process of your confirmation, Mr. Administrator, and I
    appreciate you coming back.
        One thing we talked about in your confirmation hearing is
    what is the role of independent agencies, and the fact that
    there are more and more major rules coming from the independent
    agencies and they are not subject to the same cost-benefit
    analysis that the Executive Branch agencies are, and I, at the
    time, talked to you about the fact that a number of your former
    OIRA colleagues have come out strongly in favor of providing
    this kind of cost-benefit analysis for the independent agencies
    as well.
        In fact, Democrat and Republican alike have called for
    extending 12866 to independent agencies. Senator Warner,
    Senator Collins, and I have introduced legislation again this
    year to do that. Former OIRA Administrator Cass Sunstein, one
    of your immediate predecessors, said in a column before he
    became Administrator, The commitment to cost-benefit analysis
    under 12866 has become too narrow. It should be widened through
    efforts to incorporate independent regulatory commissions
    within its reach.
        By the way, so does the American Bar Association, the
    Administrative Conference, the President's Jobs Council believe
    that. All of them have recommended extending cost-benefit
    analysis for review and independent agencies. As you know, our
    proposal does that. It does not go as far as some of us would
    like to go, frankly. It does give you an important role and
    yet, it ultimately gives the responsibility to the independent
    agencies by saying that OIRA would have the ability to review,
    but would not have the power to stop and return regulations. So
    you would have more transparency, more public scrutiny, more
    accountability.
        When I asked you about this in your confirmation hearings,
    you said you needed some time to think it over. You have had
    some time now. You say you look forward to better understanding
    what the costs and benefits are of bringing, very clever,
    independent agencies under OIRA type of mandates would be. So
    can you tell us where you are on that now and whether you are
    willing to help us on this legislation to codify much of what
    the President himself has said he is for?
        Mr. Shelanski. Thank you very much, Senator Portman. I have
    had a couple of years to think about the issue and after
    thinking about it, I still have some reservations about
    extending OIRA review to independent agencies. I would separate
    two issues, however. One is the requirement for independent
    agencies to undertake cost-benefit analysis, something that the
    President has encouraged them to do in his Executive Orders and
    whether it is OIRA who should review the way that they
    undertake that cost-benefit analysis.
        I think cost-benefit analysis is a very healthy thing for a
    regulatory system and that goes for independent agencies and
    Executive Branch agencies alike. My concern is more with OIRA
    as the reviewer of those determinations. I have worked at two
    independent agencies. I really have some appreciation for the
    value of how those agencies function for the value of the
    independence and the way they are set up as independent
    agencies.
        I do worry about an Executive Branch review process that
    could interfere with that independence and possibly interfere
    with their functions under their authorizing statutes. That
    said, you asked if I would be willing to work with your offices
    to think further about this topic and to find a way that there
    might be a way to push cost-benefit analysis more into
    independent agency rulemaking and the answer is absolutely yes.
        Senator Portman. Well, I hope you will take a look at the
    legislation more carefully because I think it does precisely
    what you are saying. Here is the backdrop, just so we all know,
    and I know you know this. One quarter of the new major rules
    are now issued by independent agencies, and for our
    constituents, those are some of the toughest rules and we hear
    about it a lot. There is a broad consensus that there is not
    the kind of quantitative analysis that we need.
        In 2013, none of the 18 major rules, none of them, issued
    by the independent agencies was based on a complete analysis of
    best costs and benefits. In 2012, not one of the 21 major rules
    had a complete cost-benefit analysis. According to the
    Administrative Conference of the United States, only one rule
    was supported by even a partial attempt to quantify benefits in
    2012.
        So there is a huge gap here. Again, our legislation does
    not say that OIRA takes it over. It says that OIRA does provide
    advice, cannot require the independent agencies to follow it.
    But I would think your expertise you have at OIRA is badly
    needed and you should embrace this idea. With that, Mr.
    Chairman, I appreciate the time and I look forward to
    continuing to work with you, Mr. Administrator.
        Mr. Shelanski. Thank you, Senator.
        Senator Lankford. Senator Heitkamp.
        Senator Heitkamp. Thank you, Mr. Chairman. We keep talking
    about major rule, which is defined as having an impact of over
    $100 million on the economy, but it was adopted, that $100
    million standard, was adopted in 1981. What would that $100
    million be today if we were going to adjust for inflation?
        Mr. Shelanski. That is a good question. I have not actually
    run that calculation. I would be happy to get back to you on
    that, but it would be substantially higher.
        Senator Heitkamp. Well, I mean, you think about it. The
    early 1980s especially were a period of dramatic inflation, and
    so we want to kind of put this in light because we talk about
    the growth and major rules, but if we index this or if we
    adjusted it for inflation, we might find out that there are--I
    share the concern that Senator Portman has about independent
    agencies.
        But I just wanted to kind of lay down a marker on what is a
    major rule. That standard being set in 1981 at $100 million,
    obviously that would be much more significant in 1981 than a
    $100 million rule today.
        But back to kind of my opening comments, if we back up. One
    of the major concerns that I have with this whole process, and
    we saw it a little bit with the DOT tank car rule, is that
    Congress consistently kind of kicks the can down the road and
    says, OK, some of these details are just too tough to get to.
    We are just going to throw this to rulemaking and we will see
    what they can come up with, and frequently the devil is in the
    details.
        But yet, that standard is out there, that requirement is
    out there. So a lot of times when we talk about these major
    rules, it is Congress that has initiated the major rules,
    congressional enactment. In fact, it should be that in all
    cases. So now we have Congress making these decisions on what
    the agencies are going to do. The agencies being understaffed
    in terms of developing the rules. We take away the potential
    for bias. And then we say, we want you to do more.
        And that is a problem because we cannot keep saying we want
    you to do more, which I think you might be surprised that we
    are going to send you more work if some of the initiatives that
    we are talking about are going to happen. What is a reasonable
    response when Congress puts more on you? How could you
    communicate better to us in terms of what the resource needs
    are?
        Mr. Shelanski. Thank you, Senator Heitkamp. It is an
    important question. I think we at OIRA, like I would say every
    office at OMB, has a heavy lift to perform and often it is a
    lift that is growing heavier, both because of Executive Orders
    and because of statutes from Congress. So to do our job well we
    would love to have more resources.
        I think we have been doing the job that we have chartered
    to do quite well. Staff really work hard. They are eager to dig
    into their work and they do a great job. But of course, as we
    have more work to do, as we have broader mandates, if it were
    to happen that independent agencies were to be brought, even on
    a discretionary basis, under our jurisdiction, that would pose
    a resource challenge.
        Again, I want to emphasize, I do not think it is a resource
    challenge that is any greater than that faced by any of the
    other component offices at the Office of Management and Budget,
    but it is a challenge.
        Senator Heitkamp. And it is a concern of mine as we kind of
    look at moving forward and designing perhaps a better
    retrospective package, a better path forward for increased
    oversight, on cost-benefits, that we may in fact be doing
    something we do not want to do which is delaying a rule, like
    the tank car rule, which was clearly involved in some pretty
    dramatic safety discussions.
        So, I want to just make sure that we are all on the same
    page. And I want to encourage you, as we, the Committee, and as
    Congress moves forward with regulatory reform and potentially
    providing more oversight and more responsibility to OIRA, that
    OIRA is able to say, We can do this in a timely fashion if we
    are given the resources and these are the resources we believe
    we need.
        And so, I just want to encourage you to ask because
    frequently we say Well, there was not enough resources. Well,
    you are not silent. You need to let us know. And with that, I
    am going to kind of stop this conversation and move to the next
    page.
        Senator Lankford. Mr. Shelanski, how we have done
    traditionally in this Subcommittee is the second round of
    questions is open. Any Member can ask any question at any time.
    There is more open colloquy here on the dais as well as with
    you, so there are no turns at this point so there will be more
    of an open dialogue and conversation.
        Let me step in to one of the things that Senator Portman
    was talking about as well just for the independent agencies.
    OIRA has a responsibility to be able to work with the agencies
    to say, This regulation that you are proposing has an effect or
    is connected to another regulation in another agency or one
    that they are planning.
        If the independent agencies are not included, how can OIRA
    help this agency in the Executive Branch stay away from
    doubling up on something that an independent agency is doing,
    just the basic awareness of that and then also the cost-benefit
    analysis? I come back to that as well. This agency may have a
    rule that they are creating that may be a $100 million rule
    plus this other agency that is an independent agency may create
    another one that is $75 million, but the cumulative effect of
    that is pretty profound, to say the least, on it. If there is
    not coordination, how do we get that if they are not included
    in this conversation with OIRA?
        Mr. Shelanski. Thank you, Senator. The independent
    agencies, while we do not review their rules, can be brought
    into interagency discussions.
        Senator Lankford. Can they? Because that is different. We
    are trying to find out if they are always brought in and are
    always being considered.
        Mr. Shelanski. When we at OIRA believe that an independent
    agency has an equity or something to say or regulates in a
    similar area, we do ask that they review the rule and comment
    on it. We cannot compel them to comment, we cannot compel
    anybody to comment, but we do afford them that opportunity.
        Senator Lankford. So what happens when SECRETARY or the
    Commodity Futures Trading Commission (CFTC) or some other
    independent agency is working on a rule and you have other
    banking rules that are happening simultaneously? Community
    banks are trying to figure out because they see two different
    sets of rules happening that are pretty similar. Who is being
    the referee in the middle of all that to make sure that they
    are going to get consistent rules and they are not having to
    fight a battle on two fronts?
        Mr. Shelanski. So when we know that an Executive Branch
    agency is issuing a regulation in an area where an independent
    agency is also working, we do ask that Executive Branch
    agency--and here we do have the authority to really push an
    answer--for an explanation of how their rule interrelates, what
    the cumulative burdens will be, whether there is duplication
    and or whether they are really doing something different from
    what the----
        Senator Lankford. So in the pecking order, then, the
    independent agency is going to be on the top and the Executive
    agency is going to have to wait on the independent agency to be
    able to finish that out?
        Mr. Shelanski. I do not think that is necessarily the case.
    A dialogue can result that can lead to a decision about who
    will regulate where. I do not know that there is any pre-
    established pecking order, but we do require the Executive
    Branch agency to answer the question.
        Senator Lankford. Right. But there is a lot of authority
    there with the Executive Branch is where you have the ability
    to be able to have that dialogue where with the independent
    agencies it is only if they choose to come in and participate,
    and hopefully most of them do choose to participate.
        But multiple places, whether they be hospitals, whether
    they be banks, especially smaller community banks, all struggle
    with these multiple regulators stepping in and a lot of
    overlap. There may be four rules that all have serious effects
    on them coming down in a 3-month time period and they are
    trying to catch up with these different rules. Sometimes they
    are conflicting, most of the time they are not. Most of the
    time it is just another layer that they are still trying to
    catch up from the previous one. Does that make sense?
        Mr. Shelanski. Where OMB has authority is to bring the
    independent agencies into the discussion. In terms of authority
    over approving or not approving the rule, that lies in the
    Executive Branch, not with the independent agencies. You are
    correct on that.
        Senator Lankford. Go ahead. It is all open.
        Senator Enzi. Thank you, Mr. Chairman. I have had a lot of
    questions on if these costs and benefits calculations are
    available to anyone, even us. We have seen some things, some
    rules come through and we wondered how they got to those
    particular costs. What is the rule on transparency on those
    things?
        Mr. Shelanski. Thank you, Senator Enzi. When a rule goes
    out from our office, when a rule is published, the regulatory
    impact analysis on an economically significant rule is part of
    the record. So for example, if it is a proposed rule that goes
    out for public comment, it is not just the rule text and
    preamble that go out. It is also the underlying rule with
    accompanying tables and appendices. These studies and these
    impact analyses are often very long and we try to make sure
    that there is as much transparency as possible about the
    calculations, the underlying data and exactly how the agencies
    reached their conclusions, and those are available to the
    public.
        Senator Enzi. OK. Are they published in the Register at the
    time?
        Mr. Shelanski. Yes. They are part of the rule package the
    agency releases publicly. Whether they will always be published
    in the Register with the rule, they are always made available.
    It can be in the agency docket, on the agency website, but they
    are part of the administrative record of that rule and they are
    publicly available.
        Senator Enzi. And if somebody questions those, what do they
    do?
        Mr. Shelanski. So when it is a proposed rule, we actually
    want people to question those. In fact, we very often, both in
    the rules that go out for public comment, the proposed rules,
    we specifically ask for questions about the underlying
    analysis. And then when the rule comes back in final form, we
    make sure that the agency has addressed those concerns.
        Senator Enzi. Thank you.
        Senator Heitkamp. I want to kind of get some information
    based on your experience, and I understand no two agencies are
    alike and that you are working with a lot of diverse subject
    matter. But some of the process pieces, you may see commonality
    and mistakes. You may see things that go where you go, Here
    they go again, the same thing.
        I am wondering if there are steps in the current rulemaking
    framework kind of across the board that have a tendency to trip
    up agencies as they are drafting these rules. Do we have any
    institutionalized kind of hiccups in the process that we could
    smooth out to make this process more responsive?
        Mr. Shelanski. Thank you, Senator. There is no doubt that
    there is unevenness across the Federal Government in the
    experience and the resources that agencies have to conduct
    these analyses. Some agencies are excellent and have large
    teams that are always doing these kinds of analyses. So we tend
    to have relatively few hiccups. We may have disagreements with
    them over aspects of the analysis, but they tend to know what
    they are doing.
        We have other agencies that have very little experience and
    sometimes a new area of rulemaking pursuant to statute or some
    public emergency may push an agency with limited experience
    into having to do kinds of analysis that they are not used to
    doing. In those cases, we tend to provide a lot of technical
    assistance. My staff, the OIRA staff, are really quite skilled
    at showing agencies and finding solutions to their analytic
    problems. Sometimes they subcontract to experts.
        Senator Heitkamp. Do you think people would have more faith
    in cost-benefit analysis if they were done by an independent
    agency and not an internal group within the subject matter?
        Mr. Shelanski. I can see certain reasons that intuitively
    one might see benefits to having some level of independent
    performance of those analyses, but I also think they are real
    drawbacks. Cost-benefit analysis is certainly not a one-size-
    fits-all kind of exercise. There is not a set of algorithms or
    equations that one would always use in cost-benefit analysis.
        How one calculates particular costs or what particular
    benefits would be often require a lot of technical expertise
    that tend to be in the hands of the agencies. I would worry
    that a generalist kind of body to perform those analyses would
    not have that and would miss key areas of costs.
        Senator Heitkamp. But you are a generalist kind of agency
    that is reviewing the cost benefit.
        Mr. Shelanski. And so we review them. The agencies perform
    those analyses and what we get to do is ask a lot of hard
    questions and come back to them and say, Why did you use this
    evidence? What about these studies?
        Senator Heitkamp. Do you not think, though, there is some
    commonality in terms of best practices in doing that kind of
    analysis?
        Mr. Shelanski. There is. And indeed, we have tried to
    capture a lot of those best practices in a guidance document
    that is really the foundational guidance document for all
    regulatory impact analyses.
        Senator Lankford. Which one is that?
        Mr. Shelanski. That is Circular A-4.
        Senator Lankford. OK.
        Mr. Shelanski. And Circular A-4 really covers a large
    number of topics that are common, that will typically arise in
    regulatory impact analyses and we try to set parameters and
    bounds in particular subject areas that must be covered so that
    agencies have a pretty fair guide in what they need to do.
        Senator Heitkamp. And not to belabor this, but have we ever
    gone back and done a look-back after we do all this analysis
    and say, Boy, we learned something about evaluating costs
    because costs could be higher costs, could be lower? It is a
    target. And then when we look at benefits, and I will give you
    the example which is on the conflict minerals regulation, which
    I hear about in North Dakota all the time, which is that the
    requirements that a lot of people work, a lot of things could
    have conflict minerals, it is really difficult for people to
    know or not know.
        We have done a supply drain kind of analysis. That means I
    better know what is in this before I buy it kind of thing. I am
    going to have to report it. But have we ever stopped anybody
    from buying conflict minerals?
        And that is the challenge that we have which is a good
    intention. No one wants us to be participating in human
    slavery. But by the same token, does that rule really
    accomplish anything? As frustrated as we get talking to our
    people, if we could say, Well, yes, but, because of that rule,
    we have shut down five mines in Africa that are engaged in
    producing conflict minerals. It probably happened.
        Mr. Shelanski. We learn a lot from the past experience with
    regulations and it helps us at OIRA, when we review the
    analyses that agencies provide, because these experiences,
    things we learn through the retrospective review process, or
    from stakeholders who come in whether to the agency or to OIRA
    in meetings under the Executive Orders that we are required to
    accept, we learn a lot about what the experience has been with
    rules that are on the ground.
        And that enables us to ask hard questions when we see
    something that is similar in a rule that is being developed.
    One of the things that we do when we review an agency's
    analysis is ask hard questions about how they got to their
    benefit determinations and actually the fit between the rule
    itself and how it will operate on the ground and the benefits
    that are projected.
        It is something we try to look at very closely, and in
    looking at that, we can be informed by what stakeholders tell
    us about past experiences. Is this going to be like this other
    rule where it has a similar structure, there was not a lot of
    benefit, but it ended up being very costly.
        One of the reasons it is great to have a retrospective
    review process is it allows those us to identify such rules for
    an agency to go back and look at, but it also helps us
    prospectively with identifying areas where the benefits may not
    be well predicted given the way the role is actually
    structured.
        Senator Lankford. Yes, and I know Senator Enzi is about to
    ask a question on this, too, but let me just give you an
    analogy of this same issue on, for instance, the conflict
    minerals, because there is more than just the cost and the
    benefit. It is also the gains to the agency as far as leverage
    that is gained with a regulation to say they have an amount of
    authority.
        I have a company in Oklahoma that did not turn in their
    form to say they do not have any conflict minerals. So they did
    not have any conflict minerals so they did not turn the form in
    to say they have none, and they were fined $1 million because
    they did not have a form to say they did not have to turn in a
    form. They ended up negotiating that with an agency who then
    dropped it down to only $100,000 fine, but it is a tremendous
    amount of leverage that an agency gains from someone who was
    saying, Why am I turning in a form to say I have nothing to
    turn in?
        There is this other piece that is out there as well that is
    a part of our own government relating to the citizens that run
    us that is a dynamic that is in this as well. I know Senator
    Enzi wanted to be able to make a comment on that, too, or on a
    different issue.
        Senator Enzi. Well, not necessarily different, a different
    cost thing, I think, and maybe more general than that. Is there
    any relationship between the time for the costs and the time
    for the benefits? A person can do something that is an
    immediate cost to the business and then that they can say, if
    they drag it out enough years, 50 years to the general public,
    it can be a great advantage. But it was an immediate cost and
    no immediate benefit. How do you work those things?
        Mr. Shelanski. Thank you. That would be a very worrisome
    kind of manipulation in a regulatory impact analysis and we are
    certainly on the lookout for that kind of thing. One can always
    put out an amortization schedule for the costs that are
    required to comply that would be very long to make the annual
    costs look low. If that has nothing to do with the actual
    investment cycle and the way people really run their business,
    that is not a helpful cost estimate.
        One of the things we do is to ensure that agencies and
    guidance we provide in Circular A-4, makes sure that agencies
    do not get the alignment between the cost period and the
    projected benefit wrong.
        Senator Enzi. One of the areas we are concerned about in
    Wyoming is sent the regional haze requirement, which blames all
    of it on coal-fired power plants, not on the Canadian forest
    fires that we have been experiencing recently.
        They seem to think that if you cleanup--if you eliminate
    the coal-fired power plants, that that eliminates the problem,
    but it does not. The way that the cost is, it is an up-front
    cost for any plant to do it. There are also some difficulties
    over how long they can depreciate the thing which is forcing
    them all into a different kind of mechanism for taking care of
    the problem than would be logical.
        But the benefits, of course, accrue over a long period of
    time, but if you extend that period of time out there long
    enough, there is always a tremendous benefit even if it is not
    realistic to the problem. So I am just mentioning that as
    something you might look at in the future and we will have some
    more specific questions on that.
        Senator Lankford. Can I followup on that same question?
    What you are saying is, is there a one-for-one ratio? For
    instance, we are going to do the costs over the next 5 years
    and also the benefit over the next 5 years and lay those side-
    by-side, or is there a time the cost really is determined over
    this and the benefit is determined over 5 or 10 years? Is it
    always one-for-one?
        Mr. Shelanski. No, it is not always one-for-one.
        Senator Lankford. OK. So what is the ratio that is
    typically accepted?
        Mr. Shelanski. It depends on the circumstances. Under
    different circumstances, you might get a different timeframe in
    which there really are going to be benefits accruing and you
    might not want to align the costs with that. That could
    actually be a disadvantage for the analysis and for businesses
    by making it look like the annualized costs are----
        Senator Lankford. Well, most of the costs of businesses in
    a heavily capitalized intensive business will probably be in
    the first 5 years.
        Mr. Shelanski. Yes.
        Senator Lankford. But if the benefits are not for 20 years
    or for 30 years, I think that is the heart of Senator Enzi's
    question. What is the formula? Again, since we do not see it,
    we need to know how is that figured?
        Mr. Shelanski. So the first thing I would say is in any
    regulatory impact analysis, you actually can see what the
    assumptions are as to time and when those costs and benefits
    will accrue. So that is something that can be commented on.
        Typically we look at the underlying evidence, what makes
    sense as a timeframe to measure costs and is there is solid
    evidence. What our concern is, is when benefits without good
    underlying evidence are projected infinitely into the future so
    that you get this massive accumulation of benefits. So we are
    very careful to make sure that any benefits that are----
        Senator Lankford. Right, but there are multiple ways to do
    that. I do not mean to interrupt you, but it is the same thing,
    if, for instance it is a 10-year cost-benefit analysis on this,
    that is going to figure different than if it is 20, because
    again, for most businesses, the first 5 years are going to be
    the most capital intensive and then there is not going to show
    a lot of costs, and so it really shows that regulation is
    inexpensive for the last 15, but it may be 15 years from now
    when there is an actual benefit that kicks in.
        So whoever sets the parameter for the number of years that
    will be included in the study really sets how it is going to
    come out. So even if you said we are going to look at the next
    10 years, or the next 5 years, or 50 years, it may go side-by-
    side, but the costs and the benefits come in at different
    times.
        So I guess that is where we are trying to get on some of
    the assumptions. Who sets that parameter? Is that you, is that
    the agency because you could figure it three different ways,
    take it 5 years, 10 years, 15 years and you are going to get
    three different sets of answers at which one has the greater
    cost, which one has the greater benefit.
        Mr. Shelanski. So we will typically look at a typical kind
    of window that--we would look at for both costs and benefits is
    a 20-year period and we would ask at what point you have
    reached the fully realized costs and the fully realized
    benefits and try to make a measurement over of that period. For
    different kinds of rules, rules that take place in an industry
    with fast-changing technology or where the circumstances may
    change, shorter time periods can be warranted. It really
    depends on the particular circumstances.
        Senator Lankford. But in a 20-year window, I would just say
    almost always the people that are paying the capital up-front
    are going to lose. It is very difficult, because their cost is
    really the first few years and then you really are racking up
    benefits over two decades to try to catch up for the cost that
    is initially in 2 years, if it is a 20-year window, if that is
    what is typical.
        Mr. Shelanski. Well, there has to be real evidence about
    what those forward-looking benefits are and that those cost
    investments will continue to have that payoff.
        Senator Lankford. Is that 20-year window, is that typical?
    Has that been OIRA's history since 1980 to do that or has that
    changed?
        Mr. Shelanski. Well, I would have to look back and see. I
    mean, it is really going to vary very much from rule to rule
    what is an appropriate timeframe to look over. But to come back
    to your point about the capital-intensive fixed costs, we try
    to make sure that the accounting for those costs is accurate.
        If it is the case that they are going to be up-front costs
    that are likely to put an industry out of business, that would
    be something that we would take very substantially into
    account, because you are not going to get those benefits, if
    the engine for those benefits, if you will, is not going to be
    around to produce them.
        Senator Lankford. You might want to check on some of the
    regulations coming down in the coal industry then because that
    has been a pretty rapid acceleration, some of the call issues
    and the number of jobs that have been lost on that one. But,
    that is a different issue. But that is a big part of this.
        I would ask one other question related, and I do not want
    to hog all the time here because we have a lot of other
    questions. When you do the cost-benefit analysis, do you always
    include direct costs, direct benefit, and indirect cost and
    indirect benefit? Are those always included in a major or
    significant rule so there is never a time that there is
    indirect benefits done without indirect costs also being
    included? Are both always included?
        Mr. Shelanski. What we always ask for is the best evidence
    on the cost side and on the benefit side. But if, for example,
    there were only evidence of direct costs and we knew that there
    was probably going to be some indirect costs but we did not
    have the evidence, we would not simply discount of those to
    zero.
        We do not require that all costs and all benefits be
    rigorously quantified. We ask an agency to be rigorous on
    identifying what the categories of costs or benefits are and to
    do their best in quantifying those. But one always has to be
    careful of a mismatch of the kind that you described.
        Senator Lankford. And that is what I am trying to figure
    out. Would there ever be a rule that we could look at and say
    indirect benefits were counted, but indirect costs were not,
    that an agency would say, we cannot tell what the indirect
    costs are going to be, but we can tell what the indirect
    benefits are going to be?
        Mr. Shelanski. So often there is better evidence for one
    than the other. I would add, there is almost always better
    evidence for the costs than the benefits, at least when it
    comes to quantified benefits. So the bias, in that sense, that
    I have seen at least in my 2 years as Administrator, has
    typically been against the benefits because cost data tends to
    be a little bit easier to come upon.
        But if we think there is good reason to believe there is a
    category of indirect costs but they are just hard to measure,
    we will push the agency to talk about those, to talk about ways
    that they might be accounted for and how they might relate to
    the benefits of the rule.
        Senator Heitkamp. I have a question, and just bear with me
    on the example. Let us say, as we all know, that there is some
    pretty stringent, whether it is ozone or whether it is CO2,
    regulations coming down the track and now you have them on your
    desk. Just imagine that happens. And the end result--I mean,
    you are calculating what it may cost to retrofit power plants,
    what it may--implementation of this rule, what that would cost
    to basically develop the technology to meet the standard in the
    new rule. But let us say what actually happens is we then
    switch to renewables that have a higher cost to consumers.
    Would the higher cost to consumers be included as an indirect
    cost of that rule?
        Mr. Shelanski. The higher cost to consumers, if there is a
    good case to be made that that will occur and one can come up
    with an analysis to show what that cost would be, would
    absolutely be something that we would ask to be included.
        Senator Heitkamp. Because these regulations frequently have
    opportunity costs, the ones that are harder to quantify and
    will result in change in behavior which will then have
    consequences of its own. I think one of the concerns that we
    obviously have is that when the reviewer or the calculator of
    the cost benefit appears to have a bias, that maybe some of
    that is not calculated the way it ought to be calculated.
        And so, let us say that I could make a pretty persuasive
    case to you that if we switch to a different fuel source
    currently not right now with natural gas but maybe down the
    road and if you looked historically--let us say we are
    switching to natural gas as a fuel source and I could show you
    historic data that showed the average price of natural gas runs
    about $7, even though we are at a historic low, or probably at
    a historic low at this point if you adjust for inflation, and
    we can anticipate over a period of time the life of that power
    plant, that in fact you will have a dramatic increase cost to
    consumers. Is that something that ever gets considered?
        Mr. Shelanski. We would be very concerned by an analysis
    that simply carried forward a current state of the marketplace
    without good justification and good analysis showing that that
    was a reasonable assumption.
        Senator Heitkamp. Well, that is good to know, and then we
    obviously are going to be taking a look at that. I want to
    switch gears just a little bit because I have something that I
    call prospective retrospective. I just think it is kind of fun
    to say it that way.
        What this is, is the idea that we have this big mess, and I
    will call it a big mess, of regulation with no real structure
    for retroactive review or retrospective review on those. And
    kind of a cajoling but not any kind of mandate.
        So the idea would be from this point forward when we
    promulgate new rules, as an essential part of that new
    rulemaking, you have to embed a retrospective review. You have
    to basically say--and issue that as part of the rule that then
    would be subject to comment on time period, comment on a number
    of things. What would be your reaction to a change in the
    regulatory process that would embed a prospective retrospective
    review process?
        Mr. Shelanski. I think this is an interesting idea and one
    that we would be very interested in discussing with you going
    forward.
        Senator Heitkamp. Well, I hope I get a better answer than
    Senator Portman. You come back and you say, What a great idea.
        Mr. Shelanski. Well, I think that accountability is one of
    the really important things in any regulatory system and I
    think asking an agency to account for how its rule has actually
    operated and whether it is achieving its goals is an important
    objective. I think the devil again is going to be in the
    details, which is why I would welcome the chance to have
    further discussions with you on it.
        Senator Heitkamp. We would not be setting any parameters.
    What we would be doing is requiring the agency to actually say,
    This is what we think we want to do, allowing stakeholders and
    people who are currently involved in that rulemaking process to
    say 10 years is not right. You need to go back to 5 years and
    make that part of the notice and comment procedure so that we
    are not one-size-fits-all, but we are requiring that it be part
    of the deliberation and the discussion.
        Mr. Shelanski. One of the things that we have been
    encouraging agencies to do where appropriate is to put in place
    a provision where they will review, at some point in the
    future, what the effect of the rule has been. We have actually
    done that on a NAA regulation involving ship strikes and right
    wales. OK. You put in place that regulation. Can you come back
    in 5 years and tell us what the effect of this rule has been?
        Senator Lankford. Did you set an actual date like that? I
    think that is part of the issue. It would just say do it at
    some future point instead of just saying 5 years.
        Mr. Shelanski. I want to be careful because I am not sure I
    remember that specific detail--I believe we put a time period
    in there.
        Senator Lankford. OK.
        Mr. Shelanski. But again, what would be required
    specifically and what the consequences would be are things that
    I think are important details. One of the concerns I would have
    and that I think would have to be resolved is anything that
    suggested to those who must comply with the rule, that in 5
    years there could be a review that has the rule not take
    effect, I think, would have a real effect on compliance and we
    would have to think about what the compliance incentives are.
    We want people to comply with the rule, for the rule to be able
    to take effect, so that the agency could do a meaningful
    assessment of whether it was working.
        Senator Heitkamp. Just to clarify, I do not think that if
    we would embed the requirement that the rule would evaporate.
    What we are simply saying is that we are going to require that
    with every new rulemaking, you actually consider how you are
    going to review this rule and how you are going to provide
    stakeholders with an opportunity to comment at time certain on
    the effectiveness and the benefit. And it also has the added
    benefit of doing a look back on cost-benefit analysis with true
    data.
        Mr. Shelanski. This is something I would like to take back
    and talk to the team about and think more about, but we would
    welcome a further discussion on this topic.
        Senator Lankford. Great. Can I come back to the cost-
    benefit issues again? In retrospective review, we have multiple
    issues that we still want to be able to talk about. Let me just
    give you a hypothetical situation. Let us just say there was a
    Supreme Court case called Michigan versus EPA, just
    hypothetically.
        Senator Heitkamp. Never heard of it.
        Senator Lankford. And there was a conversation about this
    term of appropriate and necessary and whether cost-benefit
    should be analyzed in that. EPA came out and said that they do
    not feel like they have to consider cost, that that was not
    necessarily in the appropriate and necessary. That came through
    OIRA to the process, gets to the Supreme Court, and they say,
    Of course you have to evaluate costs on it.
        Two questions, I guess. One is, obviously, that came
    through OIRA at some point and I do not know if it was while
    you were sitting there or not. So one is, why did OIRA not
    catch that say, No, you have to do a cost-benefit analysis
    here. And the second one is, how does that change the process
    for OIRA in the future?
        Mr. Shelanski. There can be difficult legal issues
    underlying a statute. The way that the EPA did the analysis was
    the subtle legal understanding at the time. It obviously had to
    go to the Supreme Court to be clarified. So I do not think that
    it would be OIRA's position to second-guess----
        Senator Lankford. But the position has been that there has
    to be some kind of cost-benefit analysis. EPA basically said,
    That is not our responsibility. We do not have to do that on a
    cost-benefit analysis on something that was very significant
    and it ends up being a very costly rule at the end of the day.
        But their position was, We do not have to do that. That is
    what I am trying to figure out. How often does that occur, that
    OIRA would say to an agency, No, we concur, you do not have to
    do a cost-benefit analysis on this though it looks like a very
    significant rule?
        Mr. Shelanski. There are certain statutes, I think only one
    or two that I can think of, that appear to bar the agency from
    taking costs into account. Those would be the only cases where
    OIRA would give a free pass to the agency, and the Clean Air
    Act (CAA) is one of the statutes that was often held up by a
    number of authorities as a place where cost-benefit analysis
    was not something that could be mandated.
        The Executive Orders, of course, require a cost-benefit
    unless prevented by law. So those are very rare occurrences. So
    even where agencies think that their rule is of borderline
    economic significance or would rather not do the cost-benefit
    analysis, we do not give them a free pass.
        Senator Lankford. Well, you and I, a couple of years ago,
    had a protracted conversation about social cost of carbon right
    when it was being released as well, which is obviously a very
    significant decision, came out in a microwave oven rule, if I
    recall correctly. The first time it was released it was kind of
    slipped into the middle of that and the implication was it is
    going to kind of go into every rule just a little bit at a
    time. And then it came back and was reviewed and has gone
    through a process, has recently gone through that again.
        You had mentioned the Circular A-4 earlier as that is kind
    of the standard on it, but the social cost of carbon, if I
    remember correctly, did not use that same standard that was set
    in there at the discount rate of how you evaluate the long-term
    effects. It changed the number a little bit. Do you happen to
    know why, on that particular rule, when you said that the A-4
    is kind of the gold standard there, why in that particular
    social cost of carbon rule the discount rate that is in A-4 was
    not used?
        Mr. Shelanski. Thank you, Senator. To clarify, the social
    cost of carbon is not a rule. The social cost of carbon is an
    input into----
        Senator Lankford. It is an estimate, correct.
        Mr. Shelanski. Yes. It is an input that agencies can use
    where appropriate in a cost-benefit analysis.
        Senator Lankford. But it is obviously extremely important
    because when you are looking at cost and benefit, it is one of
    those factors that goes in that if it is not right, again when
    you look at a 20-year window or a 50-year window, it changes
    pretty dramatically.
        Mr. Shelanski. Right. So the interagency body that came up
    with the cost, the social cost of carbon estimate, based their
    analysis on publicly available, independently developed, peer-
    reviewed models, used inputs that one would suggest were
    appropriately chosen, actually, under Circular A-4. Circular A-
    4 does not mandate that in every case a particular discount
    rate or discount range could be used.
        It gives guidance as to what we thought, at least at the
    time that the circular was last revised, that a good range of
    discount rates were from 3 to 7 percent, but which one is
    appropriate in a particular context will depend very much on
    the circumstances.
        The judgment was reached in the social cost of carbon and I
    was not there when the original estimate was developed.
        Senator Lankford. Right, but you have been there during the
    revision.
        Mr. Shelanski. I have been there during the revision. I
    think that what the revisions have done is to review whether we
    think we have the right inputs. We have actually been generally
    criticized on the outside for having a discount rate that is
    too high in that.
        And what we are doing next in the social cost of carbon
    process, which I might add that the Government Accountability
    Office (GAO) commented, I think favorably on, what we are doing
    now is moving forward in a process that we have recently
    announced with the National Academies, will develop again a
    very robust estimate that will go out for public comment and
    for peer review.
        Senator Lankford. And then how long is the look as far as
    the benefits on social cost of carbon? How far does it go out?
        Mr. Shelanski. I think we have a range that we look over
    and we have both the short and long-range estimates. So there
    is a range that will come out in that guidance.
        Senator Lankford. So give me the guess here. Is it a 5-year
    range, 10-year range, 20-year range? As you mentioned, most of
    those rules are 20 years in cost and benefit. Does it go out to
    the farthest extreme to 20 years?
        Mr. Shelanski. I am sure it does. I would have to go back
    and look and see.
        Senator Lankford. But it does not go farther than 20 years
    as far as benefits?
        Mr. Shelanski. I would have to go back and check how far
    out we are looking. The real question is under the
    circumstances given what we are trying to achieve what is an
    appropriate timeframe and some can be quite a long timeframe.
        Senator Lankford. So how do you do the indirect benefits as
    well as indirect costs when you deal with something like the
    social cost of carbon? Just take a microwave oven, for
    instance, where it all started there. There is a benefit to
    saying actually the food was cooked faster, it did not use
    other fuels, did not use other types of electricity or whatever
    it may be. How are you figuring that in as well as the cost
    that goes into it as well?
        Mr. Shelanski. Well, the social cost of carbon would only
    be one input into that regulatory----
        Senator Lankford. But it is a pretty significant input.
        Mr. Shelanski. It is, but equally significant would be
    other kinds of--for example, the benefits of using the
    microwave, the savings in time to people, the convenience, the
    cost savings that people might have from cooking more food at
    home because it is more convenient rather than going out. These
    are the kinds of things that we would ask the agency to
    consider as well.
        Senator Lankford. So back to the 7 percent versus 5 percent
    decision on social cost of carbon, can you help us understand
    how that decision was made?
        Mr. Shelanski. Well, I think that when you look at--and I
    cannot comment as to what the interagency deliberations were at
    the time, I was not there. But I would simply note this. If you
    used a 7 percent discount rate for the social cost of carbon,
    we would effectively be saying that environmental damage from
    carbon, just far enough forward for grandchildren to be
    becoming adults, would not matter at all to us. We would put a
    value of zero on that.
        And since what we are trying to achieve through the social
    cost of carbon is some accounting for the cost to society going
    forward to the cost of a well functioning economy, to the cost
    involving our health and safety, what that is going forward
    into the future, such a high discount rate would be
    inappropriate because----
        Senator Lankford. That seems a get outside of that 20-year
    window we were talking about.
        Mr. Shelanski. Well, the actual calculations of the costs
    rather than what we think is an appropriate benefits range is
    something, as I said, I would be happy to go back and look at
    those and re-engage you.
        Senator Lankford. Because again, let me just try to clarify
    that. But if you are doing that 7 percent and you are looking
    at the effects on our grandchildren, then now that our costs
    and our benefits are not side by side equal on that, now we
    have a long window for one and a short window for another one.
        Mr. Shelanski. And again, it would depend on the particular
    circumstances of the rule in which the social cost of carbon
    was being used. What the social cost of carbon does is it says,
    What are the costs to the economy, to society of putting an
    additional ton of carbon into the atmosphere.
        Senator Lankford. How far out though?
        Mr. Shelanski. Again, we had some different calculations
    because you get different numbers depending on----
        Senator Lankford. Right, but I am trying to get back to
    this 20-year amount that you say is what is typical. It goes
    beyond that 20 years though?
        Mr. Shelanski. As I said, I need to go back and double
    check our technical support document and get back to you on
    what our timeframes are.
        Senator Lankford. Yes, because I want to us to be able to
    help clarify this because this is important to us, to feel like
    there is a sense of fairness. If one side of the cost-benefit
    analysis is 20 years and the other side may go out 60, that is
    literally putting your thumb on the scale on one side and there
    is not a perception of fairness in between the two. To say if
    we do this, this will have this long-term affect out there on
    the horizon.
        Mr. Shelanski. I think that it is a question of economics
    and of evidence, not of perceived fairness. It may be that you
    can incur a cost in one year that will lead to benefits that go
    out quite a bit farther.
        Senator Lankford. Right.
        Mr. Shelanski. The question is, is that a correct economic
    analysis on the cost side and do you have adequate evidence on
    the benefits side.
        Senator Lankford. And that is what a lot of our
    conversation last time was, social cost of carbon, because the
    rule is promulgated and then, if I remember, 3 years later,
    maybe it was 4 years later, it went up 50 percent, which is a
    pretty dramatic shift in the model, and then has been re-
    evaluated again and came back $1,000, if I recall correctly.
        Mr. Shelanski. Came down about a dollar ton, yes.
        Senator Lankford. So the shift is what is interesting, I
    guess. If it is a reliable model and 3 years later you have to
    adjust it 50 percent, it causes all of us to raise our hand and
    say, Why is that a reliable model if you had to change it 3
    years later by 50 percent when you are looking at modeling that
    may go out over the next hundred years. So 3 years ago, your
    hundred-year model was that bad.
        Mr. Shelanski. Well, I am not sure it was that bad. In
    fact, it understated the costs. So in that sense, the bias
    worked in favor of those who would not want regulatory costs
    imposed. I think what we are trying to do with the social cost
    of carbon is to use the best economics and science available as
    to what the benefits will be to our society of keeping a ton of
    carbon out of the atmosphere.
        We made clear in 2010 when the original estimate came out
    that this would be an ongoing process because the models are
    constantly updated by those who develop them. New scientific
    evidence is coming in. Now, we do have to ask a fundamental
    question, whether there is a minimum threshold of reliability
    and credibility to the underlying science that it is worth the
    enterprise. We believe that there is.
        One of the reasons that we are engaging the National
    Academies, one of the reasons that we look to all of the
    international bodies that are deeply engaged in this, is to
    make sure that the science is sound and that we are keeping up
    with the latest science and economics.
        Senator Lankford. OK.
        Senator Heitkamp. If I could just switch gears here a
    little bit and talk about process. I think those of us who work
    on issues every day and who are here because we are interested
    in public policy, we tend to fall in love with our ideas.
    Right? We think, Oh, that is such a good idea, I think it
    should be a law.
        And one of the concerns that we have is that an agency, not
    wanting to be biased, gets out ahead, makes a proposal, and
    then becomes a defender of the proposal as opposed to a
    promulgator of an unbiased rationally based rule.
        And so, we have been talking a lot about advanced notice of
    proposed rulemaking so that we do not have an embedded bias in
    that original drafting for which people hunker down and go into
    defense mode. Do you believe that if agencies engaged earlier
    with stakeholders in the process and actually have that comment
    before they begin to finalize their own thinking about the
    rules that we might have a more harmonious regulatory process
    and have greater use of advanced notice of proposed rulemaking?
        Mr. Shelanski. I think we have a shared view that early
    engagement with the whole range of stakeholders is important
    and beneficial to a rule. And if an agency does come forward
    with a proposed rule before they have gathered the evidence and
    the input, that could lead to real problems because the
    starting point for the rule, as you say, could be something
    that is not well grounded in the evidence or the reality of the
    world in which the rule is actually going to operate.
        So I think agencies, by and large, are quite good at doing
    notices of inquiry or the advanced notice of proposed
    rulemaking (ANPRMs) that will help them gather the necessary
    evidence. And I think they are good even when they are not
    doing that process to have a long development process for a
    notice of proposed rulemaking where they are gathering
    stakeholder input.
        Whether it is during the process of a notice of proposed
    rulemaking (NPRM) or through an ANPRM, I fully agree that an
    agency should not proceed with a rule without a good basis for
    understanding.
        Senator Heitkamp. So you would agree that this would be a
    best practice in rulemaking generally?
        Mr. Shelanski. I think having the evidence and the
    understanding of, for lack of a better term, the marketplace in
    which the rule will operate, is a necessary baseline for doing
    a good rulemaking. What the particular procedural vehicle is
    could vary, but we certainly encourage agencies in that
    direction.
        Senator Heitkamp. Do you think we should mandate agencies
    in that direction?
        Mr. Shelanski. I think requiring agencies to have a sound
    basis for proceeding is a fine idea. The particular way that we
    would put that in place is something I would welcome
    discussions on. I would also add, though, that I think our
    system has pretty good incentives for agencies to do that as
    things stand.
        Agencies do have to justify their rules on the record
    ultimately, when they are Executive Branch rules before us at
    OIRA when we review them; when they are not, for any rule under
    the Administrative Procedure Act (APA) before a court. There
    has to be public notice and comment in most cases, not all
    cases. But in almost every case, the rule is judicially
    reviewable and if the agency does not have a good record and
    looks like it is acting----
        Senator Heitkamp. So would you not agree that judicial
    review is a pretty cumbersome and expensive process and
    results? Let us take a look at waters of the United States. I
    am sure it is something that you have never had to deal with.
    And let us look at all the various attempts to do
    jurisdictional water determinations and what has happened.
        I mean, when you end up with a court case that is 441, that
    is not particularly a good way to get guidance on how we are
    going to get certainty on what is jurisdictional waters under
    the Clean Water Act. And so, obviously lots of debate over that
    rule. I just use these as illustrations. I am not asking you to
    comment on the efficacy of the rule or whatever, but I use it
    as an illustration of where the process seems to have gone
    horribly wrong in terms of ships passing in the night.
        We need to have a definition so there is certainty to
    American businesses and American landowners, but yet we keep
    throwing more uncertainty at it. And so, it seems to me that
    the more input we can get on the front end, the more we can
    force a dialogue and collaboration, the less set people are.
    This is one of those examples that I think maybe proves the
    need to have more collaboration on the front end.
        Mr. Shelanski. I think the point about judicial review is
    we certainly would rather have rules that people do not feel
    the need to litigate and feel like there are good rules and
    ones that they can live with. But what judicial review does is
    provides an incentive. Agencies want to avoid it, just as
    litigants want to avoid it, but the mere knowledge that it
    exists and will happen in some cases, and it does happen
    frequently, is a notice to the agency, We really need to get
    our ducks in a row.
        So my suggestion is that it provides good incentives under
    the existing system for agencies to engage in outreach, but I
    think agencies, in many cases, could benefit from additional
    contact with the parties that are going to benefit and bear the
    cost from their rules and undergo preliminary steps, as I said,
    whether part of NPRM or through an ANPRM to create the rule on
    a more informed environment.
        Senator Heitkamp. When you do your review--and we will go
    back to the renewable fuel standard (RFS). We held a hearing on
    that whole process and the justification for the authority to
    do that rule was very interesting to me because this was really
    about infrastructure even though historically and under our
    mandate here, the ability to review the rule based on
    infrastructure to accommodate the marketplace was taken out,
    and a clear sign, in my understanding of statutory
    interpretation, when it is in and it is taken out, might be an
    indication that it was not intended that you could use that.
        So bootstrapping another provision to do exactly that seems
    to me to be an extension, and an inappropriate extension, of
    authority. I mean, this is not news to you, I am sure, but it
    raised the question to me on what kind of review you do on the
    legality of the rule. Never mind the cost benefit or the
    appropriate process, but the fundamental legal authority to
    actually do a rule.
        Mr. Shelanski. We focus overwhelmingly on the analytics of
    the rule and how well the rule will function, but we are not
    blind to the legal issues. They are not primarily in OIRA as a
    bailiwick. They would line up in the first instance with the
    agency.
        But part of the interagency review process, and a critical
    one, is that both internal to the Executive Office of the
    President and external through other Executive Branch agencies,
    there is legal review of the rule. So we would expect, through
    the interagency review process, White House counsel and the
    Justice Department to alert us if there were legal concerns and
    we do require those concerns to be resolved.
        We do not act as an independent court. At any given day,
    there might not be a single lawyer in OIRA. I happen to have a
    law degree. A couple of people in my office happen to have law
    degrees, but it has not been unknown for there not to be a
    single lawyer in OIRA.
        Senator Heitkamp. But in the history, there has never been
    a rule rejected for lack of legal authority to promulgate it?
        Mr. Shelanski. During the time that I have been
    Administrator, that has not been a basis on which we have asked
    an agency not to do a rule. Others have, but not us.
        Senator Lankford. Can I ask a couple of rapid fire
    questions here? On the retrospective review, can you ask, is
    there a better way to do this rather than what we have done?
    You had mentioned before some of the cost issues and
    everything. Is it permissible to say 10 years later, 20 years
    later, this is how we are regulating a retrospective review?
    Can it include the question, is there a better way, is there
    additional flexibility that would still accomplish the same
    thing?
        Mr. Shelanski. Absolutely.
        Senator Heitkamp. OK. So that can be included in the
    conversation on a retrospective review?
        Mr. Shelanski. Yes.
        Senator Lankford. Is it typical?
        Mr. Shelanski. Yes, it is quite typical.
        Senator Lankford. Let me ask a question that is just,
    frankly, obvious. So it screams just obviously an easy
    question. What time is midnight when you are talking about
    midnight regulations?
        Mr. Shelanski. I guess the way I would answer that is that
    is that more important to me than midnight is when is 10 p.m.
        Senator Lankford. Sure. I can say 2008, that was
    prospective rule is June 1, final rule is finished by November
    1.
        Mr. Shelanski. Right. So what I have asked agencies to do
    is to prioritize their rulemakings. We do not pick their
    priorities for them. But get your ducks in a row because what
    we care about at OIRA is having time to review the significant
    rules and to do a good and rigorous evaluation under the
    Executive Orders. And I cannot do that if I am getting rules
    too late in the day.
        Senator Lankford. So that the hard question is, can you
    commit to us you will follow through on Executive Order 12866
    in 2016 and even in the rush to try to get some rules done at
    the end, we are still going to do due diligence at OIRA?
        Mr. Shelanski. I can commit, Senator Lankford, that I will
    do my darndest to make sure that OIRA gets every opportunity to
    review all the rules that come through. I will do everything in
    my power to ensure that. We have started that work today with
    regular--I mean, today? We started it months ago, but it keeps
    going today and will continue through the remainder of the
    Administration to have ongoing prioritization meetings with
    agencies to make sure that we are getting the rules through in
    a cadence that allows us to do that review. I can commit to
    doing my darndest.
        Senator Lankford. Will there be a setting of a time and a
    date to say, must be done prospective by this date, must be
    done final by this date to make sure that we are not cramming
    at the end so that agencies are aware in advance?
        Mr. Shelanski. I am not sure when that conversation would
    happen or whether such firm dates are necessary, but we are
    already letting agencies know what kind of time we need to
    review.
        Senator Lankford. I would suggest those kind of dates are
    necessary so that every agency sees the deadlines that are
    coming. Otherwise, it does get sloppy at the end. Every
    Legislative Branch, whether it be State or Federal, always
    knows how sloppy things get at the end as well as every agency.
    So setting the times early would be helpful to everyone in the
    process.
        Let me ask another quick question on this as well. In 2014
    GAO found that 72 percent of the significant OIRA rules
    reviewed included no language to explain why the rule was
    designated as significant. Help us to understand that. How can
    we get better transparency, that if a rule is declared
    significant we understand why it was declared significant.
        Mr. Shelanski. I think typically when a rule is
    economically significant, for that category of significance, I
    think it is obvious, because we list the rule as economically
    significant. I think the other reasons are so varied. I would
    say the most common one, it usually is not stated because maybe
    it just seems evident on the process, is that another agency
    wants the opportunity to comment on what the rule issuing
    agency is doing. So I would say interagency equities are
    probably the biggest reason that we pull a rule in.
        Senator Lankford. But is there a way to be able to just say
    that so that people can see it and are aware of that? This is
    deemed significant because of this. It is the same thing when
    changes are made. When OIRA recommends something as a change to
    a regulation back to the agency, that is also supposed to be
    transparent on it and we are not getting that, I do not think,
    sometimes. Sometimes we are seeing the change in rules, but we
    do not see the OIRA recommendation.
        So these are just basic transparency aspects of it, to know
    why that was deemed significant, to know what OIRA was
    recommending, that an agency said you are right and we are
    making that change, would be helpful.
        Mr. Shelanski. Thank you. I will take that back and look at
    ways that we might be able to provide more insight into the
    basis for the significance determinations.
        Senator Lankford. OK. Senator Heitkamp.
        Senator Heitkamp. As long as we are going rapid fire, I
    have one more question and that is about codifying Executive
    Order 12866 and 13563. Obviously we rely on the good judgment
    of whoever sits in the Oval Office to make sure that these
    Executive Orders are continued Administration to
    Administration.
        We have proven kind of bipartisan support for that type of
    regulation or that type of oversight, that type of structure.
    Why should we not codify those two Executive Orders?
        Mr. Shelanski. I think we would be very open to exploring
    the ways in which you might be considering doing such a thing
    to talking about those with you. We feel right now that the
    Executive Orders are on very solid ground having stayed firm
    and really only been reaffirmed across Administrations of both
    parties.
        So we do not feel particularly vulnerable in that regard at
    OIRA. On the other hand, there may be aspects of the Executive
    Orders that we would be interested in hearing your thoughts on
    as you consider reform.
        Senator Lankford. So you are saying that of all 25
    candidates for President out there, you are confident that all
    25 of them will continue the same process?
        Mr. Shelanski. I looked in all of their platforms and some
    of them simply do not have an OIRA plank.
        Senator Lankford. That is our thought as well, is that
    maybe there is a need to codify some of these things because it
    is a possibility that someone may be elected that does not----
        Senator Heitkamp. They do not even know who you are.
        Mr. Shelanski. I would like to keep it that way.
    [Laughter.]
        Senator Lankford. I appreciate you being here. I appreciate
    the ongoing dialogue. The transparency part of it is extremely
    important. What you are doing is extremely important in OIRA.
    We do want to make sure the cost-benefit, that the
    retrospective reviews are actually happening. Cost-benefit is
    clear and it is happening. Things like the Michigan versus EPA
    case do cause alarm to us to say that there is an ongoing
    conversation somewhere out there where someone is saying maybe
    there is not a need for it. Waters of the United States had the
    same kind of issue to try to evaluate whether the cost is out
    there. So there are other things that raise our attention as
    well.
        To make sure that OIRA stays on top of some of these
    things, that the American people are kind of staying on top of,
    and to make sure that there is fair between cost-benefit
    analysis, and that it is very clear and consistent across the
    board. So appreciate the ongoing work. We will maintain this
    conversation in the days ahead.
        I am allowing seven additional days for any individual to
    be able to submit questions or statements for the record. With
    that, we are adjourned.
        [Whereupon, at 4:05 p.m., the hearing was adjourned.]

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