[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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        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.]

                            A P P E N D I X

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