[Congressional Record Volume 144, Number 99 (Wednesday, July 22, 1998)]
[Senate]
[Pages S8806-S8810]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




         MANAGERS' AMENDMENT TO THE REGULATORY IMPROVEMENT ACT

 Mr. LEVIN. Mr. President, today Senator Thompson and I, as 
sponsors of S. 981, the Regulatory Improvement Act of 1998, are putting 
into the Congressional Record a proposed amendment we will offer when 
S. 981 is brought to the Senate floor for consideration. The amendment 
reflects changes to the bill we have agreed to make in response to a 
number of concerns about the bill identified by the Administration and 
Members of the Governmental Affairs Committee. We are putting it in the 
Record at this time, to make the language available to the public and 
persons interested in this bill. We are also putting into the Record 
today the letter of July 15th from Acting OMB Director Jack Lew, 
stating that the Administration will sign the bill if the changes 
included in the Managers' Amendment are made and the bill passes both 
Houses in the same form. We welcome the support of the Administration 
in this effort and hope we can get the bill to the floor as soon as 
possible.
  OMB stated in their analysis of costs and benefits of federal 
regulations in 1997 that regulation has enormous potential for good and 
harm. ``The only way,'' OMB said, ``we know to distinguish between the 
regulations that do good and those that cause harm is through careful 
assessment and evaluation of their benefits and costs.'' S. 981 would 
build that careful evaluation into the regulatory process of all the 
regulatory agencies. OMB estimated that of the significant or major 
regulations currently in effect, we have received approximately $300 
billion in benefits at a cost of some $280 billion. We know that 
through the appropriate use of cost benefit analysis and risk 
assessment we can improve those figures. In a well-respected analysis 
of 12 major EPA rules and the impact of cost-benefit analysis on those 
rules, the author, Richard Morgenstern, former Associate Assistant 
Administrator of EPA and a visiting scholar at Resources for the 
Future, concluded that in each of the 12 rule makings, economic 
analysis helped reduce the costs of all the rules and at the same time 
helped increase the benefits of 5 of the rules. Report after report 
acknowledges the importance of good cost-benefit analysis and risk 
assessment for all agencies. It's long past time to get these basic 
requirements into statute. S. 981 offers us the best opportunity to do 
that.
  The Managers' Amendment Senator Thompson and I will be offering to S. 
981 reconfirms our intention that the bill not diminish or affect an 
agency's

[[Page S8807]]

responsibility to carry out the purposes of the substantive statute 
under which the agency is regulating. At the same time, the amendment 
does nothing to weaken the important requirements of the bill that 
agencies do a thorough and competent analysis of the costs and benefits 
of the major regulations they issue.
  Mr. President, I believe S. 981 will significantly improve the 
regulatory process. If enacted, it will build confidence in the 
regulatory programs that are so important to this society's well-being, 
and will result in a better, and I believe a less contentious, 
regulatory process. Those of us who believe in the benefits of 
regulation to protect health and safety have a particular 
responsibility to make sure that regulations are sensible and cost-
effective. When they aren't, the regulatory programs--which are so 
vital to our health and well being--come under attack. By providing an 
open regulatory process guided by reasonableness and common sense, we 
are protecting important programs from harmful attacks.
  Mr. President, I ask that copies of three letters exchanged between 
the Administration and Senator Thompson and me be printed in the 
Record.
  I am also pleased to announce that the Minority Leader, Senator 
Daschle, has been added as a cosponsor to the bill, S. 981.
  The letters follow:


                              Office of Management and Budget,

                                    Washington, DC, March 9, 1998.
     Hon. Fred Thompson,
     Chairman, Committee on Governmental Affairs, U.S. Senate, 
         Washington, DC.
       Dear Mr. Chairman: I am writing to provide the 
     Administration's views on S. 981, the Regulatory Improvement 
     Act of 1998. The Administration commends the thoughtful 
     effort by both you and Senator Levin to address numerous 
     concerns raised by the Administration and by others about the 
     bill as introduced.
       The Administration believes strongly in responsible 
     regulatory reform. President Clinton's issuance of Executive 
     Order No. 12866 was predicated on his belief that government 
     should do a better job of assessing risks and evaluating 
     costs and benefits before issuing major rules. While we have 
     been skeptical of the need for further comprehensive 
     regulatory reform legislation at this time, we have sought to 
     work with the Committee to ensure that any bill advances the 
     President's regulatory reform principles without creating 
     unwarranted costs to taxpayers or needless burdens on 
     agencies acting to protect human health, safety, or the 
     environment.
       The substitute bill issued earlier this month contains 
     significant improvements over last summer's draft. We very 
     much appreciate this effort. While the substitute is 
     responsive to many of our concerns, there are still serious 
     issues remaining. One of the problems with comprehensive 
     legislation is that so many different kinds of rulemaking are 
     affected. We want to be sure that any new law meets a simple 
     test: that it truly improves the regulatory system, and does 
     not impair--by creating more litigation, more red tape, and 
     more delay--the agencies' ability to do their jobs. We are 
     interested in working with you to see if we can find the 
     common ground.
       After a full review of the substitute to S. 981, we have 
     concluded that the bill does not yet meet the test we have 
     articulated, and therefore the Administration would oppose 
     the bill if it were to be adopted in its current form. Our 
     concerns are briefly outlined below, and we have developed 
     and enclosed for your consideration a set of modifications to 
     the bill that would remedy these and other concerns while 
     remaining faithful to the sponsors' intent. As you know from 
     our past conversations, many of these are critical to 
     achieving an acceptable result.
       1. Judicial Review. The Administration remains concerned 
     that the judicial review provisions would promote tactical 
     litigation over errors that were not material to the outcome 
     of a particular rulemaking. We know that this conflicts with 
     the sponsors' intent, as reflected in earlier hearing 
     discussions. To avoid additional litigation over major rules, 
     the troubling ambiguity in the current version of the bill 
     should be eliminated.
       2. Implicit Supermandate. We have been pleased that the 
     sponsors of S. 981 consistently have agreed with the view 
     that regulatory reform legislation should not alter or modify 
     the substantive reach of particular statutes designed to 
     protect human health, safety, or the environment. We remain 
     concerned that the current language of the bill would be 
     construed to narrow the range of discretion available to 
     agencies under their existing statutory mandates to protect 
     human health, safety, or the environment. The range of 
     discretion available to agencies under current law must be 
     expressly preserved to avoid an implicit supermandate.
       3. Risk Assessment. The Administration believes that, while 
     there have been improvements in Section 624, this section 
     needs to be revised still further to eliminate the imposition 
     of burdensome requirements where those requirements will not 
     enhance major rules. For example, section 624 includes in its 
     sweep an unbounded category of agency actions that are not 
     rulemakings, as well as major rules where Congress has not 
     predicated regulatory standards on risk assessment. These 
     should be excluded. In addition, the requirement for revision 
     of risk assessments threatens an endless and costly 
     analytical process, reopened with each new study, that would 
     provide additional fodder for protracted litigation. We also 
     remain concerned that certain provisions are too specifically 
     tailored to analysis of cancer risks, and are thus ill-suited 
     to other objectives, such as an evaluation of risks related 
     to environmental and natural resource protection, worker 
     safety, or airworthiness.
       4. Peer Review. The Administration is very concerned about 
     requiring peer review in contexts where the process would add 
     significantly to costs and delays of the regulatory process 
     without any foreseeable benefit. For example, the requirement 
     that cost-benefit analyses be subject to peer review would 
     add little to the review already performed by the Office of 
     Management and Budget in our regulatory review process. In 
     addition, the requirement that peer review be entirely 
     independent of the regulating agency would displace well-
     established and credible peer review mechanisms, while making 
     good peer review virtually impossible in highly specialized 
     subject areas (e.g. nuclear safety). We also believe that the 
     statute should require no more than one round of peer review 
     for each major rule.
       5. Review of Past Regulations. While the Committee 
     responded to many of the Administration's earlier concerns 
     about review of past regulations, the current version of the 
     bill creates two different, uncoordinated and likely 
     duplicative processes for the review of past regulations, 
     imposing a major burden on agencies and needless expense on 
     taxpayers. The second of these should be deleted, and the 
     cycle of review in the first should be set at 10 years.
       6. Needless Burdens. A number of the bill's requirements 
     would impose substantial costs on agencies where there would 
     be no conceivable benefit to the public or regulated 
     entities. For example, the bill imposes its analytical 
     requirements and review requirements even where the costs of 
     compliance with the regulation have been incurred by the 
     regulated community and no costs can be avoided by selecting 
     a different regulatory option. Our proposed changes address 
     other examples as well.
       7. Definitions and other issues. There are several 
     definitions and other provisions that need to be added or 
     modified to ensure clarity, to discourage unwarranted 
     litigation that would delay new safeguards, to protect the 
     constitutional prerogatives of the President and the 
     deliberative process within the Executive Branch, and to 
     eliminate unwarranted burdens on agencies. While many of 
     these changes appear minor, it would be difficult to 
     overstate their importance to us in evaluating the cumulative 
     effect of this bill.
       In developing revisions to the bill that would address our 
     concerns, we have sought to suggest changes that are 
     consistent with our understanding of the sponsors' intent and 
     with the spirit of our very constructive discussions with the 
     Committee staff. We would welcome a further opportunity to 
     work with you before the bill is reported by the Committee.
           Sincerely,
                                               Franklin D. Raines,
     Director.
                                  ____

                                                      U.S. Senate,


                            Committee on Governmental Affairs,

                                     Washington, DC, July 1, 1998.
     Mr. Jack Lew,
     Director Designate, Office of Management and Budget, 
         Executive Office Building, Washington, DC.
       Dear Mr. Lew: In March of this year, Franklin Raines, then 
     Director of OMB, sent us a letter expressing the 
     Administration's views on S. 981, the Regulatory Improvement 
     Act, shortly before its scheduled mark-up in the Governmental 
     Affairs Committee. Mr. Raines stated that while ``the 
     Administration believes strongly in responsible regulatory 
     reform,'' it has ``serious issues remaining'' with respect to 
     S. 981. Mr. Raines then enclosed ``a set of modifications to 
     the bill that would remedy'' these concerns.
       As you know, the bill was reported by the Committee on a 
     vote of 10 to 5, and now awaits consideration by the full 
     Senate. In the interest of addressing the Administration's 
     concerns so we can join together in support of S. 981, we 
     have enclosed our response to each of the proposed 
     modifications included in the attachment to the March 6th 
     letter from Mr. Raines. Our effort has been undertaken with 
     the objective of seeking to eliminate any cause for confusion 
     or misinterpretation about the specific provisions in the 
     bill while doing no harm to the important remedial and 
     beneficial effects of our legislation. We would be willing to 
     offer a Manager's Amendment on the floor during Senate 
     consideration of S. 981 which would make these changes. 
     Because such an amendment would meet your concerns, we would 
     do so with the understanding that the Administration would 
     then support this important legislation.
       The path to this point has not been easy. Regulatory reform 
     legislation over the years has engendered a great deal of 
     distrust and friction among the interested parties. Yet we 
     feel deeply that this moderate proposal will bring important 
     analytical tools and openness to the very complex issues 
     involved in

[[Page S8808]]

     federal regulation and will give the American people the 
     effective and efficient protections they deserve. If it's 
     true that nothing worth doing is ever easy, then S. 981 may 
     prove to be one of the most valuable pieces of legislation 
     we'll have enacted in a long time.
       We welcome your support and look forward to your response.
           Sincerely,
     Carl Levin,
       Senior Member.
     Fred Thompson,
       Chairman.
       Enclosure.
       1. Judicial Review:
       a. Page 62, line 16, insert after ``determining'' the 
     following: ``under the statute granting the rule making 
     authority''.
       b. Amend Section 627(e) to read as follows: ``If an agency 
     fails to perform the cost-benefit analysis, cost-benefit 
     determination, or risk assessment, or to provide for peer 
     review, a court may, giving due regard to prejudicial error, 
     remand or invalidate the rule. The adequacy of compliance 
     with the specific requirements of this subchapter shall not 
     otherwise be grounds for remanding or invalidating a rule 
     under this subchapter. If the court allows the rule to take 
     effect, the court shall order the agency to promptly perform 
     such analysis, determination, or assessment or provide for 
     such peer review.''
       c. No judicial review for Subchapter III, because 
     Subchapter III will be deleted.
       d. Clarification regarding interlocutory orders is not 
     necessary.
       2. ``Implicit Supermandate'':
       a. On page 47, strike lines 1 through 4 and insert the 
     following:
       ``(b) Nothing in this subchapter shall be construed to 
     alter or modify--
       (1) the substantive standards applicable to a rulemaking 
     under other statutes;
       (2) the range of regulatory options that an agency has the 
     authority to adopt under the statute authorizing the agency 
     to promulgate the rule, or the deference otherwise accorded 
     to the agency in construing such statute; or
       (3) any opportunity for judicial review made applicable 
     under other statutes.''
       3. Risk Assessment:
       a. On page 54, strike lines 8 through 11 and insert the 
     following:
       ``(ii) any risk assessment that is not the basis of a rule 
     making that the Director reasonably anticipates is likely to 
     have an annual effect on the economy of $100 million or more 
     in reasonably quantifiable costs and that the Director 
     determines shall be subject to the requirements of this 
     section.''
       b. On page 56, strike lines 10 through 12 and insert the 
     following:
       ``(2) Significant assumptions used in a risk assessment 
     shall incorporate all reasonably available, relevant and 
     reliable scientific information.''
       c. On page 56, strike lines 13 and 14 up to but not 
     including ``and,'' on line 14 and insert the following:
       ``(d) The agency shall inform the public when the agency is 
     conducting a risk assessment subject to this section''.
       d. No amendment. (MACT and BACT).
       4. Peer Review:
       a. On page 58, strike lines 10 through 12 and insert the 
     following:
       ``(a) Each agency shall provide for an independent peer 
     review in accordance with this section of--
       (1) a cost-benefit analysis of a major rule that the agency 
     or Director reasonably anticipates is likely to have an 
     annual effect on the economy of $500 million in reasonably 
     quantifiable costs; and
       (2) a risk assessment required by this subchapter.''
       b. On page 60, between lines 12 and 13 insert the 
     following:
       ``(e) A member of an agency advisory board (or comparable 
     organization) established by statute shall be considered 
     ``independent of the agency'' for purposes of section 
     625(b)(1)(A)(ii).
       ``(f) The status of a person as a contractor or grantee of 
     the agency conducting the peer review shall not, in and of 
     itself, exclude such person from serving as a peer reviewer 
     for such agency because of the requirements of (b)(1)(A)(ii) 
     of this section.''
       c. On page 60, between lines 12 and 13 insert the 
     following:
       ``(g) Nothing in this section shall require more than one 
     peer review of a cost-benefit analysis or a risk assessment 
     during a rule making. A peer review required by this section 
     shall occur to the extent feasible prior to the notice 
     of proposed rule making.''
       d. On page 60, between lines 9 and 10 insert the following 
     and renumber the remaining subsection accordingly:
       ``(d) The formality of the peer review conducted pursuant 
     to this section shall be commensurate with the significance 
     and complexity of the subject matter.''
       5. Other
       a. On page 70, between lines 20 and 21 insert the following 
     and renumber the remaining subsections accordingly;
       ``(a) This subchapter shall apply to all proposed and final 
     major rules and to any other rules designated by the 
     President for review.''
       On page 72, line 4, strike ``(a)'' and insert in lieu 
     thereof ``(b)''.
       b. Strike Subchapter III and strike section 610.
       c. On page 53, strike lines 14 and 15 and insert the 
     following: ``as possible unless the Director determines that 
     compliance would be clearly unreasonable.''
       d. No amendment (OSTP and OMB studies)
       e. On page 51, between lines 17 and 18 insert the 
     following: ``Consistent with subsection 621(2) and 621(3), 
     net benefits analysis shall not be construed to be limited to 
     quantifiable effects.''
       f. On page 46, strike lines 19 through 22 and insert the 
     following:
       ``(11) The term `substitution risk' means a reasonably 
     identifiable significant increased risk to health, safety, or 
     the environment expected to result from a regulatory option 
     and does not include risks attributable to the effect of an 
     option on the income of individuals.''
       On page 46, strike lines 16 through 18 and insert the 
     following:
       ``(J) a rule or agency action that authorizes or bars the 
     introduction into or removal from commerce, or recognizes or 
     cancels recognition of the marketable status, of a product 
     under the Federal Food, Drug and Cosmetic Act;''
       g. Executive Oversight:
       On page 72, line 22, strike ``communciations'' and insert 
     ``correspondence''.
       On page 73, line 3, strike ``communications'' and insert 
     ``correspondence''.
       On page 73, line 10, strike ``substantive'' and insert 
     ``significant''.
       On page 73, strike lines 16 and 17.
       On page 73, line 20, strike ``communications'' and insert 
     ``correspondence''.
       On page 74, line 3, strike ``substantive'' and insert 
     ``significant''.
       On page 74, strike line 9 through line 11.
       On page 74, line 17, strike ``announced'' and insert 
     ``published''.
       On page 74, line 23, strike ``communications'' and insert 
     ``correspondence''.
                                  ____



                              Office of Management and Budget,

                                    Washington, DC, July 15, 1998.
     Hon. Carl Levin,
     Committee on Governmental Affairs,
     U.S. Senate, Washington, DC
       Dear Senator Levin: Thank you for your letter of July 1, 
     1998, in which you respond to the views on S. 981 that we 
     expressed in former OMB Director Frank Raines' letter of 
     March 6, 1998.
       President Clinton has been a strong supporter of 
     responsible regulatory reform. In addition to signing into 
     law a number of important pieces of reform legislation, he 
     and Vice President Gore are taking a wide range of 
     administrative steps to improve the regulatory process. For 
     example, under the guidance of Executive Order 12866, 
     agencies are developing flexible performance standards and 
     using market incentives whenever possible; are applying 
     benefit-cost analysis to achieve objectives in the most cost-
     effective manner; and are reaching out to the affected 
     parties, particularly our State and local partners, to 
     understand better the intended and unintended consequences of 
     a proposed regulatory action. Under the leadership of the 
     Vice President's National Partnership for Reinventing 
     Government, agencies are improving delivery of services, 
     reducing red tape, and reforming practices to focus on 
     customer service. The Administration's goal in these actions 
     is to streamline and reduce the burden of government on its 
     citizens, improve services, and restore the basic trust of 
     public in its government.
       The debate on comprehensive regulatory reform legislation 
     is one that has sparked great passion and has provoked, as 
     you aptly note in your letter, ``distrust and friction among 
     the interested parties.'' We heartily agree with you that, to 
     say the least, ``[t]he path to this point has not been 
     easy.'' In part, this has been the result of earlier versions 
     of this legislation proposed by others that sought not to 
     improve the nation's regulatory system, but to burden and 
     undermine it. In a variety of ways these bills would have 
     created obstacles and hurdles to the government's ability to 
     function effectively and to protect the health, safety, and 
     environment of its citizens. In particular, these bills would 
     have created a supermandate, undoing the many protections for 
     our citizens that are carefully crafted into specific 
     statutes. In addition, strict judicial review and complex 
     analytic, risk assessment, peer review, and lookback 
     provisions would have hampered rather than helped the 
     government's ability to make reasonable decisions and would 
     have opened the door to new rounds of endless litigation.
       We appreciate your thoughtful efforts over the past year to 
     respond to issues that we and others have raised. In your 
     latest letter you continue to take seriously our concerns. 
     Indeed, the changes you indicate that you are willing to make 
     would resolve our concerns, and if the bill emerges from the 
     Senate and House as you now propose, with no changes, the 
     President would find it acceptable and sign it.
       I should note, however, that our experience with past 
     efforts to resolve these differences suggests that good ideas 
     and the resolution of differences can be destroyed during the 
     long process of getting a bill to the President's desk, and 
     the nuances and balance that we have all sought in this 
     legislation could be easily disrupted. Nanny of the terms 
     used carry great meaning, and further modification is likely 
     to renew the concerns that have animated our past opposition 
     to bills of this type. Accordingly, we look forward to 
     working with you to ensure that any bill the Congress passes 
     on this subject is

[[Page S8809]]

     fully consistent with the one on which we have reached 
     agreement.
           Sincerely,
                                                     Jacob J. Lew,
                                                  Acting Director.

  Mr. THOMPSON. Mr. President, I want to ask my colleagues for their 
help to bring much-needed improvements to our federal regulatory 
system. In March, the Governmental Affairs Committee favorably reported 
S. 981, the ``Regulatory Improvement Act,'' by a 10-5 vote. At the time 
of the markup, the administration sent a letter to me and Senator Levin 
expressing a number of concerns with the bill. Over the past few 
months, we have worked to resolve those concerns, which largely 
involved adding clarifying language to the bill. In addition, some 
sections of the bill were modified, and a couple were dropped. On July 
16, we received a letter from Jack Lew, the Acting OMB Director, on 
behalf of the administration. The letter says the administration 
supports the legislation with the proposed changes and will cooperate 
with us to pass it. These changes are explained in the accompanying 
summary of the managers' amendment that Senator Levin and I would 
support. I am pleased that the President recognizes that we need this 
legislation to deliver the effective and efficient regulatory system 
that the American people expect and deserve.
  Most of us recall the partisan and ultimately destructive debate on 
this issue in the last Congress. Reforming regulation is an area 
fraught with distrust. It is tempting for opponents of reform to try to 
score political points by scare tactics. We have to set aside political 
posturing if we're going to get the job done. Just last week, former 
Majority Leader Howard Baker told us, ``it ill behooves America's 
leaders to invent disputes for the sake of political advantage, or to 
inveigh carelessly against the motives and morals of one's political 
adversaries. America expects better of its leaders than this, and 
deserves better.'' I hope we heed that good advice.
  There's no doubt that improving the regulatory process is one of the 
toughest challenges we face. Regulation affects virtually every aspect 
of our lives. There are over 130,000 pages of federal regulations, and 
60 agencies continue to issue new rules at a rate of 4,000 a year. The 
costs are hundreds of billions of dollars annually, and the public 
expects better results. As the costs of regulation rise with public 
expectations of better results, the need is greater than ever for a 
smarter way of regulating. We have to find ways to do more good while 
reducing the waste in the current system.
  The evidence is overwhelming that we can achieve greater benefits at 
far less cost by regulating smarter. Hearings of the Governmental 
Affairs Committee, investigations of the General Accounting Office, the 
work of other congressional committees, and many scholarly studies show 
a striking consensus on this point. Our Committee also has found that 
the administration's Executive Order 12866 and other initiatives to 
reinvent regulation have not been as effective as was hoped.
  I want to thank the 19 cosponsors who have joined me and Senator 
Levin to improve the regulatory process. The Regulatory Improvement Act 
will promote the public's right to know, improve the quality of 
government decisions, and make government more accountable to the 
people it serves. Ultimately, it will help improve the quality of our 
lives. That is why we have the support of State and local government, 
businesses of all sizes, farmers, educational organizations, think 
tanks, scholars, and the administration. We have a rare opportunity to 
reform the regulatory process. Let's pull together and get the job 
done.
 Mr. LEVIN. Mr. President, I ask that a summary of S. 981 and a 
summary of the proposed manager's amendment be printed in the Record.
  The material follows:

          Summary of Levin-Thompson Regulatory Improvement Act

       The Levin-Thompson regulatory reform bill would put into 
     statute requirements for cost-benefit analysis and risk 
     assessment of major rules and executive oversight of the 
     rulemaking process. It builds on the bipartisan Roth-Glenn 
     bill unanimously reported out of the Governmental Affairs 
     Committee in 1995.
       It requires agencies to do a cost-benefit analysis when 
     issuing rules that cost $100 million or have other 
     significant impacts. The agency must determine whether the 
     benefits of the rule justify its costs; whether the rule is 
     more cost-effective, or provides greater net benefits, than 
     other regulatory options considered by the agency; and 
     whether the rule adopts a flexible regulatory option. If the 
     agency determines that the rule does not do so, the agency is 
     required to explain the reasons why it selected the rule, 
     including any statutory provision that required the agency to 
     select the rule. If the rule involves a risk to health, 
     safety or the environment, the bill requires the agency to do 
     a quality risk assessment to analyze the benefits of the 
     rule. Risk assessments and cost-benefit analyses for rules 
     costing $500 million would undergo independent peer review.
       During the cost-benefit analysis and risk assessment, the 
     rulemaking agency is required to consider substitution 
     risks--that is, risks that could be expected to result from 
     the implementation of the regulatory option selected by the 
     agency--and to compare the risk being regulated with other 
     risks with which the public may be familiar.
       In presenting the cost-benefit analysis and risk 
     assessment, the rulemaking agency is required to present the 
     results of the analysis and assessment in a clear and 
     understandable form, including an executive summary of: the 
     expected benefits and costs of the rule and the agency's 
     cost-benefit determinations; the risk addressed by the rule 
     and the results of any risk assessment; the benefits and 
     costs of the other regulatory options considered by the 
     agency; and the key assumptions and scientific or economic 
     information upon which the agency relied.
       The cost-benefit analysis, cost-benefit determinations, and 
     risk assessment are required to be included in the rulemaking 
     record and to be considered by the court, to the extent 
     relevant, only in determining whether the final rule is 
     arbitrary and capricious. In addition, if the agency fails to 
     perform the cost-benefit analysis, risk assessment or peer 
     review, the court may remand or invalidate the rule, giving 
     due regard to prejudicial error, and in any event shall order 
     the agency to perform it.
       The bill codifies the review procedure now conducted by the 
     Office of Information and Regulatory Affairs (OIRA) and 
     requires public disclosure of OIRA's review process.
       Finally, the bill requires the Director of OMB to contract 
     for a study on the comparison of risks to human health, 
     safety and the environment and a study to develop a common 
     basis for risk communication with respect to carcinogens and 
     noncarcinogens and the incorporation of risk assessments into 
     cost-benefit analyses.

           Summary of Proposed Managers' Amendment to S. 981

       Senator Levin and Senator Thompson plan to offer a 
     Managers' Amendment when S. 981 is brought to the floor for 
     Senate consideration. The Amendment would include the 
     following:


                           1. Judicial Review

       The bill as reported requires a court to consider the cost-
     benefit analysis, cost-benefit determinations, and risk 
     assessment in determining whether the final rule is arbitrary 
     and capricious. The bill as reported also requires a court to 
     remand or invalidate a rule if the agency fails to perform 
     the cost-benefit analysis, cost-benefit determinations or 
     risk assessment, or to provide for peer review as required by 
     S. 981. The Managers' Amendment modifies that requirement by 
     giving the court the discretion to remand or invalidate the 
     rule. The Managers' Amendment also adds a specific clarifying 
     sentence that the adequacy of compliance with the specific 
     requirements for performing the cost-benefit analysis, risk 
     assessment, and peer review is not otherwise independent 
     grounds for remanding or invalidating a rule. The Managers' 
     Amendment also requires a court to order an agency to perform 
     the cost-benefit analysis, cost-benefit determinations, risk 
     assessment, or peer review whenever the agency fails to do 
     so, even if the court allows the rule to take effect.


                   2. Relationship to Other Statutes

       The Managers' Amendment adds two additional provisions to 
     the savings clause in order to reiterate that S. 981 does not 
     contain a ``supermandate'' that would override or alter the 
     substantive standards of the statute under which the rule is 
     being issued. The Managers' Amendment confirms that S. 981 
     does not alter the range of regulatory options the agency has 
     authority to adopt under the statute authorizing the agency 
     to promulgate the rule or the deference otherwise accorded by 
     the courts to the agency in construing such statute pursuant 
     to the Chevron decision.


                           3. Review of Rules

       The bill as reported contained two provisions for the 
     review of existing rules: one for major rules and one for 
     rules affecting small businesses and small governments. The 
     Managers' Amendment strikes both review of rules provisions. 
     S. 981 will impose new and important responsibilities on 
     federal agencies to conduct their rulemakings with greater 
     care and thoroughness. In order to direct the resources of 
     the agencies to fully carrying out these requirements, the 
     provisions for the review of existing rules were stuck. Of 
     course, agencies remain free to review existing rules under 
     the Regulatory Flexibility Act on their own initiative, at 
     the request of an interested party, or pursuant to 
     Presidential directive.


                           4. Risk Assessment

       The bill as reported requires a quality risk assessment to 
     be performed for each major

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     rule with a primary purpose to address risks to health, 
     safety or the environment, as well as for risk assessments 
     that are not the basis for a rulemaking and that the OMB 
     Director determines may have a substantial impact on public 
     policy or the economy. The Managers' Amendment narrows the 
     coverage of the bill with respect to risk assessments that 
     are not the basis of a rulemaking to those risk assessments 
     that the Director anticipates are likely to have an annual 
     effect on the economy of $100 millon or more.


                             5. Peer review

       The bill as reported requires independent peer review of 
     the cost-benefit analysis and risk assessment for each major 
     rule. The Managers' Amendment would modify the application of 
     peer review of the cost-benefit analysis to only those rules 
     that the agency or OMB Director reasonably anticipates are 
     likely to have an annual effect on the economy of $500 
     million or more.
       The Managers' Amendment clarifies that members of agency 
     advisory boards required by statute and persons who serve as 
     contractors or grantees to the agency conducting the peer 
     review are not precluded from serving as peer reviewers 
     solely because of the requirement that the peer reviewers be 
     ``independent of the agency.'' The Managers' Amendment also 
     claifies that only one peer review of a risk assessment and 
     cost-benefit analysis is required by S. 981.


                            6. Net benefits

       The Managers' Amendment clarifies that application of a net 
     benefits analysis under S. 981 is not intended to be limited 
     to only quantifiable benefits; S. 981 requires the net 
     benefits analysis to include consideration of nonquantifiable 
     as well as quantifiable benefits.


                          7. Substitution risk

       The Managers' Amendment, in an effort to clarify the scope 
     of responsibility required of an agency in assessing 
     applicable substitution risks, incorporates the language in 
     the bill used to define costs and benefits. Thus, 
     substitution risk is defined in the Managers' Amendment as 
     ``a reasonably identifiable significant increased risk to 
     health, safety or the environment expected to result from a 
     regulatory option.'' The definition also makes it clear that 
     substitution risk does not include ``risks attributable to 
     the effect of an option on the income of individuals.''


                             8. Exemptions

       The bill as reported exempts from coverage of the 
     legislation ``a rule or agency action that authorizes the 
     introduction into commerce, or recognizes the marketable 
     status of, a product.'' The Managers' Amendment both expands 
     and limits this exemption. It expands it by adding 
     ``removal'' of a product as well as ``introduction;'' it 
     limits this exemption by applying it only to rules ``under 
     the Federal Food, Drug and Cosmetic Act.''


                                9. Other

       The Managers' Amendment would make a number of other 
     technical or minor changes to the bill.

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