[Senate Report 104-88]
[From the U.S. Government Publishing Office]



   104th Congress 1st            SENATE                 Report
         Session
                                                        104-88
_______________________________________________________________________

                                     

                                                       Calendar No. 117
 
                     REGULATORY REFORM ACT OF 1995

                               __________

                              R E P O R T

                                 OF THE

                   COMMITTEE ON GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                              TO ACCOMPANY

                                 S. 291

                             together with

                            ADDITIONAL VIEWS

TO REFORM THE REGULATORY PROCESS, TO MAKE GOVERNMENT MORE EFFICIENT AND 
                   EFFECTIVE, AND FOR OTHER PURPOSES




     May 25 (legislative day, May 15), 1995.--Ordered to be printed
                   COMMITTEE ON GOVERNMENTAL AFFAIRS

 WILLIAM V. ROTH, Jr., Delaware, 
             Chairman
                                     TED STEVENS, Alaska
                                     WILLIAM S. COHEN, Maine
                                     FRED THOMPSON, Tennessee
                                     THAD COCHRAN, Mississippi
                                     CHARLES E. GRASSLEY, Iowa
                                     JOHN McCAIN, Arizona
JOHN GLENN, Ohio                     BOB SMITH, New Hampshire
SAM NUNN, Georgia
CARL LEVIN, Michigan
DAVID PRYOR, Arkansas
JOSEPH I. LIEBERMAN, Connecticut
DANIEL K. AKAKA, Hawaii
BYRON L. DORGAN, North Dakota
 Franklin G. Polk, Staff Director 
         and Chief Counsel
       Paul R. Noe, Counsel
  Leonard Weiss, Minority Staff 
             Director
  Michal Sue Prosser, Chief Clerk


                            C O N T E N T S

                              ----------                              
                                                                   Page
   I. Purpose and summary.............................................1
  II. Background and need for legislation.............................4
 III. Legislative history and committee consideration.................9
  IV. Section-by-section analysis....................................11
   V. Regulatory impact..............................................65
  VI. Cost impact....................................................65
 VII. Additional Views of Senators Glenn, Nunn, Levin, Pryor,        68
      Lieberman, Akaka, and Dorgan.
VIII. Changes to existing law........................................69
                                                       Calendar No. 117
104th Congress                                                   Report
                                 SENATE

 1st Session                                                     104-88
_______________________________________________________________________


                     REGULATORY REFORM ACT OF 1995

                                _______


     May 25 (legislative day, May 15), 1995.--Ordered to be printed

_______________________________________________________________________


  Mr. Roth, from the Committee on Governmental Affairs, submitted the 
                               following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                         [To accompany S. 291]
    The Committee on Governmental Affairs, to which was 
referred the bill (S. 291) to reform the regulatory process, to 
make Government more efficient and effective, and for other 
purposes, having considered the same, reports favorably thereon 
with amendments and unanimously recommends that the bill as 
amended do pass.

                         I. Purpose and Summary

    S. 291 is the most comprehensive statutory revision of the 
regulatory process since the enactment of the Administrative 
Procedure Act of 1946. This legislation would make substantial 
changes in the procedural requirements for the issuance of 
federal regulations. ``Major rules'' would be subjected to 
rigorous economic and scientific analysis before they could be 
issued. Both the Executive and the Judicial Branches would be 
authorized to compel agency compliance with these requirements. 
This legislation, with bipartisan and unanimous Committee 
support, is an effort to achieve meaningful and lasting 
regulatory reform while ensuring that agencies properly serve 
the national interest.
    This legislation strikes a balance between reducing 
regulatory costs and still ensuring that needed public 
protections and benefits are provided. It imposes analytical 
requirements on the agencies to produce better-informed 
decisions, not to slow down the regulatory process or to force 
irresponsible outcomes. As Senator Roth stated when he 
introduced S. 291:

          We should not forget that many regulations provide 
        important benefits and protections to the public. Let 
        there be no mistake--we need a clean environment, safe 
        workplaces, and safe medications. . . . [Yet,] . . . 
        [t]oo many regulations impose undue costs, and the 
        regulatory process itself has become too cumbersome, 
        unresponsive and inefficient.

          * * * * *
          We can reinvent the regulatory process to ensure that 
        when agencies choose to regulate, they will do so in a 
        more effective and less costly manner. We can reduce 
        the burden on governments, businesses and the public, 
        and still ensure that important benefits and 
        protections are provided. We cannot afford to ignore 
        the need to regulate smarter.\1\

    \1\ 141 Cong. Rec. S. 1711 (daily ed. Jan. 27, 1995).

    A brief synopsis of the major provisions of the bill 
follows:

                        a. cost-benefit analysis

    Federal agencies would be required to perform a cost-
benefit analysis for major rules (improving costs over $100 
million or having a significant impact on the economy). The 
cost-benefit analysis for major rules would be done at the 
proposed and final stage and would include:
          An estimate of the anticipated benefits of the rule 
        (quantifiable and nonquantifiable);
          An estimate of the anticipated costs of the rule 
        (quantifiable and nonquantifiable);
          A discussion of an appropriate number of reasonable 
        alternatives to proposed rule;
          Where scientific information is used, a verification 
        of the quality and reliability of the information; and
          An explanation of whether the benefits of the rule 
        justify the costs, and whether the rule will achieve 
        the rulemaking objectives in a more cost-effective 
        manner than the alternatives.
Each cost-benefit analysis for a major rule would be subject to 
peer review by a panel of experts independent of the covered 
agency. The requirements of this legislation do not override 
the rulemaking criteria of the underlying statutes.

                       B. Market-Based Mechanisms

    During the cost-benefit analysis, agencies would be 
required to assess the feasibility of using ``market-based 
mechanisms'' (such as emissions trading credits or marketable 
permits) instead of prescriptive command-and-control 
regulation.

                           C. Judicial Review

    The legislation would provide for judicial review to compel 
agencies to conduct required analysis. The cost-benefit 
analysis and risk assessment would become part of the 
rulemaking record for purposes of judicial review. However, the 
analysis or assessment in and of themselves would not be 
subject to procedural review.

                      D. Review of Existing Rules

    Federal agencies would be required to conduct a 
comprehensive review of existing regulations to eliminate 
unnecessary regulations and to reform others. Each covered rule 
would be reviewed 10 years after its promulgation or the 
effective date of this legislation, whichever is later. For 
good cause, the President would be authorized to grant an 
extension of up to 5 years. Where an agency failed to review a 
rule within the deadlines, the rule would cease to be 
enforceable.

                              E. Openness

    The legislation would promote government accountability by 
expanding public participation in the development and review of 
regulatory actions and by providing public and agency access to 
information and communications regarding regulatory actions 
under review.

                          F. Risk assessments

    When developing major rules relating to risks to the 
environment, human health, or safety, twelve major regulatory 
agencies would be required to conduct risk assessments 
following criteria set forth in this legislation. The 
legislation would require scientifically sound risk estimates 
based on the available data. The agencies would be required to 
disclose and explain any assumptions and value judgments made 
when measuring risks. There would be exemptions from the risk 
assessment requirements for emergencies and screening analysis. 
Each risk assessment for a major rule would be subject to peer 
review by a panel of experts independent of the covered agency. 
The Office of Management and Budget (OMB), in consultation with 
the Office of Science and Technology Policy (OSTP), would be 
required to coordinate the risk assessment practices of all 
Federal agencies.
 G. Judicial Review of Determinations Under the Regulatory Flexibility 
                                  Act

    To ensure that agencies are more sensitive to the burdens 
of regulation on small businesses and small governments, the 
legislation would provide for judicial review of analyses 
required by the Regulatory Flexibility Act. If an agency fails 
to conduct a Reg-Flex analysis, small entities would have up to 
one year from the date a rule is issued to seek judicial 
review.

                    H. Congressional Review of Rules

    The legislation would provide that no major rule would be 
effective until after a 45-day period in which Congress, by 
joint resolution of disapproval (requiring passage by both 
houses and presentation to the President) could reject those 
rules. Congressional consideration of the joint resolution of 
disapproval would be subject to expedited procedures during the 
45-day period. If the President agreed with the Congress, or if 
the Congress had sufficient votes to override a Presidential 
veto, the rule would be rescinded.

                      I. Comparative Risk Analysis

    The legislation would require each covered agency to strive 
to set priorities to address the risks that are the most 
serious and could be addressed in a cost-effective manner. Each 
covered agency would be required to incorporate those 
priorities into its budget, strategic planning, regulatory 
agenda, enforcement, and research activities. The legislation 
also would require that an accredited scientific body conduct a 
study of comparative risk analysis methodologies, as well as a 
comparative risk analysis, across twelve major regulatory 
agencies. This study would promote public debate and informed 
decisionmaking regarding regulatory priorities. The ultimate 
goal would be to achieve the greatest overall risk reduction at 
the least cost.

                        J. Regulatory Accounting

    Every two years, the President would be required to submit 
to Congress an accounting statement that estimates the total 
quantitative and qualitative costs and corresponding benefits 
of Federal regulations. The President would be required to 
provide public notice and an opportunity to comment on each 
accounting statement. When submitting the accounting statement 
to Congress, the President also would be required to submit an 
associated report containing: (1) analyses of the impacts of 
Federal regulation, (2) recommendations for reform, and (3) a 
summary of any independent analyses of regulatory impacts.

                         K. Executive Oversight

    OMB would supervise and oversee implementation of the 
requirements of this legislation. To the extent this oversight 
involves the systematic review of agency regulatory proposals, 
such review would have to be completed within 90 days.
                             II. Background

    Since 1946, the federal regulatory process has been guided 
by the Administrative Procedure Act (APA), 5 U.S.C. 551-558. 
The APA was enacted following the dramatic increase in 
discretionary authority given to Executive Branch agencies 
stemming from the New Deal. It has served for almost 50 years 
as the blueprint for how agencies issue regulations. With the 
dramatic growth of complex and wide-ranging regulatory programs 
since the late 1960s, the limited procedures of the APA have 
been outstripped by new demands.\2\ These new demands have 
moved this Committee to produce S. 291, the ``Regulatory Reform 
Act of 1995.''
    \2\ See Testimony of Gary J. Edles, General Counsel of the 
Administrative Conference of the United States, before the Senate 
Committee on Governmental Affairs, March 8, 1995, at pp.3-4.
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     a. governmental affairs committee action on regulatory reform

    The Committee has been involved in overseeing the 
regulatory decisionmaking process for over two decades. Through 
a variety of studies, hearings, markups of legislative 
proposals, and oversight of the regulatory process, the 
Committee has developed a broad-ranging expertise with respect 
to both the strengths and weaknesses of regulation and 
proposals for reform. This experience and expertise has 
contributed to the development of S. 291.
    In 1975, the Senate passed a resolution, S. Res. 71, 
directing the Governmental Affairs Committee to conduct a 
comprehensive study of Federal regulations, to assess the 
impact of regulatory processes and programs, and to analyze the 
need for change. The Committee spent almost two years carrying 
out that mandate and concluded with a six volume report on 
various aspects of the regulatory process, from the 
organization and effectiveness of regulatory agencies to public 
participation in the regulatory process, to the role of 
congressional oversight.\3\ The accumulated data and analyses 
reflected in these volumes constitute the most thorough review 
of the regulatory process ever conducted by the Congress. The 
problems identified and solutions proposed have substantially 
informed subsequent debates over regulatory reform, both within 
and outside of the Committee, and have influenced the drafting 
of this legislation. The study emphasizes, for example, that 
poor, costly and burdensome agency regulations often are a 
product of defective preliminary analysis which fails to 
account for costs, the possibility of alternative regulatory 
solutions, or no regulation at all.\4\
    \3\ The Governmental Affairs Committee published the following six 
volumes of the Study on Federal Regulation between January 1977 and 
December 1978:
    1. Senate Committee on Government Operations, 95th Cong., 1st 
Sess., 1 Study on Federal Regulation, ``The Regulatory Appointments 
Process'' (Comm. Print 1977).
    2. Senate Committee on Government Operations, 95th Cong., 1st 
Sess., 2 Study on Federal Regulation, ``Congressional Oversight of 
Regulatory Agencies'' (Comm. Print 1977).
    3. Senate Committee on governmental Affairs, S. Doc. 95-71, 95th 
Cong., 1st Sess., 3 Study on Federal Regulation, ``Public Participation 
in Regulatory Agency Proceedings'' (Comm. Print 1977).
    4. Senate Committee on Governmental Affairs, S. Doc. 95-72, 95th 
Cong., 1st Sess., 4 Study on Federal Regulation, ``Delay in the 
Regulatory Process'' (Comm. Print 1977).
    5. Senate Committee on Governmental Affairs, S. Doc. 95-91, 95th 
Cong., 2d Sess., 5 Study on Federal Regulation, ``Regulatory 
Organization'' (Comm. Print 1977).
    6. Senate Committee on Governmental Affairs, S. Doc. 96-13, 96th 
cong., 1st Sess., 6 Study on Federal Regulation, ``Framework for 
Regulation'' (comm. Print 1978).
    \4\ The following conclusion from the 1978 Study rings true today:
    The report finds that decisions when and how to regulate all too 
often are based on insufficient analysis and consideration of 
alternatives. Simply because a problem exists and, in theory is 
remediable, does not mean that regulation or other government 
intervention is desirable. Controls should only be undertaken where 
there is a clearly identified problem that cannot otherwise be solved, 
and where the anticipated achievements are significant and not vitiated 
by projected adverse consequences.
    We believe that before Congress or the agency adopts any proposed 
regulatory scheme, the possible economic justifications for regulation 
should be scrutinized. The discipline inherent in that procedure is a 
key element in helping to insure good regulatory decisions.--6 Study on 
Federal Regulation, pp. xi-xii.
---------------------------------------------------------------------------
    The committee's Study provided the foundation for extensive 
hearings in the 96th \5\ and 97th \6\ Congresses that led to 
the passage in 1981 of S. 1080, an omnibus regulatory reform 
bill, by a floor vote of 94-0. Although S. 1080 was 
overwhelmingly endorsed by the Senate, it died in the House of 
Representatives.
    \5\ Hearings on Regulatory Legislation, Senate Comm. on 
Governmental Affairs, 96th Cong., 1st Sess. (1979) (2 parts). These 
hearings, encompassing 11 days of testimony from 80 witnesses, are 
summarized in S. Rep. No. 96-1018, part 1, 52-55, 96th Cong., 2d Sess. 
(1980).
    \6\ Hearings on Regulatory Reform Legislation of 1981, Senate Comm. 
on Governmental Affairs, 97th Cong. 1st Sess. (1981). See also S. Rep. 
No. 97-305, 97th Cong., 1st Sess. 1981. The development of the reform 
legislation was in close cooperation with the Senate Judiciary 
Committee. See S. Rep. No. 96-1018, Part 2, 96th Cong., 2d Sess. (1980) 
(joint report of the Senate Governmental Affairs and Judiciary 
Committees).
---------------------------------------------------------------------------
    S. 1080 reflected the increasing public concern that the 
costs of federal regulation in too many cases do not justify 
the benefits and that the scientific and policy assumptions 
underlying regulatory decisions are often questionable. May of 
the same elements of S. 1080 are included in the legislation we 
are reporting, including cost-benefit analysis, review of 
existing rule, Presidential oversight, and congressional 
review. S. 291 is rooted in S. 1080 but has been expanded to 
reflect advances in administrative law and policy over the last 
14 years, particularly in risk analysis.
            b. executive branch action on regulatory reform

    The Committee's review of the regulatory process paralleled 
a growing interest in centralized control and review by the 
President. The assertion of presidential authority over the 
rulemaking process begin in 1971 when President Richard Nixon 
established ``Quality of Life Reviews'' for certain U.S. 
Environmental Protection Agency (EPA) regulations. Every 
President since Nixon has implemented executive oversight of 
the regulatory process. President Gerald Ford required agencies 
to conduct an inflationary impact analysis for major rules. 
President Jimmy Carter established the Regulatory Analysis 
Review Group to review important regulations. He also required 
an economic impact analysis for major rules under Executive 
Order 12044.
    President Ronald Reagan took the most dramatic step over 
the rulemaking process when he issued Executive Order 12291 in 
1981. E.O. 12291 was the logical extension of an evolving 
centralized review process. E.O. 12291 required that all rules 
be reviewed by the Office of Information and Regulatory Affairs 
(OIRA) in the OBM before they were issued as proposed or as 
final. It also required that each agency analyze the costs and 
benefits of each major rule and that agencies issue rules, to 
the extent permitted by law, only if the benefits of the rule 
outweighed the costs. President Reagan also issued E.O. 12498 
In March 1985, directing agencies to prepare a yearly agenda of 
all significant regulatory actions for the coming year. When he 
took office in 1989, President George Bush continued President 
Reagon's Executive Orders.
    When President Bill Clinton took office, he rescinded E.O. 
12291 but replaced it with Executive Order 12866, which still 
requires the centralized review of rules, E.O. 12866 applies 
only to significant rules, not all rules, but it maintains the 
requirement for a cost-benefit analysis of significant rules--
primarily those that have an annual effect on the economy of 
$100 million or more.
    Throughout this period of Executive review, the Committee 
maintained its long support for improving agency decisionmaking 
through regulatory review, a mechanism that has the greatest 
promise to insure more thorough analyses of regulatory 
proposals, more balanced consideration of diverse interests and 
opinions, and more effective coordination among agencies--in 
short, better informed decisionmaking. S. 291, then, may be 
seen both as a culmination of the Committee's work in 
regulatory reform, an extension of Executive Branch efforts, 
and a response to the public demand for a more efficient 
government.

             c. the need for regulatory reform legislation

    The regulatory reform efforts in Congress and the Executive 
Branch reflect the increasing public concern about the growth 
of the Federal government and the number and scope of its 
regulatory programs. In the recent congressional elections, the 
public sent a clear message that they want a smaller, more 
efficient, and more effective government. This message reflects 
a deep and growing concern about the rising costs of federal 
regulations and their intrusiveness into the lives of many 
Americans. At the same time, the public continues to desire 
adequate protections for the environment, health and safety. 
Rising regulatory costs, limited resources, and a desire to 
preserve important protections and benefits all necessitate a 
smarter, more cost-effective approach to regulation.
    It is clear that regulatory reform should be a national 
priority. Although the deregulation of economic regulation in 
the 1970s and 1980s reduced the burden of economic regulation, 
the total cost of regulation is rising, primarily from new 
regulation of the environment, health, and safety. According to 
the EPA, by the end of this decade, the United States will 
spend $160 billion annually just on pollution control.\7\ This 
is almost 90 percent more than was spent in 1987 and 
constitutes only a fraction of regulatory costs.\8\ The total 
annual costs of all federal regulations has been estimated by 
Professor Thomas Hopkins at $560 billion for 1992; it is 
projected to rise another $100 billion by the year 2000.\9\ 
About three-fourths of that cost-increase is expected from 
upcoming risk regulations--environmental, health and safety 
standards.\10\ The Committee is deeply concerned about the 
potential adverse impact of the growing regulatory burden on 
the American public.
    \7\ Environmental Protection Agency, Environmental Investments: The 
Cost of a Clean Environment (Nov. 1990); General Accounting Office, 
Environmental Protection: Meeting Public Expectations With Limited 
Resources 9 (June 1991).
    \8\ See id.
    \9\ Thomas D. Hopkins, ``Costs of Regulation: Filling the Gaps'' 
(Rep. Prepared for Reg. Info. Service Center) Table 1 (Aug. 1992); 
Testimony of Thomas D. Hopkins, Professor of Economics, Rochester 
Institute of Technology, before the Senate Committee on Governmental 
Affairs, March 8, 1995.
    \10\ See id.
---------------------------------------------------------------------------
    The costs of regulation are passed on to the American 
consumer and taxpayer through higher prices, diminished wages, 
increased taxes, or reduced government services.\11\ Those 
costs have been estimated at $6,000 per year for the average 
American household.\12\ Lest these rising costs undermine the 
confidence of the American public in government, the agencies, 
the White House and Congress must be more sensitive to 
cumulative regulatory burden.
    \11\ See, e.g., Public Policies for Environmental Protection, 
Resources for the Future (Paul R. Portney, ed. 1990); Thomas D. 
Hopkins, ``Cost of Federal Regulation'' 3, reprinted in Regulatory 
Policy in Canada and the United States (Rochester Inst. Tech. 1992); 
Steven Pearlstein, ``The myths That Rule Us,'' The Washington Post, H1, 
Mar. 5, 1995.
    \12\ See Thomas D. Hopkins, ``Costs of Regulation: Filling the 
Gaps'' (Rep. Prepared for Reg. Info. Service Center) (Aug. 1992); 
Testimony of Thomas D. Hopkins, Professor of Economics, Senate 
Committee on Governmental Affairs, March 8, 1995.
---------------------------------------------------------------------------
    Perhaps because most regulatory costs directly impact only 
businesses and governments, they have not been adequately 
scrutinized in the past. The decisions to create and impose 
regulations typically do not include the kind of serious debate 
about cost that is required to create new on-budget programs. 
Regulations are created as their need is perceived, without the 
constraints of a budget or forced tradeoffs with other 
important priorities. This is too often true not only in the 
agencies but also in Congress. Indeed, Congress has created 
many statutes that gave rise to wide-ranging command-and-
control regulatory programs. In a time of increasingly limited 
resources, Congress, the White House, and the agencies must do 
more to curb the rising costs and inefficiencies of regulation. 
As the Administration's First Year Report on Executive Order 
12866 noted:

          Agencies today face unusual pressure to regulate. 
        With budgetary constraints so tight, and with the 
        difficulty of enacting new legislation in the highly 
        partisan atmosphere that has characterized the last 
        Congress, the only means left for the agencies to 
        implement their initiatives is through regulation. This 
        puts inordinate pressure on any attempt to hold steady 
        or reduce the amount of regulation in which they are 
        engaged.\13\

    \13\ The First Year of Executive Order No. 12866,'' A Report 
Prepared by Sally Katzen, Administrator, Office of Information and 
Regulatory Affairs, Office of Management and Budget (Dec. 20, 1994)

    Without significant new controls, the volume of regulations 
will only grow larger.
    The urgency of regulatory reform crystallizes when viewed 
as part of the larger effort to carefully allocate scarce 
resources. At a time when the national debt exceeds $4 
trillion--$16,000 for every man, woman, and child in America, 
the federal government is striving to reduce spending while 
still maintaining important initiatives, such as reforming 
education and reducing crime and drug abuse. In the same vein, 
we need to reduce the regulatory burden on the economy, while 
still achieving important goals, such as protecting public 
health, safety, and the environment. Inefficient regulations 
consume resources that could serve other important 
purposes.\14\
    \14\ See, e.g., Testimony of Frederick L. Webber, president and 
chief executive officer, Chemical Manufacturers Association, before the 
Senate Committee on Governmental Affairs, March 8, 1995, at pp. 2-12; 
Public Policies for Environmental Protection, Resources for the Future, 
15 (Paul R. Portney, ed. 1990).
    Despite the laudable goals and successes of many programs, 
experience has taught us that, too often, regulations have been 
more costly and less effective than they could have been.\15\ 
There is broad support for regulatory reform and many tools to 
achieve it, including cost-benefit analysis, market-based 
mechanisms, risk assessment, and comparative risk analysis. 
This support comes from such diverse sources as the Clinton 
Administration,\16\ Justice Stephen Breyer,\17\ the 
Administrative Conference of the United States,\18\ the 
Carnegie Commission,\19\ Resources for the Future,\20\ The 
Business Roundtable,\21\ the National Research Council,\22\ The 
Brookings Institution,\23\ the American Enterprise 
Institute,\24\ and other think tanks, commissions, and 
independent scholars throughout the country.\25\ The wide 
consensus on the need for regulatory reform and on many tools 
to achieve it has contributed to this legislation.
    \15\ As noted by the President's chief spokesperson on regulatory 
policy, Sally Katzen:
    Regrettably, the regulatory system that has been built up over the 
past five decades ... is subject to serious criticism ... [on the 
grounds] that there are too many regulations, that many are excessively 
burdensome, [and] that many do not ultimately provide the intended 
benefits.
    Statement for the Record of Sally Katzen, Administrator of OIRA, 
before the Senate Committee on Governmental Affairs, February 7, 1995, 
p. 2.
    \16\ National Performance Review, Creating a Government that Works 
Better and Costs Less, Washington, D.C. (1993); address by President 
Bill Clinton, Washington, D.C. (Feb. 21, 1995); National Performance 
Review, Improving Regulatory Systems, Washington, D.C. (Sept. 1993).
    \17\ Stephen Breyer, Breaking the Vicious Circle: Toward Effective 
Risk Regulation, Harv. Univ. Press, Cambridge, MA (1993); Stephen 
Breyer, Regulation and Its Reform (1982).
    \18\ See, e.g., ACUS Recommendation 85-2, ``Agency Procedures for 
Performing Regulatory Analysis of Rules'' (1985); ACUS Recommendation 
88-9, ``Presidential Review of Agency Rulemaking (1988); ACUS 
Recommendation 93-4, ``Improving the Environment for Agency 
Rulemaking'' (1993).
    \19\ Carnegie Commission on Science, Technology, and Government, 
Risk and the Environment: Improving Regulatory Decisionmaking, 
Washington, D.C. (June 1993).
    \20\ Paul Portney, Public Policies for Environmental Protection, 
Resources for the Future, Washington, D.C. (1990); Paul Portney, 
``Economics and the Clean Air Act,'' 4 J. Econ. Perspectives 173 (Fall 
1990); Worst Things First?: The Debate Over Risk-Based National 
Environmental Priorities, Resources for the Future, Washington, D.C. 
(Adam N. Finkel and Dominic Golding, eds. 1994).
    \21\ The Business Roundtable, Toward Smarter Regulation (1994); The 
Business Roundtable, Cost of Government Regulation Study (Mar. 1979).
    \22\ National Research Council, Science and Judgment in Risk 
Assessment, National Academy Press, Washington, D.C. (1994); National 
Research Council, Issues in Risk Assessment, National Academy Press, 
Washington, D.C. (1993); National Research Council, Valuing Health 
Risks, Costs, and Benefits for Environmental Decision Making, National 
Academy Press, Washington, D.C. (1990); National Research Council, 
Improving Risk Communication, National Academy Press, Washington, D.C. 
(1989); National Research Council, Risk Assessment in the Federal 
Government: Managing the Process, National Academy Press, Washington, 
D.C. (1983).
    \23\ See, e.g., Lester Lave, The Strategy of Social Regulation, 
Brookings Institution, Washington, D.C. (1981); Lester Lave, 
Quantitative Risk Assessment in Regulation, Brookings Institution, 
Washington, D.C. (1982); Robert W. Crandall, Controlling Industrial 
Pollution: The Economics and Politics of the Clean Air Act, Brookings 
Institution, Washington, D.C. (1983).
    \24\ See, e.g., American Enterprise Institute, Benefit-Cost 
Analysis of Social Regulation: Case Studies from the Council on Wage 
and Price Stability, Washington, D.C. (James C. Miller and Bruce 
Yandle, eds. 1979); M. J. Bailey, Reducing Risks to Life: Measurement 
of Benefits, American Enterprise Institute, Washington, D.C. (1980); 
Robert W. Hahn and J. A. Hird, ``The Costs and Benefits of 
Regulation,'' 8 Yale J. on Reg. 233 (Winter 1991); W. Kip Viscusi, 
Product-Risk Labelling: A Federal Responsibility, American Enterprise 
Institute, Washington, D.C. (1993).
    \25\ Murray L. Weidenbaum, Business and Government in the Global 
Marketplace, Prentice Hall, Englewood Cliffs, NJ (5th ed. 1995); W. Kip 
Viscusi et al., Economics of Regulation and Antitrust, D.C. Heath & 
Co., Lexington, MA (1992); W. Kip Viscusi, ``Pricing Environmental 
Risks,'' Policy Study No. 112 (Center for the Study of Am. Bus. June 
1992); W. Kip Viscusi, Fatal Tradeoffs: Public and Private 
Responsibilities for Risk, Oxford Univ. Press, NY (1992); M. K. Landy 
et al., EPA: Asking the Wrong Questions, Oxford Univ. Press, NY (1990); 
Cass R. Sunstein, After the Rights Revolution, Harv. Univ. Press, 
Cambridge, MA (1990).
          III. Legislative History and Committee Consideration

                         a. committee hearings

    On February 7, 1995, the Governmental Affairs Committee 
began a series of four hearings to explore the merits of 
regulatory reform. The February 7 hearing provided a forum for 
Senators to address problems with government regulation and 
proposals for reform. Testifying at this hearing were Senate 
Majority Leader Robert Dole as well as Senators Don Nickles, 
Kay Bailey Hutchison, Richard Shelby, and Christopher Bond.
    The Committee held its second regulatory reform hearing on 
February 8, 1995. This hearing covered the costs and benefits 
of regulation and the cumulative regulatory burden. The first 
two witnesses were Senator Frank Murkowski and John A. Georges, 
Chairman of the Board and Chief Executive Officer of 
International Paper and member of The Business Roundtable Task 
Force on Government Regulation. Senator George McGovern 
testified on the second panel. Also testifying were Mike Roush 
of the National Federation of Independent Business; Dr. Richard 
Lesher, President of the Chamber of Commerce of the United 
States; Thomas Hopkins of the Rochester Institute of 
Technology; Robert Hahn of the American Enterprise Institute; 
Carl Pope, Executive Director of the Sierra Club; and Paul 
Portney of Resources for the Future.
    A third hearing was held on February 15, 1995. The focus of 
this hearing was cost-benefit analysis, regulatory accounting, 
and risk analysis. The first panel included Bob Crandall, 
Senior Fellow at The Brookings Institution, and Professor Kip 
Viscusi of Duke University. Also testifying were John Graham, 
Director of the Harvard Center for Risk Analysis; Jerry 
Jasinowski, Chairman of the Alliance for Reasonable Regulation 
and President of the National Association of Manufacturers; 
Linda Greer, Senior Scientist at the Natural Resources Defense 
Council; and Don Elliott, Senior Partner at Fried, Frank, 
Harris, Shriver, and Jacobson.
    A fourth and final hearing was held on March 8, 1995. This 
hearing reviewed the major principles of regulatory reform and 
solicited specific recommendations on major issues, including 
judicial review, a potential petition process for reviewing 
rules, a supermandate to inject cost-benefit considerations 
into existing statutes, as well as market-based mechanisms. 
Panelists also discussed the merits of cost-benefit analysis, 
risk assessment, comparative risk analysis, reviewing existing 
regulations, and regulatory accounting. The first panel 
included Carol Browner, the Administrator of the Environmental 
Protection Agency; and Sally Katzen, the Administrator of the 
Office of Information and Regulatory Affairs in the Office of 
Management and Budget. Also testifying were C. Boyden Gray, 
Chairman of Citizens for a Sound Economy and partner, Wilmer, 
Cutler & Pickering; Frederick L. Webber, President and Chief 
Executive Officer of the Chemical Manufacturers Association; 
Gary Edles, General Counsel of the Administrative Conference of 
the United States; Peter Strauss, Professor at Columbia Law 
School and Senior Fellow at the Administrative Conference of 
the United States; David C. Vladeck, Director of the Public 
Citizen Litigation Group; Alan J. Krupnick, Senior Fellow at 
Resources for the Future; Joseph Goffman, Senior Attorney at 
the Environmental Defense Fund; and Jonathan B. Wiener, 
Professor at Duke University School of Law and the Duke 
University School of the Environment.

                   b. amendments and committee action

    On March 23, 1995, the Committee on Governmental Affairs 
marked up and favorably reported S. 291 in the nature of a 
substitute by vote of 10 to 0. Voting in the affirmative were 
Senators Roth, Cohen, Thompson, Glenn, Nunn, Levin, Pryor, 
Lieberman, Akaka, and Smith. In addition, Senators Stevens, 
Cochran, Grassley, McCain, and Smith voted in the affirmative 
by proxy. On the same day, the Committee on Governmental 
Affairs also marked up and favorably reported by voice vote the 
same text in the nature of a substitute for S. 343.
    The Roth-Glenn Manager's Amendment to the Roth Substitute 
Amendment was approved by voice vote. Moreover, a number of 
amendments were offered, debated and voted upon. The following 
were accepted:
    (1) Roth amendment for the sunset of ``rules that are not 
reviewed by the agencies in a timely manner'' with the 
exception of removal of paragraph (ii) on p. 17, lines 15-19 
(voice vote).
    (2) Roth amendment to exempt ``the banking institutions and 
monetary policy of the Fed from the regulatory requirements of 
the legislation'' (voice vote).
    (3) Levin amendment strengthening the market mechanisms and 
performance standards language (without language).
    (4) Levin amendment on establishing an effective date for 
the bill--180 days after enactment (voice vote).
    (5) Levin amendment to strike the word ``procedural'' from 
the judicial review section (adopted 8-6). Voting in the 
affirmative were Senators Thompson, Glenn, Nunn, Levin, Pryor, 
Lieberman, Akaka, and Dorgan. Negative votes were cast by 
Senators Roth, Cohen, Cochran (by proxy), Grassley (by proxy), 
McCain (by proxy), and Smith (by proxy).
    (6) Levin amendment to eliminate ``a one-time requirement 
in section 638(a)(1)(B) that agencies report on the status of 
guidelines they are required to develop'' (without objection).
    (7) Levin amendment to consolidate ``the reporting 
requirements appearing elsewhere in the bill without deleting 
any requirements.'' The amendment ``incorporates into section 
6(e) the reporting requirements of section 638(b) and section 
639(c), and requires that these reports be submitted once, 
instead of requiring the reports over and over again'' (without 
objection).

                    IV. Section-by-Section Analysis

                         section 1. short title

    The name of the legislation is the ``Regulatory Reform Act 
of 1995''.

                         section 2. definitions

    This section adds a definition to section 551 of title 5, 
United States Code. The term ``Director'' means the Director of 
the Office of Management and Budget.

                  section 3. analysis of agency rules

    Section 3 substantially amends chapter 6 of title 5, United 
States Code. Section 3(a) creates three new subchapters, 
requiring: (1) analysis of agency rules, including cost-benefit 
analysis and review of existing regulations; (2) risk 
assessment; and (3) executive oversight. Section 3(b) amends 
the Regulatory Flexibility Act, heretofore chapter 6 of title 5 
(hereafter subchapter I), to provide for judicial review of 
determinations made under that Act. Section 3(c) is a savings 
clause, stating that the current legislation does not limit any 
of the President's constitutional duties. Finally, section 3(d) 
provides the technical and conforming amendments necessary to 
reorganize chapter 6 into subchapters, including, for example, 
moving the Regulatory Flexibility Act to subchapter I of 
chapter 6.
    In amending title 5, United States Code, the Committee-
passed bill applies the definition of ``agency'' under section 
551 to subchapters II and III and IV of the bill--the cost-
benefit analysis, risk assessment and executive oversight 
requirements. This definition includes the independent 
regulatory agencies within the scope of this legislation. Thus, 
the requirements to identify major rules and perform cost-
benefit analyses and risk assessments, where appropriate, would 
apply not only to departments and other executive agencies, but 
also to all the independent regulatory agencies, such as the 
Securities and Exchange Commission, the Federal Trade 
Commission, the Consumer Product Safety Commission, the 
Interstate Commerce Commission, etc.
    This legislation would also require these independent 
regulatory agencies, like all other Executive Branch agencies, 
to be subject to Presidential oversight for compliance with the 
requirements of this legislation. Such Presidential oversight 
is likely to include review of proposed and final major rules 
by the Office of Management and Budget (OMB). Since 1981, OMB's 
regulatory review authority under Presidential executive order 
(E.O. 12291, 12498, and 12866) has explicitly exempted 
independent regulatory agencies and made their participation in 
the regulatory review scheme voluntary. This was based on the 
longstanding tradition of independence from Presidential 
control for these agencies and the fact that service by the 
commissioners who head independent regulatory agencies is 
protected by the good cause removal requirement.
    The Committee believes that the provisions of this 
legislation, especially the requirements for cost-benefit 
analysis and risk assessment, the review of existing rules, and 
the congressional review of rules, should apply to all 
Executive Branch agencies, including the independent regulatory 
agencies. Subjecting the independent regulatory agencies to 
these regulatory management tools will improve the regulatory 
programs of these agencies without violating their 
independence.
    The Committee's decision to subject the independent 
regulatory agencies to a general Executive Branch-wide cost-
benefit analysis and review process is not unprecedented. The 
Paperwork Reduction Act of 1980 (44 U.S.C. 3507) required OMB 
to review the information collection proposals of independent 
regulatory agencies, but empowered the agencies to override an 
OMB disapproval. In the fourteen-year history of that Act, the 
independent agency override has been used seven times, 
according to OMB. The success in incorporating independent 
agencies into the OMB review process under the Paperwork 
Reduction Act supports including them in any OMB oversight 
process.
    More importantly, the growing need for more efficient and 
effective government regulation, as well as for more coherent 
policy management of the Executive Branch, supports lowering 
some walls that have separated the independent agencies from 
other agencies in the Executive Branch.
    For these reasons, the Committee believes that independent 
regulatory agencies should generally be covered by the 
requirements of this legislation. Specific exemptions are 
provided within the definition of ``major rule'' and ``rule'' 
to protect the integrity and effectiveness of certain kinds of 
regulations.
    During the Committee's mark-up, however, Chairman Roth and 
Senator Glenn spoke about and agreed on the importance of 
protecting the independence of the Federal Reserve. They also 
agreed on the need to give more attention to the question of 
the impact of regulatory analysis and review requirements on 
the unique missions of certain other independent agencies, such 
as those that oversee the safety and soundness of financial 
institutions. Committee members will consider this question 
before the legislation is taken up by the full Senate.
                              section 3(a)

    Section 3(a) creates new subchapters II, III, and IV in 
chapter 6, title 5, United States Code.

Subchapter II--Analysis of agency rules

    The first new subchapter in chapter 6 of title 5, United 
States Code, establishes provisions for new definitions (sec. 
621), cost-benefit analysis of agency rules (sec. 622), the 
scope of judicial review (sec. 623), extension of deadlines to 
allow adequate time for agencies to perform the required 
regulatory analysis (sec. 624), agency review of existing rules 
(sec. 625), and public disclosure of cost-benefit analysis 
information (sec. 626).
            Sec. 621. Definitions
    This section defines certain terms used in cost-benefit 
analysis. These definitions are used not only in the new 
subchapter II, but also are referred to and incorporated into 
subchapters III and IV.
    (1) The term ``benefit'' means the reasonably identifiable 
significant favorable effects, including social, environmental 
and economic benefits, that are expected to result directly or 
indirectly from implementation of a rule or an alternative to a 
rule.
    The Committee intends to give broad meaning to the term 
``benefit.'' Federal agencies issue regulations to assist in 
the implementation of laws passed by Congress. As such, the 
value of a regulation is the extent to which it provides the 
public benefits envisioned by a law. These benefits can be 
readily apparent, as in economic benefits obtained from 
standardized hazardous material transportation rules, or in the 
regained safety of a locality's drinking water supply. These 
benefits can also be obvious but also very broad, as in the 
growth of an economic sector or improved nation-wide employment 
rates. Finally, regulatory benefits can be significant but 
difficult to quantify, such as the value of increased 
visibility over the Grand Canyon.
    This wide variety of possible benefits must be recognized 
in the rulemaking process. However, merely because benefits may 
be varied or difficult to quantify should not relieve agencies 
from identifying the specific benefits of a rule. One of the 
basic findings underlying this legislation is that agency 
action must be based more clearly on identified benefits. The 
identification of regulatory benefits should enable agencies to 
improve the effectiveness and efficiency of the regulatory 
process and to best serve the goals of the enabling statute.
    As a part of this broad meaning of ``benefit,'' the 
Committee requires agencies to consider ``direct'' as well as 
the ``indirect'' benefits. Many benefits, like costs, can be 
clearly attributed to a regulatory action. Many, however, flow 
in more tangential ways. The Committee expects agencies to make 
a reasonably thorough effort at identifying and analyzing all 
significant benefits that flow from a regulatory action. At the 
same time, the Committee cautions agencies against speculative 
attribution of distant outcomes to a regulatory action.
    The definition of benefits is not limited to favorable 
effects which can be quantified. They may include, for example, 
identifiable and significant but potentially nonquantifiable 
benefits, such as increased freedom of choice for consumers or 
enhanced opportunities for public enjoyment of the environment.
    Finally, the definition of benefits is limited to those 
that are ``significant.'' Agencies should not spend valuable 
resources trying to assess every small, remote benefit of a 
rule; during the cost-benefit analysis, only significant 
benefits should be addressed. Equitable considerations, such as 
whether a rule reduces risks to sensitive subpopulations, 
whether the risk reduced is involuntary, or whether the rule 
has a distributional impact on low-income groups, also can play 
an important rule in an agency's decisionmaking process.
    (2) The term ``cost'' means the reasonably identifiable 
significant adverse effects, including social, environmental, 
and economic costs that are expected to result directly or 
indirectly from implementation of, or compliance with, a rule 
or an alternative to a rule. The concerns expressed above 
regarding ``benefit'' apply equally here. As Dr. Paul Portney 
testified before the Committee:

          It is often alleged that we have a very good idea 
        about how much it costs to comply with federal 
        regulation. I do not believe this to be true. In some 
        cases, we have a good idea about how much a regulated 
        party must spend out-of-pocket to comply with a 
        regulatory requirement. But the sum total of such out-
        of-pocket expenditures is not identical with ``costs'' 
        as economists think of them for the purposes of a 
        benefit-cost analysis. This latter concept includes the 
        value of time that people must spend waiting in line 
        for permits, car inspections, etc. It includes the 
        adverse health effects they incur because of the time 
        involved to bring a potentially effective new 
        therapeutic drug to market. It includes the 
        inconvenience they suffer when a product becomes less 
        effective on account of a regulation, or disappears 
        from the market altogether. None of these ``costs' 
        involves any out-of-pocket expenditure, but they must 
        all be counted in any serious benefit-cost analysis. To 
        be sure, pollution control expenditures by required 
        parties--the out-of-pocket costs referred to above--are 
        an essential ingredient in doing a proper benefit-cost 
        analysis, but the latter requires considerably more 
        sophistication in cost estimation than a mere toting up 
        of who spent what.\26\
    \26\ Testimony of Dr. Paul R. Portney, Vice President, Resources 
for the Future, before the Senate Committee on Governmental Affairs, 
February 8, 1995, at p. 3.

    As in the case of ``benefits,'' the Committee intends to 
give broad meaning to the term ``cost.'' At the same time, the 
definition of costs is limited to those that are 
``significant.''
    Agencies must be sensitive to all of the significant costs 
regulation can impose. While the compliance costs often 
comprise a substantial portion of total costs, there are other 
costs of regulation. To name a few, these costs include 
substitution effects (such as increased risks caused by a 
regulatory approach), as well as the adverse impacts on 
consumer choice, technological innovation, wages, productivity, 
and economic growth. Costs also could include lower employment, 
even if short-term.
    Agencies must identify and evaluate direct and indirect 
costs, as well as quantitative and non-quantitative costs. 
Again, agencies should eschew unreliable speculation about 
costs, as with benefits, but they should try to responsibly 
identify all ``significant'' costs imposed by a regulatory 
action.
    (3) The term ``cost-benefit analysis'' means an evaluation 
of the costs and benefits of a rule--quantified to the extent 
feasible and appropriate and otherwise qualitatively 
described--that is prepared in accordance with the requirements 
of this subchapter. The legislation adds that this analysis 
should be performed at the level of detail appropriate and 
practicable for reasoned decisionmaking on the matter involved, 
taking into consideration the significance and complexity of 
the decision and the need for expedition. The Committee intends 
that the agencies use the best available techniques for these 
analyses, and tailor the specificity and rigor of the analysis 
to the consequences of the decision to be made. The Committee 
recognizes, however, that there is no mechanistic ``one size 
fits all'' approach to cost-benefit analysis. Part of the 
decision-making discretion that Congress delegates to agencies 
is the responsibility to reasonably determine the degree of 
detail and rigor necessary to support a rulemaking decision.
    (4) The term ``major rule'' is defined to include two 
categories of significant rules: economically significant and 
otherwise significant rules. Because cost-benefit analysis and 
the periodic review of regulations required by section 625 are 
costly and time-consuming requirements, the Committee intends 
that they apply only to those rules that will have a 
significant impact on the economy. Agencies are required to 
prepare a cost-benefit analysis only for major rules.
    The first category of ``major rule'' is defined in 
subsection 621(4)(A)(i) as ``a rule or group of closely related 
rules that the relevant agency, the Director of OMB, or a 
designee of the President reasonably determines is likely to 
have an annual effect on the economy of $100,000,000 or more in 
reasonably quantifiable direct and indirect costs.''
    The Committee's decision to set the threshold for major 
rules at $100,000,000 follows the long-standing tradition under 
centralized executive review of rules. Since President Ford, 
every President has required the review of regulations under an 
executive order. An essential component of these orders is a 
distinction between important rules and those that are more 
routine. This distinction recognizes that the resources devoted 
to regulatory analysis should be commensurate with the 
consequences of the decisions to be made. For over 20 years, 
that distinction has been drawn where rules impose annual costs 
on the economy of $100 million or more. Rules of such 
significance can benefit greatly from detailed analysis. The 
Committee is concerned that, particularly in this time of 
budget austerity, setting a lower threshold to trigger the 
detailed analytical requirements of this legislation would 
overwhelm the agencies and impair the regulatory process. While 
cost-benefit analysis can lead to more efficient rules, a 
careful balance must be struck, lest the costs of the analysis 
itself outweigh its benefits.
    The Committee recognizes that any standard for the 
definition of major rule will be difficult to apply in 
practice, even though it may appear on paper to create an 
objective, ``bright line'' test. Even the direct, readily 
quantifiable, costs of a regulation are difficult to calculate 
accurately and are all the more difficult to quantify before 
the rule has been proposed.
    All significant costs of a rule, even if indirect and 
difficult to calculate, should be considered and weighed in the 
cost-benefit and cost-effectiveness determinations of section 
622. However, to determine whether a rule is ``major'' under 
subsection 621(4)(A)(i), the agency should look to the 
significant direct and indirect costs that can be identified 
and quantified with relative certainty.
    In determining whether a rule is ``major,'' the agency need 
only consider the costs of the proposed rule and not its 
benefits. However, if a proposed ``deregulatory'' action will 
reduce the benefits of a current rule, the reduced benefits 
should be counted as a regulatory ``cost'' for purposes of 
making a major rule determination. Regulations produce both 
direct and indirect benefits, and, as is the case with costs, 
only those direct and indirect, readily quantifiable benefits 
should be used to determine whether the cost of a regulation in 
reduced benefits reaches the $100,000,000 threshold.
    Subsection 621(4)(A)(ii) provides a second prong to the 
major rule definition to permit agencies and the President in 
their discretion to subject to cost-benefit analysis those 
rules which, while not imposing cots of $100,000,000 on the 
economy, still have a substantial or significant impact on 
important national goals or on certain sectors of the economy. 
The Committee recognizes that certain rules while outside of 
subsection 621(4)(A)(i), still have an important impact on 
certain economic sectors, such as state and local governments. 
The Committee encourages agencies or the President to determine 
that such rules are major under the second prong of the major 
rule definition, consistent with the availability of resources 
to prepare regulatory analyses. Subparagraphs (I) through (V) 
provide guidance for such agency determinations.
    Subparagraph (I) allows agencies to determine that a rule 
is major where it imposes a ``substantial increase in costs or 
prices'' on certain groups, government entities, or geographic 
regions. Subparagraph (V) covers rules with a significant 
adverse impact on a sector of the economy or a class of 
persons. Similarly, subparagraph (IV) applies to rules that 
materially alter the budgetary impact of entitlements, grants, 
user fees or loan programs, or the rights and obligations of 
recipients. Regulatory agencies should be sensitive to the 
disproportionate impact their actions can have on certain 
groups or sectors of the economy, even if the aggregate effect 
is not substantial. The Committee encourages agencies to be 
sensitive to these concerns and use cost-benefit analysis to 
streamline the regulatory burden, consistent with statutory 
directives.
    Subparagraph (II) provides that a rule may be major where 
it will have ``significant adverse effects'' on such important 
societal interests as wages, economic growth, investment, 
productivity, innovation, the environment, public health or 
safety, or the competitiveness of American businesses. There 
may be situations where the direct, measurable economic effect 
of a regulation will be slight, but the indirect effects, 
especially those experienced over the long term, can be 
substantial. In addition, regulatory actions that reduce 
compliance burdens may, in some cases, have significant adverse 
effects on the ``environment, public health or safety.'' 
Therefore, a cost-benefit analysis may be appropriate for such 
rules. These are among the factors which agencies should 
consider in making determinations under subparagraph (II).
    Subparagraph (III) includes in the definition of major rule 
a rule that would seriously conflict or interfere with a past 
or planned action of another agency.
    The Committee intends that concerns about agency resources 
should guide major rule determinations under subsection 
621(4)(A)(ii). Thus, agency resources should be devoted to a 
reasonable number of rules whose impact will be most 
significant under the narrative criteria set forth in 
subsection 621(4)(A)(ii).
    Subsection 621(4)(A) provides that a ``group of closely 
related rules'' ought to be a major rule because the committee 
does not want to allow agencies to avoid the analytic 
requirements of the legislation by breaking up a rule into 
smaller component parts. The Committee is aware that it may be 
difficult to identify those separate rules which should be 
aggregated to determine whether a cost-benefit analysis is 
required. Where a statutory provision requires an agency to 
implement a series of regulatory actions directed toward a 
single goal and affects one industry or sector of the economy, 
the agency should consider aggregating those discrete actions 
into a single major rule for the purposes of chapter 6. 
However, where different agency rules, promulgated pursuant to 
different enabling statutes or statutory mandates, would all 
affect one industry, activity or groups of persons, aggregation 
generally would not be appropriate. While such rules might be 
viewed as closely related by regulated parties, they are 
totally separate when considered by the agency. The Committee 
is concerned that aggregation of those rules would impose an 
unworkable burden on agencies.
    Aggregation does not determine how cost-benefit analysis is 
to be performed. Where closely related rules constitute a major 
rule, the agency can conduct a cost-benefit analysis for the 
whole group, or perform individual analyses for each rule, 
depending on the circumstances. If such a group of closely 
related rules will be proposed over a period of months, 
individual analyses may be the most reasonable approach. This 
should not be construed to obviate a cost-benefit analysis of 
subsequent rules that independently satisfy major rule 
criteria, unless the initial analysis for a group of 
regulations had fully considered all of the potential effects 
of the subsequent regulations. Thus, an agency might be 
required to perform a general cost-benefit analysis for each 
set of regulations that qualifies as a major rule.
    The term ``major rule'' explicitly exempts three categories 
of rules. First, subparagraph (i) excludes rules involving the 
internal revenue laws. The Committee was concerned that the 
enormous economic impact of such rules might make an 
overwhelming number of tax regulations major rules. While many 
IRS rules have a major economic impact or are otherwise 
significant, they have this impact because their goal is to 
raise revenue. Subjecting IRS rules to cost-benefit analysis 
would interfere with this revenue-raising function, as well as 
create needless delay and uncertainty.
    Second, subparagraph (ii) exempts from ``major rule'' any 
rule that authorizes the introduction into, or removal from, 
commerce, or recognizes the marketable status, of a product. 
The Committee believes that adequate procedures and safeguards 
exist to screen out potentially dangerous or undesirable new 
products or to remove existing ones. The Committee did not want 
to disturb those procedures or to delay the introduction or 
removal of products from commerce in accordance with those 
procedures.
    Finally, subparagraph (iii) exempts from the major rule 
definition any rule that is exempt from notice and public 
comment procedures under section 553 of title 5 of the United 
States Code. These include: rules relating to a military or 
foreign affairs functions; interpretation rules; rules relating 
to grants, benefits, or loans; rules relating to agency 
management or personnel; and rules relating to the acquisition, 
management or disposal of federal property. In some cases, 
these rules could have a significant impact on the economy. 
However, the Committee decided to minimize the burdens on the 
agencies; where notice and comment pursuant to section 553 is 
not required, a cost-benefit analysis will not be required 
either.
    (5) The term ``market-based mechanism'' means a regulatory 
program or requirement that imposes legal accountability for 
the achievement of a regulatory goal, but affords maximum 
``market-oriented'' flexibility as to how to achieve that goal. 
Two key elements of this approach are: (1) affording maximum 
flexibility to each regulated person to comply with mandatory 
regulatory objectives, such as the opportunity to exchange 
increments of compliance responsibility for cash or other legal 
consideration; and (2) allowing regulated persons to respond at 
their own discretion to changes in general economic conditions 
pertaining to the regulatory program without undermining the 
achievement of the program's regulatory mandate or requiring a 
new rulemaking.
    The Committee believes that, where practical, market-based 
mechanisms can be far more efficient and effective than 
command-and-control regulation.\27\ Where market-based 
mechamisms can be adequately administered and enforced, they 
can achieve equivalent or greater benefits at far less cost 
than command-and-control regulation. The Committee prefers 
market-based mechanisms because, when practical and 
enforceable, they enable regulated parties to achieve 
compliance in the least costly manner, reward innovators who 
meet or exceed regulatory goals, and adapt to changed 
circumstances more quickly than traditional command-and-control 
regulations. Accordingly, whenever agencies consider adopting a 
major rule, they should always consider whether a market-based 
mechanism could be used.
    \27\ The testimony before the Committee strongly supports the view 
that market-based mechanisms can be far superior to command-and-control 
regulation. See Testimony of Joseph Goffman, Senior Attorney, 
Environmental Defense Fund, before the Senate Committee on Governmental 
Affairs, March 8, 1995; Testimony of Alan J. Krupnick, Senior Fellow, 
Resources for the Future, before the Senate Committee on Governmental 
Affairs, March 8, 1995; Testimony of Jonathan B. Wiener, Associate 
Professor, Duke University School of Law and Duke University School of 
Environment, before the Senate Committee on Governmental Affairs, March 
8, 1995; Testimony of C. Boyden Gray, Partner, Wilmer, Cutler & 
Pickering and Chairman, Citizens for a Sound Economy, March 8, 1995.
    The Committee views the success of the program for reducing 
nationwide sulfur dioxide emissions established under Title IV 
of the Clean Air Act as a useful and clear-cut example. There, 
Congress imposed directly on sources of emissions explicit 
pollution reduction requirements. The sources were forced to 
meet those requirements through any means they chose, including 
purchasing credits representing the performance of needed 
reductions by other sources. This program is achieving greater 
emissions reductions at about one-tenth of the anticipated 
costs of command-and-control regulation and is 40 percent ahead 
of the statutory schedule.\28\
    \28\ Testimony of C. Boyden Gray, Partner, Wilmer, Cutler & 
Pickering and Chairman, Citizens for a Sound Economy, before the Senate 
Committee on Governmental Affairs, March 8, 1995, at p. 4.
---------------------------------------------------------------------------
    The definition allows regulated entities to respond to both 
compliance requirements and changing economic circumstances 
``at their own discretion in an automatic manner.'' This 
definition of market-based mechanisms is intended to serve as a 
benchmark against which an agency should measure any proposal 
to harness market forces to achieve program objectives. Where a 
given regulatory alternative may not fall squarely within the 
definition of ``market-based mechanism,'' the definition 
nonetheless would serve as a model against which regulators can 
judge the inherent limitations of other market incentives, such 
as using taxes, fees, or charges as regulatory instruments. For 
example, in a changing economy, fixed charges may afford 
sources only limited flexibility to respond--in contrast to the 
latitude sources enjoy in an emissions trading market--and 
introduce economic distortions that do not enhance the 
achievement of the program objective. Moreover, agencies should 
take care not to characterize command-and-control regulation as 
market-based mechanisms or performance standards. The Committee 
expects that the definitions of these terms will provide 
sufficient guidance to the agencies.
    (6) The term ``performance standard'' means a requirement 
that imposes legal accountability for the achievement of an 
explicit regulatory objective, such as the reduction of 
environmental pollutants or of risks to human health, safety, 
or the environment, on each regulated person. In contrast to 
command-and-control regulation, performance standards simply 
establish the ultimate regulatory goal and free regulated 
parties to meet or exceed that goal as they choose. The 
Committee's preference for market-based mechanisms also extends 
to performance standards, which have the same elements of 
accountability, flexibility, and cost-effectiveness.
    (7) The term ``risk assessment'' has the same meaning as 
such term now is defined under section 632(5) of title 5, 
United States Code.
    (8) The term ``rule'' has the same meaning as such term is 
defined in section 551(4) of title 5, United States Code. The 
definition of ``rule'', also contains several exclusions. 
Subparagraph (A) excludes certain rules of ``particular 
applicability as that phrase is understood in section 551(4) of 
title 5. These are rules which, while technically within the 
definition of ``rule'', are more properly considered as 
licenses or orders because they apply only to a small group or 
a single individual. The Committee believes that such rules 
would not greatly benefit from the cost-benefit analysis and 
periodic review requirements of this legislation because they 
are generally developed through complex and lengthy proceeding, 
which often involve sophisticated economic analysis. Rules of 
particular applicability also can have a direct impact on 
individual rights and privileges. Enhancing presidential 
authority over such rules could allow for its abuse.
    Subparagraphs (B) and (C) exclude from the legislation's 
scope certain rules relating to monetary policy or to the 
safety or soundness of federally insured depository 
institutions. Subparagraph (D) excludes certain rules issued by 
the Federal Election Commission and the Federal Communications 
Commission. In all of these instances, the Committee felt that 
the analytic requirements of the legislation would unduly 
inhibit these rules from achieving their objectives.
            Sec. 622. Rulemaking cost-benefit analysis

                             A. Background

    This section lays out the requirements for agencies to do 
initial and final cost-benefit analysis when proposing and 
issuing major rules. The Committee recognizes that many of the 
problems with the regulatory process can be traced to the 
failure of agencies to consider all of the potential effects of 
their rules before promulgation. The cost-benefit analysis is 
intended to provide a framework for the agency to assess the 
impact of its rule on the economy and society as a whole. Good 
analysis is the servant of judgment, not a substitute for it. 
The Committee intends that the analysis be used by agencies to 
develop alternative regulatory approaches, to compare the 
benefits and costs of such approaches, and to produce better 
informed decisionmaking.\29\
    \29\ When well used, cost-benefit analysis is a highly effective 
tool to increase the efficiency of the regulatory process. One EPA 
study, for example, found that ``the return to society from improved 
environmental regulations is more than one thousand times EPA's 
investment in cost-benefit analysis.'' See U.S. Environmental 
Protection Agency, ``EPA's Use of Cost-Benefit Analysis: 1981-1986'' 
(Aug. 1987), at p. 5-2.
---------------------------------------------------------------------------
    The concept of cost-benefit analysis has developed over the 
past several administrations to the point where some very 
sophisticated analyses have been prepared. The Committee is 
confident that the cost-benefit requirements of this 
legislation can be implemented consistent with responsible 
presidential initiatives to improve cost-benefit analysis.
    The same requirements that apply to new regulations must 
also apply to agency action to cut back or rescind existing 
regulations, and this is especially true of the cost-benefit 
analysis requirements of this section.
    A ``rule'' is defined in the APA as any ``agency statement 
of general or particular applicability and future effect 
designed to implement, interpret or prescribe law or policy.'' 
5 U.S.C. 551(4). This definition includes ``deregulatory'' and 
regulatory reform actions that reduce or shift compliance 
burdens. The Committee expects that where such changes rise to 
the level of being major rules under this legislation, the 
agency must determine whether the benefits of the deregulatory 
change will justify the costs and that the action will be 
adopted in the most cost-effective manner possible.
    It is conceivable that some actions designed to reduce 
compliance costs may impose costs in the form of new risks to 
public health, safety or the environment. These substitution 
risks should be viewed as increasing the net cost of the 
regulatory alternative. Alternatively, reducing the compliance 
burden imposed on one group or sector of the economy may 
increase the burden on another; those costs also should be 
considered. Such analysis should be relevant and technically 
valid and appropriate. Agencies should not use inappropriate 
analytic techniques.\30\
    \30\ See Hearing before the Senate Committee on Governmental 
Affairs, ``Risk-Risk Analysis,'' S. Hearing 102-1144 (Mar. 19, 1992); 
hearing before the Senate Committee on Governmental Affairs, ``Risk-
Risk Analysis: OMB's Review of a Proposed OSHA Rule,'' GAO/PEMD-92-33 
(May 1992).
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    A satisfactory cost-benefit analysis would enable 
independent reviewers to make an informed judgment as to 
whether the benefits of the rule justify its costs, and whether 
the rule substantially achieves the statutory objectives in the 
most cost-effective manner. This determination encompasses the 
whole rulemaking record.
    To fulfill its potential for improving the regulatory 
process, the preliminary cost-benefit analysis must be made 
public by the agency to allow comment and criticism by 
interested parties. As more information is submitted to support 
or rebut the analysis, it and the final rule will be improved. 
The preliminary cost-benefit analysis should be summarized in 
the notice of proposed rulemaking, as should any other 
preliminary analysis published on the proposed rule. Agencies 
are encouraged to integrated required documents where feasible 
to minimize paperwork and delay.
    The cost-benefit analysis should be developed by the agency 
during the development of the rule. The cost-benefit analysis 
should guide the agency decision-making process, not provide a 
post hoc rationalization for a decision made before the 
analysis was prepared. Once completed, the final cost-benefit 
analysis should be made public with the statement of basis and 
purpose accompanying the rule. A summary of the analysis should 
be published with the rule in the Federal Register. If the 
analysis is properly performed, it will provide an excellent 
brief in support of the agency's factual conclusions and policy 
choices.
    The Committee recognizes that economic analysis should not 
be the sole standard for all regulatory decisionmaking. 
Mandating a strict, cost-benefit standard for regulatory 
decisions under all federal laws would ignore the diversity of 
enabling legislation dealing with an enormous range of subject 
matter. The cost-benefit analysis required by this legislation 
will help to identify questions clearly, to describe 
assumptions made, and then to clarify the rationale justifying 
the proposed action so that they may be open for public debate.
           B. Framework for conducting cost-benefit analysis

    The first step, outlined in subsection 622(a), is for 
agencies, before publishing a notice of proposed rulemaking, to 
determine whether the rule is a major rule under subsection 
621(4)(A)(i)--that is, whether the rule is likely to have a 
gross annual effect on the economy of $100,000,000 or more in 
reasonably quantifiable direct and indirect costs--and if not, 
whether the rule is a major rule under the narratives in 
subsection 621(4)(A)(ii).
    If the agencies do not determine a rule to be major, 
subsection (b) allows the Director of OMB or a designee of the 
President to exercise the same authority not later than 30 days 
after the publication of the notice of the proposed rulemaking. 
This provision is designed to ensure effective Executive Branch 
oversight of the cost-benefit requirements. A notice of any 
major rule determination shall be published in the Federal 
Register, as a part of the notice of proposed rulemaking where 
possible, and such notice shall include a succinct explanation 
of the agency's or the President's action.
    Both the preliminary and final cost-benefit analysis should 
address in detail the issues presented by the regulation, 
including the need for the rule, the various alternative 
approaches (including the potential advantages and 
disadvantages of each), the legal basis for agency action, and 
an assessment of the benefits and costs of the proposed action. 
The analysis should provide an objective, critical, and 
impartial discussion of the regulatory problem and of the 
potential solutions.
    Although basically parallel, the preliminary and final 
cost-benefit analyses differ in several important respects. In 
most instances, the quality of analysis and data relevant to 
the analysis will improve between the time a rule is first 
proposed and when it is finally issued. Preliminary analyses 
often use simplified methodologies and data sources. In 
contrast, later estimates typically apply more sophisticated 
analyses and better data sources, including those provided 
during public comment. This tends to improve the accuracy and 
reliability of estimates, often substantially. In some 
instances, initial estimates may overestimate costs or 
underestimate benefits. To a large degree, such additional 
information will be provided by peer review, public comments, 
or other material developed by the agency. Thus, the later 
analysis should generally be more complete. In addition, the 
final analysis should address significant comments submitted on 
the preliminary analysis. The preliminary cost-benefit and 
cost-effectiveness evaluations required by subsection 622(c) 
will be followed by the formal determinations required by the 
final cost-benefit analysis. The final determinations, of 
course, should consider any additional data received by the 
agency since the publication of the preliminary cost-benefit 
analysis.

                C. Content of the cost-benefit analysis

    Subsection 622(c) requires the agency to place an initial 
cost-benefit analysis in the file of a major rule and publish 
in the Federal Register a summary of such analysis. The agency 
then must provide an opportunity for interested persons to 
comment pursuant to section 553 of title 5, United States Code.
    According to subsection 622(c)(2), each initial cost-
benefit analysis shall contain eight major components:
          (A) An analysis of the benefits of the proposed rule;
          (B) An analysis of the costs;
          (C) A discussion of an appropriate number of 
        reasonable alternatives;
          (D) An assessment of the feasibility of establishing 
        a regulatory program that operates through the 
        application of market-based mechanisms;
          (E) An explanation of the extent to which the 
        proposed rule (i) will accommodate differences among 
        geographic regions and among persons with differing 
        levels of resources with which to comply; and (ii) 
        employs voluntary programs, performance standards, or 
        market-based mechanisms that permit greater flexibility 
        in achieving the identified benefits of the proposed 
        rule;
          (F) A description of the quality, reliability, and 
        relevance of economic or scientific evaluations of 
        information;
          (G) An explanation of whether the identified benefits 
        of the proposed rule justify the identified costs of 
        the proposed rule, and of how the proposed rule is 
        likely to substantially achieve the rulemaking 
        objectives in the most cost-effective manner;
          (H) If a major rule addresses risks to human health, 
        safety or the environment--(i) a risk assessment; and 
        (ii) an assessment of incremental risk reduction or 
        other benefits associated with each significant 
        regulatory alternative considered by the agency in 
        connection with the rule or proposed rule.

                    1. Identification of the problem

    Every cost-benefit analysis, whether preliminary or final, 
should begin with a discussion of the nature of the problem. 
The agency should identify those persons or national interests 
that the underlying statute and the regulation is intended to 
benefit and discuss the nature of the harm that likely will 
occur if no action is taken. The analysis should identify the 
cause or causes of the problem and explain whether or not a 
market-based mechanism would provide an adequate solution. The 
agency should identify causes, not just symptoms of the 
problem.
    The analysis also should identify the objectives of the 
rule, and explain how the rule will achieve them. The Committee 
encourages agencies realistically to discuss any potential 
shortcomings of the regulation. Agencies should recognize that 
regulations impose costs and sometimes fail to fully attain 
their objectives. The agency should bear in mind that, just as 
market do not function perfectly, neither do regulatory 
programs. When considering the benefits of regulating, agencies 
should not compare imperfect markets or externalities with 
idealized, perfectly functioning regulatory programs. 
Recognizing these limitations, the agency should make a 
reasonable attempt to predict the results of the rule in the 
cost-benefit analysis. The cost-benefit analysis should make 
the case why the proposed regulation will produce better 
results than no action.
    This legislation requires agencies to identify the 
statutory authority relied upon by the agency to promulgate the 
regulation. The agency should briefly explain why its proposals 
is within its statutory jurisdiction and is consistent with 
congressional intent. A similar analysis should be done for 
each significant alternative to help guide the agency to the 
least costly alternative that is consistent with statutory 
objectives.

                     2. Benefits--Sec. 622(c)(2)(A)

    The heart of a cost-benefit analysis is a review and 
discussion of the benefits and costs of the proposed rule and 
the reasonable alternatives, including an attempt to balance 
and compare those costs and benefits. Subsections 622(c)(2)(A), 
(d)(2)(A), and (e)(1) require the agency to analyze and 
describe the benefits of a rule and its alternatives. 
Economists have noted that the valuation and calculation of 
benefits generally pose the greatest problem in preparing a 
cost-benefit analysis, although cost estimates can also be 
difficult. The benefits of regulation--particularly 
environmental, safety and health standards, often are 
substantial, yet difficult to calculate. The Committee does not 
expect all cost-benefit analysis will assign numerical values 
to all projected benefits. The agencies should use a rule of 
reason. When some aspect of a benefit simply cannot be 
quantified, the agency should describe the benefit in some 
detail, state what significance it attributes to the 
nonquantifiable aspects of the benefit, and explain the basis 
for its conclusion of this point. Those benefits which cannot 
be quantified need only be described precisely and succinctly. 
If the agency provides a monetary or other quantitative 
estimate, the analysis should include the methodological 
justification. The ranges of predictions and margins of error 
should also be specified, as required by subsection 622(e)(1). 
Subsection 622(e)(2) requires that the agency should rely on 
cost, benefit, or risk assessment information that is supported 
by material that would allow the public to assess the accuracy, 
reliability, and validity of such information. Finally, the 
agency should clearly articulate the relationship between costs 
and benefits under subsection 622(e)(2)(B).
                      3. Costs--Sec. 622(c)(2)(B)

    Subsections 622 (c)(2)(B), (d)(2)(A), and (e)(1) make clear 
that the cost-benefit analysis should address several critical 
issues in assessing the costs of a regulation. The cost-benefit 
analysis should look beyond the immediate compliance costs of 
regulation and attempt to quantify, or at least identify, the 
indirect costs and adverse effects which may result from the 
rule. Opportunity costs can be difficult to project but also 
can be among the most significant costs of regulation. The 
inefficient use of resources, and investment disincentives can 
have a significant impact on the economy. The cost-benefit 
analysis also should, to the extent practical, identify and 
describe the indirect adverse effects of the regulation on 
productivity, wages, economic growth, research and innovation, 
and the environment, public health and welfare. Where these 
effects are beneficial or neutral, this should be documented as 
well. Where costs are difficult to quantify, agencies should 
not expend unreasonable efforts in seeking to calculate all 
possible costs.
    The Committee believes that when estimating direct economic 
costs, the agency should, where appropriate, consider whether 
affected groups can bear the expected costs of the regulations. 
The agency should consider industry structure, revenues, and 
other characteristics, such as access to capital financing, 
geographic location, and the probable future effects of other 
regulatory requirements.
    Agencies then should calculate the total direct costs of 
compliance, including such costs as construction, operation, 
monitoring, financing, paperwork, and opportunity costs. 
Agencies also should estimate costs to government units, 
including costs of compliance, administration, enforcement, or 
lost tax revenue.
    If a proposed regulation restricts uses of a product or 
service, the agency should consider that lost benefit as a 
regulatory cost. Such an evaluation would not require an agency 
to determine the inherent ``value'' of a product. The price 
that consumers are willing to pay for a product or service is 
the best measure of its value. Where a regulation would ban a 
product or service, the cost of that regulation would be the 
difference between the value of the product or service banned 
and that of its nearest substitute or technical alternative, 
taking into full consideration other factors affecting product 
pricing and performance.

                   4. Alternatives--Sec. 622(c)(2)(C)

    Subsection 622(c)(2)(C) requires the preliminary cost-
benefit analysis to contain a brief description of alternative 
methods for achieving the objectives of the rule, consistent 
with the underlying statute. Agencies are required to consider 
not only alternatives proposed by the public, but should take 
an affirmative effort to develop alternatives that will achieve 
the statutory objectives in a less costly or more effective 
manner. In the past, agencies have sometimes adopted rules 
without seriously considering alternatives that could more 
effectively achieve the statutory goals or achieve those goals 
in a less costly manner. This provision is intended to compel 
agencies to seek out and consider an ``appropriate number'' of 
such alternative approaches, particularly market-based 
mechanisms. The legislation focuses the agency's discussion on 
an ``appropriate number'' of alternatives so that agencies are 
not forced to engage in limitless or wasteful discussions of 
possible regulatory alternatives.
    Alternatives that achieve substantially all of the benefits 
of a proposal should be identified and considered, to determine 
if such alternatives could reduce the net costs of the 
regulation. Alternative levels and methods of compliance may be 
appropriate. The alternative of having no regulation should be 
a starting point in the analysis. There may be existing 
voluntary, market,\31\ judicial, state, or local regulatory 
mechanisms that could adequately resolve the problem identified 
by the agency for action. This is not to suggest that a no 
action alternative may be adopted when a regulation is mandated 
by the statute under which the agency is acting.
    \31\ In certain instances, EPA has successfully used voluntary 
programs, such as the 33/50 Program, to achieve substantial reductions 
in pollution in a cost-effective, flexible manner. See Testimony of 
Carol M. Browner, Administrator, U.S. EPA, before the Senate Committee 
on Governmental Affairs, March 8, 1995, at p. 2.
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    In recent years, as the costs of regulation and the need to 
reduce this burden have grown, agencies have developed a number 
of innovative regulatory techniques to make regulatory programs 
less costly and more effective. For example, performance 
standards can be used instead of design standards to reduce 
compliance cost while still meeting regulatory goals. Market-
based mechanisms, such as the sale of marketable permits, have 
been used to reduce the costs of pollution control while 
meeting or exceeding regulatory goals. Regulations mandating 
information disclosure or labeling may adequately guide 
consumer choice and obviate more traditional command-and-
control regulation. Pollution prevention initiatives also may 
reduce the need for regulation and achieve public health, 
safety, or environmental goals in a cost-effective manner.\32\ 
Indeed, many government agencies and the regulated community 
are undertaking pollution prevention efforts. Some innovative 
firms have found a competitive advantage in pollution 
prevention, reducing compliance costs or creating new value to 
the firm.
    \32\ See Testimony of Carol M. Browner, Administrator, U.S. EPA, 
before the Senate Committee on Governmental Affairs, March 8, 1995, at 
p. 2.
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    While far from complete, a fundamental shift is taking 
place in the way federal regulators go about their business, a 
shift that this legislation is intended to encourage. In the 
past, agencies too often reached for a single tool, command-
and-control regulation, relying on administrative sanctions 
imposed through formal enforcement procedures, to solve any 
regulatory problem that arose. Traditional regulation, while 
necessary and appropriate in some cases, can be time-consuming, 
costly to both businesses and governments, and can create 
disincentives to industrial innovation. Command-and-control 
regulation is usually less effective and more costly than more 
flexible approaches.

 5. Analysis of Market-Based Mechanisms--Sec. 622(c)(2)(C), (D), & (E)

    The specific reference in section 622(c)(2)(C)(ii) to 
market-based mechanisms reflects not only the Committee's 
preference for the use of market-based mechanisms in the design 
of regulatory programs, but also the specific steps agencies 
must follow so that this preference will be consistently 
considered when formulating major rules. If agencies fulfill 
the requirement of setting forth the extent to which the 
designs of proposed regulatory programs incorporate market-
based mechanisms, then each rulemaking process, as well as the 
record created therein, necessarily should reflect discussion 
and analysis of market-based mechanisms. Since the Committee 
believes that where practicable and applicable, such 
alternatives are likely to produce better performing and more 
cost-effective regulatory programs, then market-based 
mechanisms will be an important standard against which agency 
design efforts can be judged. The agency's assessment of the 
feasibility of establishing a regulatory program that operates 
through the application of market-based mechanisms must be 
expressly reflected in the rulemaking record of major rules. 
Any specific alternatives adopted must be consistent with the 
statute under which the agency is acting.

6. Scientific or Economic Information or Evaluations--Sec. 622(c)(2)(F)

    Subsection 622(c)(2)(F) is intended to protect against the 
use of invalid scientific assumptions by requiring an agency to 
describe what actions have been taken to ensure the reliability 
of scientific evidence and the conclusions drawn from that 
evidence. This requirement is intended to ensure the accuracy 
and scientific validity of the data and studies upon which the 
agency relies. Many scientific studies already are subjected to 
peer review before publication in recognized scientific 
journals. While the Committee stopped short of requiring such 
reviews in each case, it intends that scientific evaluations 
and information not previously subjected to such review should 
be carefully evaluated.

        7. Cost-Benefit and Cost-Effectiveness Determinations--
                       Sec. 622(c)(2)(G), (d)(2)

    Subsections 622(c)(2)(G) and 622(d)(2) are the heart of the 
cost-benefit requirements of this legislation. They take the 
agencies one step beyond the descriptive exercises of 
subsection 622(d)(1) and 622(d)(2)(A). Subject to a carefully 
drawn exception discussed below, subsection 622(d)(2)(B) 
requires that, in the final cost-benefit analysis for a major 
rule, the agency must make a twofold determination based on the 
whole rulemaking record: (1) whether the benefits of the rule 
justify its costs; and (2) whether the rule will achieve the 
rulemaking objectives in a more cost-effective manner than the 
alternatives presented in the rulemaking proceeding. This 
requirement parallels that in subsection 622(c)(2)(G) for the 
preliminary cost-benefit analysis issued in connection with the 
notice of proposed rulemaking for a major rule.
    The choice of the word ``justify'' is an important one. It 
signifies two concepts: first, that precise quantification of 
costs and benefits is not mandated; second, that agencies may 
bring to bear certain judgmental factors to supplement their 
numerical analysis in making the required determination.
    When pioneering his own regulatory reform proposal, Senator 
Bennett Johnson elucidated the advantages of ``justify'' over a 
more quantitative word:

          Justify was used rather than exceed for two reasons. 
        First, it is often more difficult to estimate the 
        benefits of an environmental regulation than it is to 
        estimate the costs. For example, a clean air regulation 
        may have far-reaching benefits for the environment that 
        are difficult to quantify.
          Consequently, I wanted to give the Administrator the 
        latitude to take into account those difficult-to-
        estimate benefits. . . . All I ask is that the 
        Administrator candidly describe. . . . the 
        nonquantifiable benefits that weighed in her 
        determination. . . .
          The second reason for using justified is that other 
        policy considerations may constitute a benefit of a 
        regulation. For example, the Administrator may conclude 
        that poor children in particular inner-cities may be 
        suffering from exposure to a chemical that poses a 
        human health threat. Even though the quantifiable 
        benefits may not exceed the quantifiable costs, the 
        Administrator may determine that the regulation is 
        nevertheless justified on other policy grounds. Again, 
        I have no objection to these considerations, as long as 
        the Administrator clearly articulates them as part of 
        her certificate.\33\

    \33\ 140 Cong. Rec. S. 5877 (daily ed. May 18, 1994).
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    The second requirement, that the rule ``achieve the 
rulemaking objectives in a more cost-effective manner than the 
alternatives described in the rulemaking,'' also is not a 
purely ``objective'' quantitative exercise. The agency is not 
necessarily required to adopt the alternative with the lowest 
compliance costs where another alternative provides 
substantially greater benefits. The term ``cost-effective'' 
implies a balancing and weighing of not only the cost of each 
alternative considered, but also the differing degrees of 
effectiveness of each such alternative.
    When testifying before the Committee, Dr. Paul Portney 
underscored the limits to quantifying all important costs.

          [R]eform legislation should avoid the perils of 
        excessive quantification. It is useful--nay, 
        essential--to make our regulators think hard and 
        analytically about the good their programs will do and 
        the burdens they will impose. Where these benefits and 
        costs can reasonably be identified and expressed in 
        dollar terms, they should be accompanied by sensitivity 
        analysis to reflect uncertainties. But it makes no 
        sense to me to pretend that we can, at this point in 
        time, at least, make predictions of ecosystem damage 
        analogous to the estimates we can make of expected 
        reductions in cancer cases that might accompany reduced 
        ambient concentrations of a carcinogenic air pollutant. 
        While we should push regulators to a quantitative and 
        precise where they can, they need also to be able to 
        say, ``This program will have other good (or bad) 
        effects. While I cannot estimate their likelihood or 
        magnitude at this time, they played a role in the 
        decision I made.'' \34\
    \34\ See Testimony of Paul R. Portney, Vice President of Resources 
for the Future, before the Senate Committee on Governmental Affairs, 
February 8, 1995, at pp. 9-10.

    This does not mean that agencies are free to act 
arbitrarily or in the absence of appropriate record support in 
making their determinations under subsections 622(c)(2)(G) and 
622(d)(2). An agency's cost-benefit and cost-effectiveness 
determinations must be ``reasonable.'' By imposing this 
requirement of reasonableness, the Committee intends that the 
agency will engage in ``reasoned decisionmaking.'' To satisfy 
this standard, an agency must apply clearly articulate and 
understandable criteria, and must explain the reasons why it 
has reached the determinations required under subsections 
622(c)(2)(G) and 622(d)(2).
    This legislation provides that the evaluations and 
determinations required by subsections 622(c)(2)(G) and 
622(d)(2)(B) are to be made ``if not expressly or implicitly'' 
inconsistent with the statute under which the agency is acting.
    This language is intended to clarify the relationship 
between the requirements of the legislation and the substantive 
provisions of the enabling statutes that govern agency 
decisionmaking. The language makes clear that the legislation 
is generic reform legislation providing methodologies for 
improving regulatory decisions; it does not override the 
specific substantive provisions of enabling statutes. The 
language is also intended to reassure the public and members of 
Congress that the cost-benefit and cost-effectiveness 
requirements of the legislation would not introduce into the 
decisionmaking process factors that are inconsistent with 
Congress' intent in enacting particular regulatory statutes.
    The requirement for cost-benefit and cost-effectiveness 
determinations in the cost-benefit analysis reflects the 
Committee's judgment that comparative analysis of the cost and 
benefits of regulatory proposals and alternatives can 
contribute significantly to the development of more effective 
and less costly regulations. At the same time, the ``where not 
inconsistent'' limitation recognizes that, in certain cases, 
Congress may have already determined by legislative enactment 
that cost-benefit and cost-effectiveness analysis does not 
provide the appropriate test for decisionmaking.
    It is not wise to attempt in this report to specify 
particular statutes that the Committee believes would be 
inconsistent with the cost-benefit and cost-effectiveness 
provisions of this legislation. In some cases, such a 
discussion would place this Committee in a position of 
appearing to make authoritative interpretations about statutes 
with which it is not intimately familiar. Such interpretations 
are the province of reviewing courts or congressional 
authorizing committees. Further, a discussion that placed 
certain statutes in a particular category might be 
interpreted--wrongly--as an implied finding that other 
analogous statutes omitted from the discussion were not to be 
afforded similar treatment. The Committee recognizes that the 
language of subsection 622(c)(2)(G) and 622(d)(2)(B) must be 
applied on a case-by-case basis by agency officials and, upon 
challenge, by reviewing courts. However, it is in order for the 
Committee to make some general comments about how the 
subsections are expected to apply to different categories of 
enabling statutes.
    Determining whether the requirements of the legislation are 
consistent with the enabling statutes at hand is to be done 
according to the generally accepted rules of statutory 
construction. Thus, the Committee anticipates that when 
statutory terms are ambiguous, agency officials and courts will 
give due weight to legislative history, previous court 
interpretations of related statutory provisions, and other 
evidence of congressional intent.
    The Committee anticipates that regulatory statutes will 
fall into one of the three categories: (1) their terms, as 
fleshed out by appropriate tools of statutory construction, may 
specify that cost factors are, or are not, to be considered in 
reaching a final regulatory decision; (2) while not 
specifically mentioning costs, the statutory scheme may create 
a strong implication that the determinations required by 
subsections 622(c)(2)(G) and 622(d)(2)(B) are, or are not, to 
be considered; or (3) the terms, after consideration of other 
aids to statutory construction, may be truly ``silent'' on the 
question. The different categories create different problems of 
interpretation.
    An enabling statute whose terms disclaim the relevance of 
the cost to a regulatory decision clearly would be inconsistent 
with this legislation. At the other end of the spectrum are 
statutes in which Congress specified that cost factors were to 
be an integral part of a regulatory decision. Rules issued 
under the latter category of statutes should follow the cost-
benefit analysis laid out in this legislation.
    Some statutes may not expressly mention costs in either of 
the above ways but may create a strong implication about their 
relevance. This may be particularly true for statutes that 
specify that regulations are to be promulgated by means of a 
certain methodology in light of specific criteria. A statute 
laying down precise criteria not including costs or 
establishing a methodology not considering costs may 
(particularly in light of clarifying legislative history) imply 
that the requirements of section 622 are inconsistent. To the 
contrary, for statutes with relatively elastic criteria and 
methodologies, the more reasonable implication is that they are 
consistent with this legislation.
    Finally, the Committee is aware that after a careful 
attempt to analyze the underlying statute, using accepted rules 
of statutory construction, the most reasonable interpretation 
may be that it is truly ``silent'' on the question of whether 
cost-benefit and cost-effectiveness considerations can be 
included in the preliminary and final regulatory analysis. The 
Committee intends that the requirements of subsections 
622(c)(2)(G) and 622(d)(2) apply in such a case. Thus, the 
Committee in no way intends that application of the 
requirements depends upon an affirmative statutory confirmation 
that costs are relevant. This result is fully consistent with 
the Committee's approach to cost-benefit analysis: as a general 
matter it can substantially improve decisionmaking and 
therefore should be a part of that regulatory process where not 
inconsistent with specific enabling legislation.

       8. Risk assessment and risk management--Sec. 622(c)(2)(H)

    Subsection 622(c)(2)(H) requires for each major rule 
addressing risks to human health, safety, or the environment 
that the agency conduct a risk assessment as detailed in 
subchapter III. Moreover, the initial and final cost-benefit 
analysis must include an assessment of the incremental risk 
reduction associated with each significant regulatory 
alternative considered.

  9. Quantification and evaluation of costs and benefits--Sec. 622(e)

    Section 622(e) establishes guidelines for the evaluation 
and description of benefits and costs in the preparation of a 
cost-benefit analysis. The Committee recognizes that each 
agency will have to tailor its analytical methodology to meet 
particular regulatory problems. However, subsection (e) sets 
forth three basic principles which the Committee intends all 
agencies to follow.
    First, subsection (e) articulates the Committee's 
realization that in some cases it will not be possible or 
desirable to attempt to quantify all of the costs or benefits 
of a regulatory proposal or of the reasonable alternatives to 
it. Subsection (e) emphasizes that, although nonquantifiable, 
such costs and benefits are not to be ignored; they should be 
described in the cost-benefit analysis, identified in ``as 
precise and succinct a manner as possible'' and considered in 
making the determinations required by section 622(d)(2). As a 
further safeguard against inadequate attention to 
nonquantifiable costs and benefits, subsection (e) concludes 
with a statement disclaiming any intention that the cost-
benefit and cost-effectiveness evaluations required by 
subsections 622(c) and (d) be made primarily on a mathematical 
or numerical basis.
    Second, subsection (e) establishes conditions for the 
treatment of quantifiable costs and benefits. Where such 
quantifications are provided, the subsection requires that they 
be made ``in the most appropriate units of measurement'' and 
that they ``specify the ranges of predictions'' and ``explain 
the margin of error involved in the quantification methods and 
in the estimates used.'' For example, a given cost-benefit 
analysis may describe one of the quantifiable benefits of a 
regulation as ``cases of serious injury reduced.'' The most 
precise estimate, consistent with subsection (e), may be the 
prediction that actual benefits will be within a range of ``ten 
to fifty cases annually'' (this is the ``range of 
prediction''). The probability that the number of cases reduced 
will actually be within this range may be eighty percent.
    By requiring that benefits and costs be quantified ``in the 
most appropriate units of measurement,'' the Committee intends 
to emphasize that benefits and costs need not always be 
expressed in monetary terms. However, reducing all costs and 
benefits to a common unit of measurement will make the 
analytical and evaluative exercise more useful and 
understandable. Hence, efforts should be made to translate 
costs and benefits into monetary or other concrete terms where 
appropriate. For example, benefits that consist of reducing or 
controlling adverse effects on health or the environment could 
be described in the first instance by estimating, using the 
risk assessment procedures of this legislation, the degree to 
which the rule would reduce the risk that such effects would 
occur. Where meaningful methodologies are available, the agency 
then might attempt to determine how much society is willing to 
pay to achieve such a reduction in risk.
    These requirements recognize that quantification of costs 
and benefits is far from an exact science. As stated elsewhere 
in this Report, the Committee intends a reasonable analysis and 
comparison employing the degree of precision appropriate to 
each situation. The requirements also recognize that past 
regulatory analyses have not always adequately disclosed the 
imprecisions inherent in numerical estimates or the assumptions 
built into the methodologies used to arrive at them. Subsection 
(e) requires that assumptions and imprecisions in the analysis 
be prominently displayed, a requirement paralleling this 
subsection's directive that the agency's evaluation of cost-
benefit relationships be ``clearly articulated.''
    Third, subsection (e) prohibits agencies from relying on 
cost or benefit information ``not accompanied by data, 
analysis, or other supporting materials that could enable the 
agency and other persons interested in the rulemaking to assess 
the accuracy and reliability of such information.'' This 
requirement addresses the concern that participants in the 
regulatory process sometimes make vague, overstated cost or 
benefit claims not adequately documented at the time nor borne 
out by subsequent experience. In appropriate cases, the agency 
should consider whether the cost or benefit information 
provided is consistent with the provider's representations to 
other regulatory decision-makers and with data and methodology 
that have accurately predicted the costs or benefits associated 
with previous regulations. The nature and extent of information 
required by the agency should be tempered by the practical 
limits of economic and scientific analysis. There is always a 
danger that interested persons may misrepresent the projected 
costs or benefits of regulation so as to support arguments for 
a more or less strict regulatory approach. This certainly 
merits agency scrutiny.

              10. Use of data and information--Sec. 622(g)

    Subsection (g) makes clear that it is the responsibility of 
an officer or employee of the agency to direct the preparation 
of the cost-benefit analyses. This provision does not preclude 
a person outside the agency from gathering data or information 
to be used in preparing the cost-benefit analysis or from 
providing an explanation sufficient to permit the agency to 
analyze such data or information. Agencies also are not 
precluded from using contractors to perform preliminary and 
supporting analysis, but agencies maintain ultimate 
responsibility for such analyses. The agency must identify the 
data or information gathered or explained and describe the 
arrangement by which the information was procured by the 
agency, including the total amount of funds expended for it. 
Nothing in this subsection precludes the transfer of employees 
from one agency to another for temporary duty assignments to 
assist in the preparation of a cost-benefit analysis. The 
Committee recognizes that certain agencies may have expertise 
in certain areas, and encourages agencies to share personnel to 
best accomplish the purposes of this legislation.

                    11. Savings clause--Sec. 622(h)

    Subsection (h) provides that the cost-benefits requirements 
not alter the criteria for rulemaking otherwise applicable 
under other statutes.
            Sec. 623. Judicial review
    The central requirement of this legislation is that a cost-
benefit analysis and, where relevant, risk assessment, be 
prepared for major rules. Such analyses, where not inconsistent 
with the statute under which the agency is proposing the rule, 
must include determinations as to whether the rule's benefits 
justify its costs and whether the rule will achieve its 
objectives in a more cost-effective manner than alternative 
approaches. The Committee intends that these cost-benefit and 
risk assessment requirements be subject to limited court 
scrutiny only as part of the whole administrative record and 
should guide a reviewing court in evaluating the validity of 
the rule.
    Simply put, the Committee intends to allow sufficient 
substantive review to ensure that agencies will produce rules 
based on reasoned analysis pursuant to subchapters II and III. 
At the same time, the Committee does not want to encourage 
litigation over procedural technicalities that might ensnare an 
agency that has made a good-faith effort to perform and 
consider cost-benefit analysis and risk assessment.
    Section 623 imposes significant limits on the role of 
judicial review in enforcing the risk assessment and cost-
benefit requirements of this legislation. This legislation is 
intended to create a framework for cost-benefit analysis that 
the Committee believes will lead to improved regulation. It 
will serve primarily as a blueprint for deliberations by the 
agency officials who conduct the rulemaking and by any peer 
review panels that provide an independent look at the agency's 
reasoning (although the Committee also anticipates input from 
presidential oversight authorities, members of the public, and, 
of course, the relevant oversight committees of Congress).
    Subchapters II and III are not intended to create a 
detailed code of privately enforceable rights. If the 
legislation's specifications as to risk assessment and cost-
benefit analysis were judicially enforceable in their own 
right, the court's attention would inevitably be focused on 
what is really an interim step in the process. Yet, the 
question of whether the agency's analysis comports with the 
specifications of this legislation should never be examined in 
a vacuum.
    The legislation specifically provides for independent and 
external peer review to help ensure that agencies use 
technically and scientifically sound techniques for risk 
assessments and cost-benefit analyses. The comments of the peer 
review panel, along with the risk assessment or cost-benefit 
analysis, become part of the administrative record and may be 
considered during review of the final rule.
    The cogency of the agency's cost-benefit analysis 
conclusions should be considered in light of any peer review 
panel's comments and the agency's response to those comments in 
the statement of basis and purpose.
    If the independent experts on the peer review panel are 
satisfied that the risk assessment or cost-benefit analysis is 
valid, a court might well rely on the panel's endorsement as 
one reason to sustain the validity of the final rule. 
Conversely, if the peer review panel found significant reasons 
to doubt the validity of an agency's assessment or analysis, 
and the agency simply ignored its comments, that might help a 
court conclude that the final rule is arbitrary and capricious.
    It is the end product--the agency's justification for the 
rule in light of the entire record--that should be the focus of 
the court's attention.
    Subsection (a) makes clear that compliance or noncompliance 
by an agency with the provisions of subchapters II and III is 
subject to judicial review only in connection with the review 
of the final rule and according to the provisions of section 
623.
    Subsection (b) prohibits judicial review of a determination 
of whether a rule is, or is not, a major rule where that 
determination is made by a designee of the President or the 
Director under section 622. The authority granted to the 
Director or other designee by section 622(b) to identify major 
rules is intended to facilitate presidential management and 
coordination of the regulatory process. The Director or other 
designee will be able to focus the attention of agencies on 
those rules which they believe, consistent with national 
priorities, should be designated major rules pursuant to 
section 621(4)(A) and subjected to a more intensive analysis 
than would normally be the case. Legal challenges to the 
exercise or failure to exercise this inherently managerial or 
political authority would be inappropriate and therefore are 
precluded.
    Subsection (c) allows limited judicial review of an agency 
determination that a rule is, or is not, a major rule under 
section 621(4)(A)(i) (on the grounds that the rule is likely to 
have a gross annual effect on the economy of $100,000,000 or 
more in reasonably quantifiable direct and indirect costs). The 
Committee, however, does not intend to stimulate protracted 
litigation over an agency's preliminary estimate of a rule's 
economic impact. Consequently, judicial review is limited to an 
evaluation of whether an agency properly calculated the 
economic impact of a rule in light of the information available 
at the time it performed this analysis. The Committee intends 
that courts generally will defer to an agency's reasonable, 
good faith estimate of whether the $100,000,000 threshold has, 
or has not, been met. A rule only may be set aside based on a 
clear and convincing showing that the agency has erred. This 
heightened evidentiary standard is appropriate in light of the 
difficulty of projecting ab initio the economic impact of a 
rule and the extent to which agencies may have to rely on 
subjective judgments in making cost estimates. Subsection (c) 
also provides that there is no judicial review of the 
determination that a rule is, or is not, a major rule under 
621(4)(A)(ii). This bar on review is appropriate in light of 
the complexity and subjectivity of the criteria set out in that 
subsection, and because agency priority-setting does not 
readily lend itself to judicial scrutiny.
    Subsection (d) provides that, if the agency has failed to 
perform the analysis or assessment required under the 
legislation, the court shall vacate and remand the rule to the 
agency for further consideration in light of the requirements 
of this legislation. The subsection specifies that courts are 
not to review whether analyses or assessments conformed to the 
particular requirements of this chapter. This subsection also 
ensures that immaterial procedural flaws in an analysis or 
assessment shall not be a sufficient basis for overturning a 
rule.\35\ Rather, the analysis and assessment become part of 
the overall rulemaking record, as provided in subsection 
623(e).
    \35\ See Testimony of Peter L. Strauss, Betts Professor of Law, 
Columbia Law School, before the Senate Committee on Governmental 
Affairs, March 8, 1995, at pp. 11-12 (stating that allowing judicial 
review of procedural compliance issues would invite a high reversal 
rate that is as likely to reflect judicial error as agency error).
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    Subsection (e) provides that any analysis or assessment 
prepared under the legislation shall not be subject to an 
interlocutory challenge separate or apart from review of the 
agency action to which it relates. Such piecemeal review of 
agency compliance would delay the rulemaking process. When an 
action for judicial review of the agency action is instituted, 
any cost-benefit analysis or risk assessment for such agency 
action shall constitute part of the whole rulemaking record of 
agency action for the purposes of judicial review, and shall, 
to the extent relevant, be considered by a court in determining 
the legality of the agency action. The analyses and assessments 
will summarize, analyze, and tie together much of the factual 
and other support for the rule. As such, the Committee expects 
that the analysis or assessment will often provide a strong 
brief in support of the rule and should help justify the rule 
both to the public and the court, as statements of basis and 
purpose traditionally have done in agency rulemaking 
proceedings. The courts should give ample deference to an 
agency's identification, valuation, and comparison of 
regulatory costs and benefits. The Committee does not want 
courts to second-guess agency decisions in this regard. This is 
an essential limitation, as judges normally lack the technical 
training in science and economics to conduct in-depth reviews 
of the adequancies of cost-benefit analyses or risk 
assessments.
    Where the party challenging the rule is able to demonstrate 
that, in light of the cost-benefit analysis or risk assessment, 
the rule is arbitrary and capricious, the court may remand the 
rule to the agency for the development of a more complete 
record, or for the preparation of a more detailed analysis or 
risk assessment, or both.
            Sec. 624. Deadlines for rulemaking
    For a two-year period after the effective date of the 
legislation, this section extends certain rulemaking deadlines 
for up to six months to allow agencies time needed to comply 
with the analytical requirements of the legislation. The 
affected deadlines include statutory and judicial deadlines for 
rulemakings, as well as rulemaking deadlines that would create 
an obligation to rgulate through individual adjudications.
    The sole purpose of this section is to give agencies some 
time to make a reasonable effort to faithfully fulfill the 
requirements of this legislation. The Committee understands 
that the legislation creates new obligations for agencies in a 
time of limited budgets. In many cases, these obligations will 
have to be met without additional resources. The Committee 
intends that agencies be given a reasonable opportunity to 
develop policies and procedures adequate to comply with the 
law. The Committee does not intend this grace period to be used 
otherwise to delay decisions or to compromise the 
implementation of legal requirements.
            Sec. 625. Agency Review of Existing Rules
    The Committee believes that for regulatory reform to be 
effective it must not be prospective only. It must also look 
back and review existing regulations to eliminate outdated, 
duplicative, or unnecessary rules, and to reform and streamline 
others. With the passage of time, outmoded government decisions 
need review and revision. Review is also needed to address the 
rising cumulative regulatory burden on individuals, businesses, 
States and local governments, and others. Too many private and 
public resources are spent on compliance with current Federal 
regulations to limit regulatory reform to new rules.
    Review of existing rules has been required since 1981 under 
Executive Orders 12291, 12498, and 12866. yet, getting agencies 
to review existing rules apparently is much easier said than 
done. In the first annual report on E.O. 12866, released in 
November 1994, OIRA Administrator Sally Katzen admitted that 
bureaucratic incentives make such review a difficult 
undertaking. While the ``lookback'' process had begun under 
E.O. 12866, she said, ``it had proven more difficult to 
institute than we had anticipated. . . . [A]gencies are focused 
on meeting obligations for new rules, often under statutory or 
court deadlines, at a time when staff and budgets are being 
reduced; under these circumstances, it is hard to muster 
resources for the generally thankless task of rethinking and 
rewriting current regulatory programs'' (p. 36). Much the same 
point was made in OIRA's May 1, 1994, report to the Vice 
President on the first six months of implementation of E.O. 
12866 (PP. 22 & 25), and in Ms. Katzen's testimony before the 
Committee on May 19, 1994. After extensive review of the 
regulatory process, Vice President Gore concluded that 
``thousands upon thousands of outdated, overlapping regulations 
remain in place.'' \36\ The long but disappointing record of 
Executive Branch review efforts necessitates a legislative 
mandate.
    \36\ National Performance Review, From Red Tape to Results: 
Creating a Government that Works Better and Costs Less (1993).
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    The Committee believes that however bitter the medicine may 
be, it is time that agencies deliver on the now long-standing 
requirement to review existing rules. Accordingly, at section 
625 of the legislation, the Committee requires agencies to 
review their current rules. The section sets up a very 
reasonable timeframe of ten years (with an extension of up to 5 
years for good cause) for the review of each rule. To ensure 
that this requirement is met, the legislation would render 
unenforceable any rule that is not reviewed as required by the 
section. The Committee believes that this is a reasonable and 
effective requirement and finally will set agencies on the road 
of revisiting forgotten, but still potent, rules.
    Section 625(a) requires each agency, within 9 months after 
the effective date of the legislation, to prepare and publish 
in the Federal Register a proposed schedule for the review of 
major rules, as well as other rules selected by the agency. To 
set priorities for review, the agency must work with the 
Administrator of OIRA and with the classes of persons affected 
by the rule, including members from the regulated industries, 
small businesses, State and local governments, and 
organizations representing the public. The Committee expects 
that agencies will solicit comments from these groups and hold 
public meetings, where useful and appropriate, to discuss 
priorities for review.
    The head of the agency and the OIRA Administrator should 
base priorities for review on the likelihood that the revision 
or elimination of a rule would: (1) provide the same or greater 
benefits at substantially lower costs; (2) achieve 
substantially greater benefits at the same or lower costs; or 
(3) replace command-and-control rules with market mechanisms or 
performance standards that achieve substantially equivalent 
benefits at lower costs or with greater flexibility.
    With each proposed schedule for the review of existing 
rules, the agency must include: (1) a brief explanation of the 
reasons why the agency has selected each rule for review; (2) a 
target date for completion of each review; and (3) a request 
for public comments on the proposed schedule. The agency should 
schedule its reviews so that they are reasonably distributed 
over time, with rules most in need of scrutiny reviewed first.
    Agencies should also insure that related rules are reviewed 
at the same time. The Committee intends that agencies review 
complete rules or sets of closely related rules as a whole. 
While rules are often promulgated in the Federal Register in 
somewhat isolated or distinct form, they are usually 
incorporated into a larger rule or set of rules codified in the 
Code of Federal Regulations. Thus, for example, a mechanical 
review of rules based merely on elapsed time since promulgation 
would most probably obscure the full scope of a rule and 
confuse those who are interested in it. The Committee expects, 
therefore, that agencies will schedule rules for review both 
within the permitted timeframe and in a manner sufficient to 
include substantively related regulatory matters.
    No later than 90 days before publishing the proposed 
schedule in the Federal Register, each agency shall submit the 
schedule to the Director of OMB (or other presidential 
designee), who may select any additional rule for review.
    No later than 1 year after the effective date of this 
section, each agency must publish in the Federal Register a 
final review schedule, along with its response to comments 
received concerning the proposed schedule.
    Subsection (b)(1) states that the agency shall review: (A) 
each rule on the schedule; (B) each major rule promulgated, 
amended, or otherwise continued by an agency after the 
effective date of this section; and (C) each rule promulgated 
after the effective date of this section that is selected for 
review by the President (or the Director or other presidential 
designee).
    The review of a rule required by this section shall be 
completed no later than the later of: (A) 10 years after the 
effective date of this section; or (B) 10 years after the date 
on which the rule is (i) promulgated; or (ii) amended or 
continued pursuant to this section. These deadlines can be 
extended only under the provisions of subsection (f) which 
allow for a one-time extension of up to five years for the 
review of a rule.
    Subsection (c) provides a list of four items that must be 
included in a notice of proposed action for a rule being 
reviewed, which would then be published in the Federal 
Register.
    First, the notice must include an identification of the 
specific statutory authority under which the rule was 
promulgated and an explanation of whether the agency's 
interpretation of the statute is expressly required by the 
current text of that statute or, if not, whether it is within 
the range of permissible interpretations of the statute.
    Second, to the extent practicable, the agency must perform 
an analysis of the benefits and costs of the rule during the 
period in which it has been in effect. While the Committee 
believes the review of a rule would be of little use if some 
effort was not made to analyze the true costs and benefits of 
the rule, the Committee is equally concerned that agencies 
might expend very considerable resources in an overly detailed 
look back. The review should bring to the fore old rules that 
need to be eliminated or modified. Analysis sufficient to flag 
those rules is the goal. Subsequent analysis designed to 
support new or revised regulations should be more detailed.
    Third, agencies should explain the proposed action with 
respect to the rule, including action to repeal or amend the 
rule to resolve inconsistencies or conflicts with any other 
obligation or requirement established by any Federal statute, 
rule, or other agency statement, interpretation, or action that 
has the force of law.
    Finally, the notice should include a statement that the 
agency seeks proposals from the public for modifications or 
alternatives to the rule which may accomplish the objectives of 
the rule in a more effective or less burdensome manner.
    Subsection (d) states that if an agency proposes to repeal 
or amend a rule under review pursuant to this section, the 
agency shall, after issuing the notice required by subsection 
(c), comply with all applicable rulemaking and other procedures 
that the agency would otherwise have to comply with. In other 
words, the fact that the rulemaking is initiated to satisfy the 
review requirements of this legislation does not alter the 
legal obligations of the agency to comply with all required 
rulemaking procedures or other decision-making requirements. 
Any requirements that the agency would have to comply with if 
it were repealing or amending the rule for any other reason 
would also apply to a rulemaking to repeal or amend that rule 
on account of review undertaken under this section.
    Subsection (e) states that if an agency proposes to keep 
unchanged a rule after review under this section, the agency 
shall: (1) give interested persons at least 60 days after the 
publication of the notice required by subsection (c) to comment 
on the proposed continuation; and (2) publish in the Federal 
Register notice of the continuation of such rule.
    Subsection (f) allows for the extension of the time period 
in which an agency is to review any particular rule. If an 
agency reasonably determines that the review of a rule within 
the 10-year time frame is contrary to an important public 
interest, the agency may request the President (or the 
President's designee), to extend the period up to five 
additional years. Extensions must be published in the Federal 
Register with an explanation of the reasons. The Committee 
expects that the ten-year time-frame for review will be 
complied with in most cases. This subsection's extension will 
give agencies some flexibility where, for example, resource 
constraints frustrate otherwise timely review of all rules. For 
example, as discussed with regard to subsection (a), above, the 
Committee expects that agencies will schedule the review of 
rules by related subject matter over a reasonable period of 
time. Such schedules may lead to the review of a related or 
commonly codified set of rules, some of which are older than 
ten years (e.g., distinct sections may have been promulgated at 
different times). The ability to request and justify an 
extension would, in such a case, provide for a more meaningful 
review of the entire set of rules. The Committee intends that, 
as an exercise of executive oversight, a decision to grant an 
extension under this subsection shall not be subject to 
judicial review.
    In subsection (g), the Committee included, as an amendment 
in mark-up, a ``sunset'' provision, which makes a rule 
unenforceable if an agency has not conducted its review of that 
rule within the timeframe allotted. In this way, the Committee 
ensures that agencies will take seriously the need to review 
existing rules in a timely fashion. As discussed previously, 
the Committee wants to ensure that the call to review existing 
rules will no longer be easily ignored. With a sunset, agencies 
will have to follow through on the review requirements, or face 
the loss of a regulation.
    Subsection (h) states that nothing in this section shall 
relieve any agency from its obligation to respond to a petition 
to issue, amend, or repeal a rule, for an interpretation 
regarding the meaning of a rule, or for a variance or exemption 
from the terms of a rule, submitted pursuant to any other 
provision of law.
            Sec. 626. Public participation
    The efficiency and effectiveness of the Federal regulatory 
process depends not only on the adequacy of cost-benefit 
analysis, but also on the transparency of the process. Public 
participation, regulatory review, judicial review, and 
congressional oversight all depend to one extent or another on 
confidence that agencies will consider all relevant 
information, allow for meaningful public comment on regulatory 
proposals, disclose communications that may affect a regulatory 
decision, and compile a complete rulemaking record.
    The current legislation relects the Committee's concerns on 
a set of sunshine procedures that can improve public 
participation and maximize accountability for regulatory 
decisions without burdening agency decisionmakers or 
compromising pre-decisional disclosure or Executive privilege 
concerns. Section 626 requires rulemaking agencies to take a 
number of steps to insure accountability for, and public 
participation in, the development and review of regulatory 
actions. Section 645 provides parallel requirements for public 
disclosure of regulatory review-related information by OMB or 
another regulatory review office. These provisions were 
included in the managers' amendment introduced in the 
Committee's mark-up on March 23, 1995. Both sets of provisions, 
as they now appear in the current legislation, are consistent 
with recommendations of the Administrative Conference of the 
United States. (Recommendation 88-9, para. 4-6, 1 C.F.R. 
305.88-9).
    Section 626 first requires agencies to make all reasonable 
efforts to provide the public with opportunities for meaningful 
participation in the regulatory process. Agencies should seek 
to inform and solicit comments from those who are intended to 
benefit from and those who are expected to be burdened by any 
regulatory action.
    Second, in promulgating individual rules, agencies must 
include in their rulemaking notices statements that: (1) 
summarize steps taken to comply with the cost-benefit analysis 
and other requirements of this legislation; (2) summarize any 
cost-benefit analysis performed for the rule; (3) certify that 
the rule's benefits justify its costs (or explain why such 
statement cannot be made); and (4) summarize any regulatory 
review decisions, and the agency's response to such review, 
including an explanation of any significant resulting changes 
to the rule.
    The certification established by this legislation is a new 
requirement for the rulemaking notice. It requires that 
agencies certify that a rule's benefits justify its costs. This 
provision is in accordance with Section 622's requirement that 
the initial and final cost-benefit analyses contain an agency 
determination as to whether the benefits of a rule justify the 
costs of a rule. The Committee also expects, by the terms of 
this subsection, that where an agency states that it cannot 
certify that the benefits justify the costs, the agency will 
state explicitly why such a determination cannot be made. Such 
explanation may include a statement that there is insufficient 
data upon which to base such a determination or that the 
underlying substantive statute upon which the rule is based 
precludes the agency from making that determination or requires 
the issuance of rule for which the benefits do not justify the 
costs. In any case, this provision requires the agency to be 
explicit about any inability to make the required 
certification.
    By ``significant,'' the Committee means any substantive 
decision or action that affects or relates to the content of an 
agency rulemaking activity, such as a significant or 
substantive change or communication. It does not include: 
stylistic, clerical, or grammatical matters; simple 
descriptions of a rulemaking activity; or status reports. It 
does include modifications of agency cost-benefit analyses; 
suggested changes to or criticisms of a rulemaking activity; 
assessments of the impact of a rulemaking activity; or 
suggestions about or criticisms of a milestone, schedule, or 
date for undertaking a rulemaking activity.
    The requirement for explanation of significant changes made 
to rules as a result of regulatory review parallels the 
requirement in section 645 that OMB or another regulatory 
review office explain its review actions. The rulemaking agency 
should fully explain and justify the reason for any significant 
change made to a rule based on regulatory review.
    Third, to give the public notice about the pendency of 
regulatory review, agencies must identify, upon request, a 
regulatory action and the date upon which such action was 
submitted for any regulatory review established under 
subchapter IV.
    Fourth, to provide the public with a reasonable 
understanding of the rulemaking decision and its underlying 
analysis, agencies must disclose any information created or 
collected in performing any cost-benefit analysis.
    Finally, to ensure the compilation of a complete and 
accurate rulemaking record, agencies must place in the 
rulemaking record all written communications received from OMB 
or other designated officer under subchapter IV, or any other 
person or office relating to regulatory review.

Subchapter III--Risk assessment

    Risk assessment is a widely recognized tool to structure 
information for regulatory decisionmaking. The acceptance of 
risk assessment as a standard tool can be traced back to the 
seminal report issued by the National Academy of Sciences in 
1983: Risk Assessment in the Federal Government: Managing the 
Process. The report presented a conceptually sound and logical 
approach that has been widely adopted by federal and state 
agencies to assess environmental, health, and safety risks.
    Twelve years after publication of the NAS risk report, 
there is general agreement that the risk assessment process 
needs to be refined. The process is not broken, but it does 
need to be better understood. Risk assessment can be most 
useful when those who rely on it to inform the risk management 
process understand the nature and limitations of risk 
assessment, and use it accordingly. This means that 
decisionmakers must at least understand that the process must 
rely on assumptions and cannot be divorced from assessors' 
values. They must understand what assumptions were used in the 
assessment in question, and what values they reflect; that the 
risk estimate with which they work is expressed as a range, 
with the level of certainty that the true average is in that 
range quantified; and, that variability is expressed to the 
degree that it is known, i.e., how many and what kind of 
persons (e.g., children) will likely be at significantly higher 
or lower risk than the hypothetical average individual. Risk 
managers must take all of these factors into account in making 
a decision, along with political and economic factors extrinsic 
to the risk assessment.
    In recent years, several studies have documented the use of 
risk assessment and recommended improvements to the process. In 
June 1993, the Carnegie Commission on Science, Technology, and 
Government issued Risk and the Environment: Improving 
Regulatory Decision Making. Many of the provisions within the 
risk assessment subchapter of this bill are strongly supported 
by findings in the Carnegie Commission report.
    The Office of Science and Technology Policy (OSTP) within 
the Executive Office of the President issued a brief report in 
March 1995 entitled, ``Science, Risk, and Public Policy''. This 
report also supports many of the concepts addressed in the risk 
assessment subchapter. Three of the principles in the OSTP 
report--an open and transparent risk assessment process; 
scientific peer review; and level of effort commensurate with 
the severity of risk--are embodies in this risk assessment 
subchapter.
    This subchapter presents: findings and purposes (sec. 631); 
definitions (sec. 632); applicability (sec. 633); savings 
provisions (sec. 634); principles for risk assessments (sec. 
635); principles for risk characterization (sec. 636); peer 
review (sec. 637); guidelines, plan for assessing new 
information, and report (sec. 638); research and training in 
risk assessment (sec. 639); interagency coordination (sec. 
640); plan for review of risk assessments (sec. 640a); judicial 
review (sec. 640b); and deadlines for rulemaking (sec. 640c).
            Sec. 631. Findings and purposes
    This section describes the importance of using realistic 
and plausible scientific risk assessments in making sound and 
cost-effective management decisions. Risk assessment has proven 
to be a useful decisionmaking tool, but improvements are needed 
in both the quality of the science and the characterization and 
communication of the findings. In addition, the public 
stakeholders need to be more fully involved in the 
decisionmaking process, and they must have access to critical 
information that is effectively communicated in an objective 
and unbiased manner.
    The purpose of the subchapter are to provide principles and 
procedures for agencies to follow to ensure that the public and 
the Executive Branch are presented with he most realistic and 
plausible information; that relevant data and potential 
methodologies are fully considered; that significant choices in 
the risk assessment process are explained, and that consistency 
in preparing risk assessments and characterizations is 
enhanced.
            Sec. 632. Definitions
    This section defines several key technical terms and lists 
the agencies covered by the risk assessment requirements. The 
term ``emergency'' is defined as a situation that is 
immediately impending and extraordinary, demanding due 
attention by the agency to control a risk reasonably expected 
to cause death, serious illness or severe injury to humans, or 
substantial endangerment to private property or the environment 
if no action is taken.
    The term ``estimates of risk'' is defined as numerical 
representation of the potential magnitude of harm to 
populations or the probability of harm to individuals. 
Estimates are derived by considering the range and distribution 
of estimates of dose-response and exposure, including 
appropriate statistical representation of the range and most 
likely exposure levels. When appropriate and practicable, there 
should be a description of any subpopulations that are likely 
to experience greater than average exposures.
    The term ``hazard identification'' is defined as the 
identification of a substance, activity, or condition 
potentially causing harm to human health, safety or the 
environment.
    Risk assessment is the process by which complex technical 
data are combined and analyzed to provide decision makers with 
information useful in making policy decisions. In some decision 
contexts, such as when evaluating food additives, it is useful 
to distinguish four steps in the risk assessment: hazard 
identification, dose-response analysis (which together comprise 
``hazard assessment''), exposure assessment and risk 
characterization. In other contexts, such as transportation 
safety, one or another of the first three steps may not be 
relevant. ``Risk assessment'' is defined as identifying, 
quantifying, where feasible and appropriate, and characterizing 
hazards and exposures in order to provide structured 
information on the nature of threats to human health, safety, 
or the environment. This definition is included because some 
regulatory activities, such as OSHA's Hazard Communication 
regulation, are triggered by the hazard identification step, 
and also because many extra-regulatory consequences also are 
triggered. It is very important that ``hazard identification'' 
related to major rules meet the same quality as any full ``risk 
assessment.'' Hazard identification should be distinguished as 
only the first step in the risk assessment process and not be 
substituted for a full ``risk assessment'' for the purposes of 
this legislation.
    ``Risk characterization'' is defined as the integration, 
synthesis, and organization of hazard identification, dose-
response and exposure information that addresses the needs of 
decision makers and interested parties. The characterization 
should include discussions of the uncertainties, conflicting 
data, estimates or risks, extrapolations, inferences, and 
opinions.\37\
    \37\ This definition tracks the Carnegie Report that describes risk 
characterization as the process ``in which the results of the above 
steps (hazard identification, exposure assessment, and dose-response) 
are integrated to describe the nature of the adverse effects and the 
strength of the evidence and to present one or more `risk numbers'.'' 
(p. 77). The definition also follows the evolving views of several 
recent National Academy of Sciences Committees that have come to regard 
risk characterization as more than merely a written summary of the risk 
assessment.
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    A ``screening analysis'' is defined as a qualitative 
estimate or bounding estimate \38\ of risk that allows risk 
managers to accept or reject some management options, or allows 
establishing priorities for agency action. A screening analysis 
also could include an assessment such as one for a negotiated 
product restriction or approval, performed by a regulated party 
and submitted to an agency under a regulatory requirement.\39\ 
The Committee recognizes that screening analyses typically use 
conservative assumptions for their purposes when assessing the 
risk.
    \38\ A bounding estimate is an estimate of exposure, dose, or risk 
that is likely to be significantly higher than that incurred by any 
person in the population with the highest actual exposure, dose, or 
risk. Bounding estimates are frequently generated by using high-end 
values for all of the parameters that are used to calculate exposure, 
dose, or risk. Bounding estimates are useful in developing statements 
that an exposure, dose, or risk is ``not greater than'' the estimated 
value. Bounding estimates do not characterize actual high-end risks to 
a population.
    \39\ See Science, Risk and Public Policy, at p.3 (``Risk 
assessments range in depth and complexity from simple screening 
analyses to major undertakings . . .'').
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    A ``substitution risk'' is defined as a reasonably likely 
increased risk resulting from a regulatory option designed to 
decrease other risks. The agency should view this increased 
risk as increasing the net costs of a regulation and should 
account for any substitution risks in the risk assessment and 
cost-benefit analysis.
            Sec. 633. Applicability
    This legislation provides guidance on how risk assessments 
required by the legislation should be conducted. This section 
recognizes that enforcement of the exact provisions has to be 
tempered by the circumstances. In particular, the principles 
and procedures included in the subchapter do not apply when a 
risk assessment or characterization is performed in respect to 
an emergency (as determined by the agency head), an 
environmental inspection or individual facility permitting 
action, a screening analysis, or product label.
            Sec. 634. Savings provisions
    This section states that nothing in the chapter is intended 
to modify any statutory standard or requirement designed to 
protect human health, safety, or the environment.
            Sec. 635. Principles for risk assessment
    This section presents basic principles that should be 
followed in conducting a risk assessment. First, the risk 
assessment should provide a systematic means to structure 
information.\40\ Second, to the maximum extent practicable, 
policy-driven default assumptions \41\ should be used only in 
the absence of relevant available information. The risk 
assessment process should also promote involvement from all 
stakeholders and provide an opportunity for public input.\42\
    \40\ The 1995 OSTP report states ``The concept of risk assessment 
is attractive as a decision-making tool because it implies rationality, 
orderliness, and scientific credibility.'' (p. 4).
    \41\ Policy-driven default assumptions (sometimes referred to as 
default options) are a key element of risk assessment as it is 
practiced today. The 1983 NRC report, Risk Assessment in the Federal 
Government: Managing the Process, defined default options as ``the 
option chosen on the basis of risk assessment policy that appears to be 
the best choice in the absence of data to the contrary.'' As described 
in the 1994 NRC report, Science and Judgment in Risk Assessment, 
default options ``are generic approaches, based on general scientific 
knowledge and policy judgment, that are applied to various elements of 
the risk assessment process when specific scientific information is not 
available. (p. 28). Default assumptions are necessary to bridge gaps 
where information is incomplete.
    \42\ In the Principles in Devising Risk Policy, the 1995 OSTP 
report states: ``The risk assessment process should be as open, 
transparent, and participatory as possible.'' (p. 17).
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    Although policy-driven default assumptions are inherent in 
the risk assessment process, subsection 635 (a)(2) provides 
that, to the maximum extent practicable, relevant available 
information should always be utilized and the policy-driven 
default assumption modified, based on the available data. As 
the recent NAS/NRC report Science and Judgment in Rick 
Assessment (1994) clearly acknowledges,

          Over time, the choice of defaults should have 
        decreasing impact on regulatory decision-making. As 
        scientific knowledge increases, uncertainty diminishes. 
        Better data and increased understanding of biological 
        mechanisms should enable risk assessments that are less 
        dependent on default assumptions and more accurate as 
        predictions of human risk. (p. 90).

    Subsection 635 (a)(5) specifies that risk assessments 
should be designed so that the degree of specificity and rigor 
employed in commensurate with the consequences of the decision 
to be made.\43\ Differently stated, the level of effort 
required for an assessment depends on what is at stake. In some 
cases, very severe risks can be identified and managed with 
relatively simple risk assessments because the stakeholders 
agree that the danger is great enough not to require further 
analysis. Often, the risks requiring detailed analysis are 
those that are marginal on a cost-benefit scale: in these 
cases, credible, detailed analyses can be crucial to satisfying 
stakeholders.
    \43\ The OSTP report recognizes that risk assessments can vary from 
simple screening analyses to ``major undertakings that require years of 
agency effort costing hundreds of thousands of dollars and resulting in 
detailed, scientifically peer-reviewed documents. (p. 3-4). 
Accordingly, the OSTP Principles of Devising Risk Policy state: ``The 
level of effort in assessing a risk should be commensurate with the 
severity of the risks and costs to society.'' (p. 17).
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    The risk assessment principles of section 635 and the risk 
characterization principles of section 636 are broadly written 
to accommodate the wide range of risk assessments encompassed 
by the legislation. For example, the Committee does not intend 
to force agencies looking at safety risks to provide ``exposure 
information,'' if that term is not applicable to the types of 
risk assessments that the agency does. In Secretary Pena's 
testimony before the Senate Environment and Public Works 
Committee on March 22, 1995, he stated:

          Risk assessment and risk characterization, as defined 
        in S. 291 . . ., have little to do with the 
        Department's safety rulemaking process. Unlike EPA or 
        health agencies, DOT safety rules seldom are based on 
        quantification of the risks of toxicity or exposure for 
        exposed individuals, populations, or resources. . . . 
        Much of what we already do to define safety problems is 
        a very real form of risk assessment, but it makes no 
        sense to require the FAA or the Coast Guard to go 
        through an EPA-like risk assessment procedure, using 
        techniques and terminology that are not meaningful in 
        an aviation or maritime safety context. Adding 
        procedural steps make it less likely that agencies can 
        take the proactive steps necessary to address perceived 
        safety concerns before accidents happen.

    The Committee recognizes the variety of risk assessments 
that would be required under this law, and that in different 
agencies different terms may be used to denote the same kind of 
activity. For instance, in accident-prevention studies of the 
type referred to by Secretary Pena, elaborate event-frequency 
analyses are carried out, with the express purpose of 
estimating the probability of different kinds of accidents. 
These correspond to the complex exposure assessments frequently 
done by EPA. For safety studies, the hazard part is virtually 
constant for all similar accidents, so the information useful 
to decision makers is just the predicted event frequency; for 
evaluating other risks, both the hazard and exposure may vary 
from one instance to another, and both need to be understood. 
The Committee does not intend to deter agencies from using the 
forms of risk assessment appropriate to their respective 
regulatory decisions, nor to prescribe the methodology for 
doing so. It does intend that the methodology be credible and 
understandable, and its limitations be made known to the 
public. The Committee intends to allow agencies to use the most 
advanced and scientifically valid techniques for performing the 
wide variety of risk assessments covered by this legislation.
            Sec. 636. Principles for risk characterization
    This section presents basic principles that should be 
followed when characterizing the results of a risk 
assessment.\44\ Subsection 636(1)(A) requires that the risk 
characterization include a description of the exposure 
scenarios used, the natural resources or subpopulations being 
exposed, and the likelihood of the selected exposure scenarios. 
Subparagraph (B) goes on to require that when the risk assessor 
makes significant choices or judgments in the selection of 
models, assumptions, or inferences, those choices should be 
identified and explained. Of particular concern are any policy 
decisions or policy-driven default assumptions made by the risk 
assessor, as indicated in subparagraph (B)(iii). In describing 
judgments, the risk assessor should indicate, pursuant to 
subparagraph (B)(iv), the extent to which a model or other tool 
has been validated by, or conflicts with, empirical data. 
Finally, the impact of alternative choices of assumptions, 
default options or mathematical models should be described 
pursuant to subparagraph (B)(v).
    \44\ These risk characterization principles reflect those 
enunciated by joint EPA-industry work groups. See American Industrial 
Health Council, ``Improving Risk Characterization,'' Washington, D.C. 
(Sept. 1992).
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    Subparagraph (C) further requires the risk characterization 
to include, as appropriate, a description of the major sources 
of uncertainties in the hazard identification, dose-response 
and exposure assessment phases of the risk assessment. These 
first three steps in the risk assessment process include 
varying degrees of uncertainty based on the assumptions 
made.\45\
    \45\ See Science and Judgment in Risk Assessment (pp. 71-72).
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    Subsection 636(1)(D) requires that risk assessments, to the 
extent feasible, include as a component of the risk assessment 
the range and distribution of exposures and risks \46\ used in 
and generated by the risk assessment.\47\ The purpose of this 
provision is to provide the risk manager with as complete a 
picture of the risks as possible, avoiding, for example, the 
simple presentation of a single-point upper-bound exposure or 
risk estimate.
    \46\ See Risk and the Environment: Improving Regulatory Decision 
Making: ``Regulatory agencies should report a range of risk estimates 
when assessing risk and communicating it to the public. How risk 
estimates, whether derived from an inventory or not, are conveyed to 
the public, significantly affects the way citizens perceive those 
risks. Single-value risk estimates reported to the public do not 
provide an indication of the degree of uncertainty associated with the 
estimate. Such numbers do not convey the conservative nature of some 
risk estimates.'' (p. 87); see also Science and Judgment in Risk 
Assessment: ``EPA should make uncertainties explicit and present them 
as accurately and fully as is feasible and needed for risk management 
decision-making. To the greatest extent feasible, EPA should present 
quantitative, as opposed to qualitative, representations of 
uncertainty.'' (pp. 9-24) ``The committee endorses the EPA's use of 
bounding estimates, but only in screening assessments to determine 
whether further levels of analysis are necessary. For further levels of 
analysis, the committee supports EPA's development of distributions of 
exposure values based on available measurements, modeling results, or 
both.'' (pp. 10-28)
    \47\ This principle is supported by the Carnegie Commission report 
which states, ``Single-value risk estimates reported to the public do 
not provide an indication of the degree of uncertainty of risk 
associated with the estimate. Such numbers do not convey the 
conservative nature of some risk estimates.'' (p. 87). The 1995 OSTP 
report also emphasizes the importance of describing the uncertainties 
inherent in risk assessments, ``Variation in risk estimates also arises 
from choices of assumptions and methods to address and treat 
uncertainty in available scientific data. Risk assessors may develop 
different estimates of risk because they employ different (but equally 
justifiable) assumptions.'' (p. 9).
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    For exposure assessment, the distribution of exposures 
generally presents a probability or frequency distribution of 
exposures across the population for which the exposure 
assessment is being conducted. From this distribution, the risk 
manager can identify exposures at various percentiles of a 
population. The distribution of exposures should reflect real 
differences in exposure that result from different life styles, 
place of residence, age, and physiological parameters. In 
certain cases, the distribution of exposures also reflects 
uncertainty in exposure parameters (e.g., fate and transport 
parameters). In many cases, there will be sufficient exposure 
information available to generate a probability distribution, 
using probabilistic methods, such as Monte Carlo analysis.\48\ 
Risk assessors should resort to combining single-point values 
to generate estimates of unknown probability only when 
conducting screening risk assessments. Where, as may often be 
the case, there is insufficient data to generate a 
distribution, then multiple-point estimates should be 
preferred. If single-point estimates are generated, both most 
likely and high-end estimates should be presented.
    \48\ Monte Carlo simulation is a mathematical technique for 
generating a distribution of values for exposure, dose, or risk in a 
population by using mathematical models of the expected distributions 
for those parameters that are used to estimate exposure, doses, or 
risk.
    For risk assessments, the distribution of risk estimates 
relates mainly to uncertainty in the dose-response and exposure 
assessments, but also could include variability in exposure. 
The risk estimates entail a number of uncertainties, including 
applicability of animal toxicity data to humans, choice of 
model for extrapolating to low doses, and the usually small 
number of subjects in laboratory tests or epidemiologic 
studies. Many of these uncertainties are not amendable to 
representation as a distribution. In such cases, the risk 
assessor should use expert judgment to describe the qualitative 
or quantitative likelihood of various assumptions and their 
impact on the risk estimate. If distribution cannot be 
generated, the risk assessor should provide multiple risk 
estimates that reflect, for example, use of central tendency 
and high-end estimates.\49\
    \49\ See U.S. Environmental Protection Agency, Policy for Risk 
Characterization (Mar. 21, 1995): ``Information should be presented on 
the range of exposures derived from exposure scenarios and on the use 
of multiple risk descriptors (e.g., central tendency, high-end of 
individual risk, population risk, important subgroups, if known) 
consistent with the terminology in the Guidance on Risk 
Characteristics, Agency risk assessment guidelines, and program-
specific guidance.'' (p. 2).
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    Finally, this subsection states that when a covered agency 
provides a risk assessment or risk characterization for a 
proposed or final regulatory action, such assessment or 
characterization shall include a statement of any significant 
substitution risks. While recognizing that it may be difficult 
for an agency to foresee all substitution risks, the Committee 
believes it is important to make such evaluations. The 
Committee is concerned that government has not always been 
sensitive to risks caused or exacerbated by certain regulatory 
actions. One such example is the asbestos scare in the early 
1980s. Government scientists argued that asbestos exposure 
could cause thousands of deaths. Public alarm led Congress to 
pass a sweeping law that led cities and states to spend between 
$15 and $20 billion to remove asbestos from public buildings. 
But about three years later, EPA officials confirmed that 
asbestos removal had been a very costly mistake. Ripping out 
the asbestos raised the risk to the public because asbestos 
fibers become airborne during removal.\50\ Removing the 
asbestos also delayed the opening of many schools and other 
buildings.\51\
    \50\ See U.S. Environmental Protection Agency Advisory from 
Administrator William K. Reilly (Mar. 6, 1991).
    \51\ See Stephen Breyer, Breaking the Vicious Circle: Toward 
Effective Risk Regulation 12-13 (1993); Gregg Easterbrook, A Moment on 
the Earth: The Coming Age of Environmental Optimism 250-53 (1995).
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            Sec. 637. Peer review
    This section specifies that agency heads must develop a 
systematic program for independent and external peer review of 
risk assessments and cost-benefit analyses conducted for major 
rules. Central to the peer review program should be review 
panels consisting of independent experts from relevant 
scientific disciplines. Members of the peer review panel should 
be selected on the basis of their expertise in the sciences 
relevant to the regulatory decision. The panels should be 
broadly representative and balanced and, to the extent 
possible, include experts affiliated with government (but not 
the covered agency), small business, industry, academia, labor, 
agriculture, consumers, conservation organizations, and other 
public interest groups and organizations. Qualified panel 
candidates should not be excluded on the basis that they 
represent an entity that may have a potential interest in the 
outcome, provided that the potential interest is fully 
disclosed to the agency and the public.
    The agency peer review programs must ensure that reviews 
are conducted on a timely basis and that they contain balanced 
presentations of all considerations, including minority reports 
and an agency response to all significant comments. In 
addition, adequate protection must be provided to ensure that 
confidential business information and trade secrets are 
protected.
    Subsection 637(b)(1)(B) specifies that the major rule peer 
review requirement does not pertain to the authorization or 
approval of any individual substance or product. Subsection 
637(b)(2) provides that the Director of the OMB may order that 
peer review be provided for any risk assessment or cost-benefit 
analysis that is likely to have a significant impact on public 
policy decisions or would establish an important precedent.
    Subsection 637(c) requires the peer review panel to submit 
a report to the agency describing the scientific and technical 
merit of data and methods used for the risk assessment and 
cost-benefit analyses. In turn, subsection 637(d) requires the 
head of the covered agency to respond in writing to every peer 
review and to address the significant points in the review. 
Under subsection 637(e), the agency response must be made 
available to the public and be part of the administrative 
record for purposes of judicial review of any final agency 
action.\52\ Finally, subsection 637(f) exempts from the peer 
review requirements any data, method, document, or assessment, 
or any component thereof, that previously has been subjected to 
peer review.
    \52\ Peer review is a widely accepted component of risk analysis. 
As stated in the OSTP Principles in Devising Risk Policy, ``Appropriate 
scientific peer review and guidance are essential to the risk 
assessment process.'' (p. 17). The Carnegie Commission Report also 
highlights the importance of external peer review. The report states 
``A key element in setting risk-based priorities is science advice, 
both internal (within the agency) and external (through science 
advisory boards and other mechanisms). External science advisory boards 
serve a critically important function in providing regulatory agencies 
with expert advice on a range of issues.'' (p. 90).
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            Sec. 638. Guidelines, plan for assessing new information, 
                    and report
    Subsection 638(a) requires agencies to adopt guidelines to 
implement the risk assessment and risk characterization 
principles under sections 635 and 636 and the cost-benefit 
analysis requirements under section 622. Agencies are also 
required to develop a format for summarizing risk assessment 
results. Agencies must issue a report on the status of the 
guidelines no later than 12 months after the effective date of 
this section. The guidance must include information on 
technical methodologies and standards for acceptable quality of 
specific kinds of data as well as address important decisional 
factors for risk analysis.
    Subsection (b) requires that the guidelines, plan and 
report must be open to public comment. However, the guidelines 
are not required to be developed as a rule. The Committee was 
concerned that the APA rulemaking process is too rigid and 
time-consuming for the development of risk assessment 
guidelines. The guidelines must allow for flexibility to adapt 
to differing circumstances. For the same reasons, subsection 
(d) makes clear that the development, issuance, and publication 
of risk assessment and risk characterization guidelines 
developed under this section are not subject to judicial 
review. Subsection (c) requires the President to review the 
guidelines at least every 4 years.
            Sec. 639. Research and training in risk assessment
    This section requires agency heads to regularly and 
systematically evaluate risk assessment research and training 
needs and to develop a strategy and schedule for meeting those 
needs. Subsection 639(a)(1) requires the evaluation to include 
the need for research to reduce generic data gaps, to address 
modelling needs, and to validate default options, particularly 
those common to multiple risk assessments. Subsection 639(a)(2) 
also specifies that the evaluation should also identify 
research that would lead to improvements of methods to quantify 
and communicate uncertainty and variability among individuals, 
species, populations, and ecological communities. Under 
subsection (a)(3), emerging areas of research--including 
comparative risk and noncancer endpoints--should also be 
identified and described. Finally, subsection 639(a)(4) 
provides that the agency evaluations should also identify long-
term needs to adequately train individuals in risk assessment 
techniques. While the Committee believes agencies must improve 
their risk assessment research and staff capabilities, we do 
not intend to have agencies waste resources on unnecessarily 
duplicative efforts. Agencies should work cooperatively to 
improve the overall ability of the Executive Branch to conduct 
risk assessment.
            Sec. 640. Interagency coordination
    This section is designed to improve the conduct, 
application and practice of risk assessment across all relevant 
agencies. Section (a) requires the Office of Management and 
Budget, in consultation with the Office of Science and 
Technology Policy, to periodically survey the manner in which 
agencies are conducting risk assessments. Such a survey will 
allow for a determination of the scope and adequacy of risk 
assessment practices in use by the Federal government. It also 
will promote the injection of new scientific advances into the 
risk assessment practices of the Federal agencies. Subsections 
640(a)(3) and (a)(4) require OMB to establish with OSTP 
appropriate interagency mechanisms to promote coordination 
between agencies and to ensure consistent use of state-of-the-
art practices. Finally, subsection (b) requires the President 
to appoint National Peer Review Panels to submit a report to 
the President and Congress every 3 years reviewing the progress 
made by the agencies in implementing provisions of this 
chapter.
            Sec. 640a. Plan for review of risk assessments
    This subsection requires the head of each agency to 
publish, within 18 months after the effective date of this 
section, a plan to review and revise risk assessments conducted 
during the transition between enactment of the act of the 18 
month period.
            Sec. 640b. Judicial review
    The provisions in section 623 relating to judicial review 
apply to this subchapter.
            Sec. 640c. Deadlines for rulemaking
    The provisions in section 624 relating to deadlines for 
rulemaking apply to this subchapter.

Subchapter IV--Executive Oversight

    This subchapter creates a general framework for 
presidential supervision of the cost-benefit analysis 
requirements of this legislation. Presidential regulatory 
review has been in effect in one form or another for twenty 
years. Since 1981, it has been conducted in a centralized 
process by the Office of Management and Budget under Executive 
Order Nos. 12291, 12498, and, most recently, 12866.
    The Committee endorses centralized regulatory review. As it 
has become an integral part of the Federal regulatory process, 
it should be an explicit element in any regulatory reform 
legislation. The Committee is mindful that in the past, 
presidents have argued against regulatory review legislation 
because of potential inroads on presidential prerogatives. The 
Committee believes, however, that placing a regulatory review 
mandate into this legislation will help put to rest arguments 
about the fundamental nature or need for regulatory review. 
Nonetheless, respectful of separation of powers, the Committee 
has only placed into a statute a general framework of executive 
oversight, limited only by time limits for regulatory review 
and public disclosure requirements. This allows a President the 
flexibility to craft the details of any regulatory review 
scheme, consistent with the legislative substantive cost-
benefit analysis requirements.
    The subchapter applies the legislation's definitions to 
this subchapter (sec. 641); authorizes the establishment of 
regulatory oversight procedures (sec. 642); provides procedures 
for the promulgation of the oversight rules and establishes 
deadlines for regulatory review (sec. 643); delegates primary 
oversight authority to the Director of OMB (sec. 644); requires 
public disclosure of regulatory review-related information 
(sec. 645); and prohibits judicial review of any executive 
oversight decisions (sec. 646).
            Sec. 641. Definition
    The legislation's definitions in sections 551 and 621 apply 
to the executive oversight provisions created by this 
subchapter.
            Sec. 642. Procedures
    The Director of OMB or other designated officer to whom 
authority is delegated under section 644 is authorized to: (1) 
establish procedures for agency compliance with the 
requirements of the subchapters II and III, i.e., cost-benefit 
analysis, risk assessment, peer review, and review of current 
rules; and (2) monitor, review, and ensure agency 
implementation of such procedures. The Committee expects that 
OMB will continue to operate its regulatory review process, as 
currently established by E.O. 12866, with only minor changes to 
match the requirements of this legislation. Again, the 
Committee intends to give the President Maximum flexibility to 
structure the regulatory oversight process, consistent with the 
provisions of this legislation.
            Sec. 643. Promulgation and adoption
    To ensure public accountability, and to address some of the 
complaints about secrecy and special interest access to 
decisionmakers, the legislation requires that the regulatory 
oversight procedures established pursuant to section 642 shall 
be implemented after opportunity for public comment.
    Assuming that those procedures include a regulatory review 
component, though not mandating it out of deference to the 
prerogatives of the Chief Executive, the time for such review 
shall not exceed 60 days, although it may be extended for good 
cause for an additional 30 days. To prevent the use of 
regulatory review for delay, the legislation requires that any 
notice of extension be explained and placed in the rulemaking 
agency's rulemaking file.
            Sec. 644. Delegation of authority
    The Committee expects that the President will delegate the 
authority granted by this subchapter to the Director of the 
Office of Management and Budget. OMB possesses sufficient 
resources and clout to perform the function, and the Committee 
believes OMB should oversee the regulatory process. However, 
recognizing the prerogatives of the President, the Committee 
authorizes the delegation of that executive oversight function 
to an officer within the Executive Office of the President. The 
legislation only requires that that officer be appointed 
subject to the advice and consent of the Senate. This ensures 
accountability to Congress.
            Sec. 645. Public disclosure of information
    To provide fair and equal opportunity for the public to 
participate in the regulatory process, the legislation 
establishes requirements for public disclosure of regulatory 
review-related information. The provisions in section 645 
parallel those found in section 626, regarding public 
participation and accountability in agency rulemaking 
decisions.
    The legislation requires that the Director, or other 
official designated to perform executive oversight of the 
regulatory process, establish procedures to provide public and 
agency access to information concerning regulatory review 
actions. The Committee intends that ``regulatory review'' be 
understood broadly to include any review of agency rulemaking 
that is conducted pursuant to the direction of the President or 
his designee. Given the development and presumed continued use 
of a centralized process for the review of Executive Branch 
regulatory decisions, the term is not meant to apply to ad hoc 
or informal review or to intra-agency review. It is meant to 
apply to any ongoing, organized or systematic inter-agency 
process of presidentially overseen regulatory review. The 
Committee also intends that the term ``review action'' be 
understood to include any review decision made by a regulatory 
reviewer. This includes not just final review decisions, but 
any decision, recommendation, comment, suggestion, or direction 
that the reviewer makes and is in any way communicated to the 
rulemaking agency.
    The public disclosure procedures that are to be established 
pursuant to this section must include at least three elements. 
First, they must provide disclosure to the public on an ongoing 
basis of information regarding the status of regulatory actions 
undergoing review. This means that the public should be able to 
learn from the regulatory reviewer what agency regulatory 
actions are under review. The Committee assumes that this would 
entail the production of a single monthly listing of all agency 
regulatory actions under review--as OMB currently prepares 
pursuant to E.O. 12866. In this way, the legislation would 
merely create a statutory right to information now provided 
under presidential executive order.
    Second, no later than the date of publication of, or other 
public notice about, a regulatory action the public must have 
access to: (A) all written communications, including drafts of 
all proposals and associated analyses, between the reviewer and 
the regulatory agency; (B) all written communications between 
the reviewer and any person not employed by the Executive 
Branch of the Federal Government relating to the substance of a 
regulatory action; (C) a record of all oral communications 
relating to the substance of a regulatory action between the 
reviewer and any person not employed by the Executive Branch of 
the Federal Government; and (D) a written explanation of any 
review action and the date of such action. Again, the Committee 
expects that this requirement largely will entail the 
continuation of the current OMB practice of maintaining 
regulatory review files in a public reading room.
    Third, as a counterpart to public disclosure of regulatory 
review information, a regulatory reviewer must disclose 
information to the rulemaking agency to insure full and 
complete consideration of all information relevant to a 
rulemaking decision. Accordingly, the reviewer is required to 
provide the rulemaking agency, on a timely basis: (A) all 
written communications between the reviewer and any person who 
is not employed by the Executive Branch of the Federal 
Government; (B) a description of oral communications, and an 
invitation to participate in meetings, relating to the 
substance of a regulatory action between the reviewer and any 
person not employed by the Executive Branch of the Federal 
Government; and (C) a written explanation of any review action. 
By ``explanation,'' the Committee means a description that 
should include, but is not limited to a discussion of the ways 
in which the review action might lead to a provision or 
proposal different from that proposed by the rulemaking agency; 
the analytical, scientific, technical, or statistical reasons 
for the review action; and the basis for and findings of the 
review action in relation to the statutory mission underlying 
the proposed rulemaking action.
            Sec. 646. Judicial review
    The legislation clearly and unequivocally states that no 
exercise of authority granted under this subchapter by the 
Director, the President, or by an officer to whom such 
authority has been delegated under section 644 shall be subject 
to judicial review in any manner.
             section 3(b). regulatory flexibility analysis

    The Regulatory Flexibility Act, currently codified as 
Chapter 6, is renumbered by section 3(d) of this legislation to 
be Chapter 6, Subchapter I, section 611 of title 5, United 
States Code. It is also amended to include new provisions on 
judicial review.
            Sec. 611. Judicial review
    Under the Regulatory Flexibility Act, agencies are required 
to certify that a rule would not have a significant economic 
impact on a substantial number of small entities. They must 
prepare a regulatory flexibility analysis that provides 
alternatives that would accomplish the stated objectives and 
that would minimize any significant economic impact.
    This section allows small entities to seek judicial review 
of an agency's certification or analysis for regulatory 
flexibility, giving formal enforcement to this provision. Small 
businesses have up to one year from the effective date of a 
rule to file an action if they disagree with an agency's 
findings. In the case in which a law requires an action 
challenging a final regulation to be commenced before the 
expiration of the one-year period, the lesser period will apply 
to a petition.
    There are two avenues that a court can take in making a 
determination that the agency must revisit a regulatory 
flexibility analysis: (1) if an agency certifies that a rule 
would not have a significant economic impact, the court may 
order the agency to prepare a final regulatory flexibility 
analysis if it determines that the certification was arbitrary, 
capricious, an abuse of discretion, or otherwise not in 
accordance with the law; or (2) the court may determine that 
the agency did not comply with the requirements of section 604 
(final regulatory flexibility analysis), and therefore, it may 
order the agency to take corrective action to comply with those 
requirements.
    If, after 90 days, the agency has not taken corrective 
action or performed the required analysis, the court may stay 
the rule or grant other relief. In making any determination or 
granting any relief, the court shall take due account of the 
rule of prejudicial error.
    Judicial review of any regulatory flexibility analysis 
entails review of the whole record of agency action.
    Nothing in this section bars judicial review of any other 
impact statement or similar analysis required by any other law 
if judicial review of such statement or analysis is otherwise 
provided by law.
    The effective date for the judicial review section shall 
only apply to final agency rules issued after the effective 
date of the legislation. That is, judicial review of regulatory 
flexibility analysis is only prospective, not retrospective.
    Nothing in this legislation shall limit the President's 
authority and responsibility that the President otherwise 
possesses under the Constitution and other laws of the United 
States with respect to regulatory policies, procedures, and 
programs of departments, agencies, and offices.

            section 3(d) technical and conforming amendments

    Section 3(d) provides the technical and conforming 
amendments to Part I, Chapter 6, of title 5, United States 
Code. Up to this point, Chapter 6 consisted of regulatory 
flexibility analysis. With this legislation, Chapter 6 is 
substantially amended to create Subchapter I, which includes 
the regulatory flexibility analysis with additional language on 
judicial review of the Regulatory Flexibility Act. It also 
creates three new subchapters: Subchapter II--Analysis of 
Agency Rules; Subchapter III--Risk Assessments; and Subchapter 
IV--Executive Oversight.

                    section 4. congressional review

    As the number and complexity of federal statutory programs 
has increased over the last fifty years, Congress has come to 
depend more and more upon Executive Branch agencies to fill out 
the details of the programs it enacts. As complex as many of 
the statutory schemes passed by Congress are, the implementing 
regulations are often more complex by several orders of 
magnitude. The delegation of legislative rulemaking authority 
to Executive Branch agencies has been upheld by the courts, 
unless Congress has failed to establish sufficient standards to 
guide agency action. See, e.g., Panama Refining Co. v. Ryan, 
293 U.S. 388 (1935). However, as more and more of Congress' 
legislative functions have been delegated to federal regulatory 
agencies, many have complained that Congress has effectively 
abdicated its constitutional role as the national legislature 
in allowing federal agencies so much latitude in implementing 
and interpreting congressional enactments.
    In many cases this criticism is unjustified. However, there 
are instances where the criticism is well founded. Our 
constitutional scheme creates a delicate balance between the 
appropriate roles of the Congress in enacting laws, and the 
Executive Branch in implementing those laws. It must not be 
forgotten that federal regulations have the force and effect of 
law only because Congress has delegated legislative rulemaking 
authority to Executive agencies. Section 4 of S. 291 will help 
to redress the balance, reclaiming for Congress some of its 
policymaking authority, without at the same time requiring 
Congress to become a super regulatory agency.
    Section 4 of this legislation establishes a government-wide 
congressional review mechanism for all major rules. This allows 
Congress the opportunity to review every major rule before it 
takes effect and to disapprove any rule to which Congress 
objects. Congress may find a rule to be too burdensome, 
excessive, inappropriate or duplicative. The bill uses the 
mechanism of a joint resolution of disapproval which requires 
passage by both houses of Congress and the President (or veto 
by the President and a two-thirds' override by Congress) to be 
effective. In other words, enactment of a joint resolution of 
disapproval is the same as enactment of a law. However, the 
bill establishes expedited procedures for consideration of a 
joint resolution of disapproval relating to a major rule for 
the 45 day period after the rule is published as final but 
before it takes effect. That is the unique and all-important 
feature of this provision.
    Congress has considered various proposals for reviewing 
rules before they take effect for almost twenty years. Use of a 
simple (one-house), concurrent (two-house), or joint (two 
houses plus the President) resolution are among the options 
that have been debated and in some cases previously implemented 
on a limited basis. In INS v. Chadha, 462 U.S. 919 (1983), the 
Supreme court struck down as unconstitutional any procedure 
where executive action could be overturned by less than the 
full process required under the Constitution to make laws--that 
is, approval by both houses of Congress and presentment to the 
President. That narrowed Congress's options to use of a joint 
resolution of disapproval. The one-house or two-house 
legislative veto (as procedures involving simple and concurrent 
resolutions were previously called), was thus voided.
    Because Congress often is unable to anticipate the numerous 
situations to which the laws it passes must apply, Executive 
Branch agencies sometimes develop regulatory schemes at odds 
with congressional expectations. Moreover, during the time 
lapse between passage of legislation and its implementation, 
the nature of the problem addressed, and its proper solution, 
can change. Rules can be surprisingly different from the 
expectations of Congress or the public. This makes 
congressional review of rules an important component of 
regulatory reform. Congressional review gives the public the 
opportunity to call the attention of political accountable, 
elected officials to concerns about proposed rules. If these 
concerns are sufficiently serious, Congress can stop the rule 
before any damage is done.
    In this section, Part I of title 5, United States Code, is 
amended to add a new chapter, Chapter 8, congressional review 
of agency rulemaking. This provision establishes a 45 day 
period after a major rule is published as final during which 
Congress, by joint resolution, can disapprove the rule using an 
expedited procedure.
    Section 801(a) limits the application of the congressional 
review process to major rules as defined in section 621(4) and 
as determined under section 622 of this bill. This includes 
rules determined to be major because of the $100 million 
economic impact and rules determined to be major because of the 
other factors identified in this bill for that purpose.
    Section 801(b) requires that when a major rule is published 
as final, the rulemaking agency must submit to Congress a copy 
of the rule, the statement of basis and purpose for the rule 
and the proposed effective date of the rule. The rule may not 
take effect: 1) for 45 days from the date on which Congress 
receives the rule or the date on which the rule is actually 
published in the Federal Register, whichever is later; or 2) if 
the President vetoes a joint resolution of disapproval with 
respect to the rule during the 45 day period, not until the 
earlier of the date on which one house of Congress fails to 
override the veto or 30 days expires from the date of the veto.
    Section 801(c) states that a major rule shall not take 
effect if a joint resolution of disapproval is enacted into 
law.
    Section 801(d) provides that a major rule that would 
otherwise not be able to take effect because of the 
requirements of this section may take effect if the President 
determines in writing that the rule is necessary because of an 
imminent threat to health or safety or other emergency; 
necessary for the enforcement of criminal laws; necessary for 
national security. The 45 day period for the expedited 
consideration of a joint resolution of disapproval would still 
apply, however.
    Section 801(e) provides that major rules promulgated during 
the period 60 days before Congress adjourns and the date on 
which the succeeding Congress convenes shall be treated for 
purposes of this section as though they were published as final 
on the date the succeeding Congress convenes. Such rule, 
however, shall take effect as otherwise provided by law.
    Section 801(f) provides that a major rule that is 
disapproved by enactment of a joint resolution shall be treated 
as though it has never taken effect.
    Section 801(g) states that the failure of Congress to enact 
a joint resolution of disapproval should not be used by a court 
or agency to infer any intent on the part of Congress with 
respect to the rule.
    Section 801(h) provides that a rule shall cease to be 
enforceable against any person if the rulemaking agency fails 
to submit the rule to Congress as required by this section.
    Section 801(i) provides the exact language for a joint 
resolution of disapproval under the terms of this section. It 
requires the joint resolutions be referred to the appropriate 
committee of jurisdiction and prohibits such committee from 
reporting the resolution before eight days have elapsed from 
the submission of the rule to Congress or its publication in 
the Federal Register. It is intended that only one committee in 
each house receive a joint resolution of disapproval. It is 
also the intent of the Committee that the committee of 
jurisdiction be the committee with primary jurisdiction over 
the statute under which the rule is being issued.
    This subsection further provides that if the committee to 
which the joint resolution is referred has not reported such 
resolution by the end of 20 calendar days after the submission 
or publication date, then the committee can be discharged by a 
petition signed by 30 Senators. Upon discharge, the resolution 
will be placed on the Senate calendar. Although this bill does 
not establish such procedures for consideration by the House 
committee, it is anticipated that the House will include 
similar procedures when the bill is considered in conference.
    This subsection establishes very strict procedures for 
consideration of the joint resolution on the floor of the 
Senate. Any senator may move to proceed to the consideration of 
the resolution at any time after it has been placed on the 
calendar and all points of order against the resolution or 
against consideration of the resolution are waived. The motion 
to proceed is privileged and not debatable or amendable. Once a 
motion to proceed to the consideration of the joint resolution 
is agreed to, the resolution shall remain the unfinished 
business of the Senate until it is disposed of.
    Debate on the resolution itself is limited to no more than 
10 hours, equally divided between proponents and opponents. A 
motion to further limit debate shall be in order and is not 
debatable. Amendments and motions to postpone, proceed to the 
consideration of other business, or to recommit the resolution 
are not in order, nor is a motion to reconsider the vote on the 
resolution. The vote on final passage shall immediately follow 
the debate on the resolution and a single quorum call. All 
appeals from the decisions of the Chair during these procedures 
shall be decided without debate. Similar expedited procedures 
are expected to be developed and added by the House during the 
conference on this legislation.
    If the Senate receives a resolution from the House before 
the same resolution is passed in the Senate, then the House 
resolution is not to be referred to committee; the procedure in 
the Senate applies to the Senate resolution, but when the vote 
on final passage occurs, it is to be on the resolution of the 
House.
    These procedures are to be enacted as part of the 
rulemaking power of the Senate, and, when added, the House of 
Representatives.
    Subsection 801(j) states unequivocally that none of the 
provisions or requirements relating to congressional review of 
rules is subject to judicial review in any manner.

                     section 5. studies and reports

    This section directs the Administrative Conference of the 
United States to conduct two major studies. The first study 
relates to the operation of the risk assessment requirements of 
subchapter III. ACUS is required to submit an annual report to 
the Congress on the findings of the study.
    The second study, due no later than December 31, 1996, 
relates to the operation of chapters 5 and 6 of title 5, United 
States Code (commonly referred to as the Administrative 
Procedure Act), as amended by section 3 of this legislation; 
ACUS must submit a report to the Congress on the findings of 
the study, including proposals for revision, if any.
    These studies will address how subchapter III and other 
provisions of the APA, as amended, are actually being 
implemented (or are likely to be implemented) by regulatory 
agencies, the courts, and other participants in the regulatory 
process. These studies also will consider how the method of 
implementation furthers the objectives of this legislation and 
the public interest. Where necessary, the studies will provide 
recommendations on how to improve implementation, as well as 
proposed statutory amendments. Finally, the Committee expects 
that these studies will cover other sections of the APA and 
related provisions of law affected by the current legislation.
    For example, it will be critically important to determine 
the effect of this legislation on the agencies themselves--to 
determine whether agencies have the capability to carry out the 
new requirements, and how the new requirements will affect the 
agencies' ability to fulfill their other statutory obligations. 
Will agencies have the staff, expertise, and time to do what 
this legislation requires? Will the development of new 
regulations, and the review and reform of existing regulations, 
be unduly delayed by the new requirements? Are the new 
requirements themselves cost-effective or overly burdensome--
e.g., would many regulations come out the same even if the new 
analyses had not been required? The Committee expects the 
studies under section 5 to help answer such key questions.
    ACUS, which will conduct the studies under section 5, is an 
independent, non-partisan agency, that includes a diverse group 
of leading regulatory experts and practitioners from agencies, 
the judiciary, business, academia, and other sectors. Because 
ACUS is comprised of respected experts and practitioners 
representing a wide range of perspectives and interests, and 
has a record of developing unbiased, practical solutions to 
regulatory problems, the Committee believes that this agency is 
well suited to producing the studies and recommendations needed 
to fulfill the intent of section 5.

                    section 6. risk-based priorities

    The Committee believes that setting risk-based priorities 
offers the best opportunity to allocate rationally the 
resources of both the government and the private sector to 
provide protections for human health, safety and the 
environment. With the tool of comparative risk analysis, we can 
make our health, safety and environmental protection dollars go 
farther and provide greater overall protection, saving even 
more lives than the current system. As the blue-ribbon Carnegie 
Commission panel noted in its report Risk and the Environment: 
Improving Regulatory Decision Making, ``The economic burden of 
regulation is so great and the time and money available to 
address the many genuine environmental and health threats so 
limited, that hard resource allocation choices are 
imperative.'' (p. 118).
    The 1995 National Academy of Public Administration (NAPA) 
Report to Congress, entitled Setting Priorities, Getting 
Results, recommends that the Environmental Protection Agency 
use comparative risk analysis to identify priorities and use 
the budget process to allocate resources to the agency's 
priorities. The NAPA study commends EPA for having pioneered 
risk prioritization studies and comparative risk analyses. 
However, the report states that during the 1995 budgetary 
process, EPA did not push for shifts in resources to the 
higher-priority programs. The report recommends that Congress 
``could enact specific legislation that would require risk-
ranking reports every two to three years. Congress should use 
the information when it passes environmental statutes or 
reviews EPA's budget proposals.'' (p. 49).
    To prioritize resource use based on risk, the government 
must systematically evaluate the threats to health, safety and 
environment that its programs address and determine which of 
those are the most serious and most amenable to cost-effective 
amelioration. Section 6 of this legislation requires each 
designated agency to engage in this evaluation among and within 
the programs it administers. To better enable the President and 
Congress to prioritize resources agencies, this section also 
requires that the risks addressed by all of the designated 
agencies be evaluated and compared.
    The purpose of these analyses is not to dictate how the 
government uses its resources, but to provide Congress and the 
President with the information to make more informed choices. 
We anticipate that, among other things, these analyses will be 
useful for identifying unaddressed sources of risk, risks borne 
disproportionately by a segment of the population and research 
needs. This information also will foster a clearer reasoning 
for regulating in one area over another or allocating resources 
to one program over another. Finally, conducted in the public 
view, these analyses are likely to enhance public debate about 
these choices and ultimately create greater public confidence 
in government policy.
    Comparative risk analysis is not purely a scientific 
undertaking. The Committee believes that, while hard data will 
form the underpinnings of the analysis, public values must also 
be incorporated when assessing the relative seriousness of the 
risks and when setting priorities. After all, scientific data 
alone cannot tell us which of the following is the greater risk 
or which should be addressed first: neurological damage, heart 
disease, or birth defects; a plane crash or cancer. The 
comparative risk analysis should be conducted in such a way 
that public values are ascertained and considered. This will 
require including public input in the comparative risk 
analysis. Nevertheless, when the analysis is completed, it 
should be clear to the public and policy makers which part of 
the risk comparison reflects science and which part reflects 
values.
    To encourage the use of risk-based priorities, the 
Committee is requiring not only that each agency set risk-based 
priorities for its programs, but also for the OMB to commission 
a report with an accredited scientific body to study the 
methodologies of comparative risk analysis and to conduct such 
an analysis to compare risks across agencies.
    This section includes: (a) the purpose of this section; (b) 
definitions; (c) department and agency goals; (d) comparative 
risk analysis; (e) reports and recommendations to Congress; and 
(f) a savings provision and judicial review.
    The purposes of this section are to: (1) encourage Federal 
agencies engaged in regulating risks to human health, safety, 
and the environment to achieve the greatest risk reduction at 
the least cost practical; (2) promote the coordination of 
policies and programs to reduce risks to human health, safety, 
and the environment; and (3) promote open communication among 
Federal agencies, the public, the President, and Congress 
regarding environmental, health, and safety risks, and the 
prevention and management of those risks. The importance of 
such a risk-based approach has been advocated in numerous 
recent studies and publications\53\ and in testimony before the 
Governmental Affairs Committee.\54\
    \53\ See, e.g., Carnegie Commission on Science, Technology, and 
Government, Risk and Environment: Improving Regulatory Decisionmaking, 
Washington, D.C. (June 1993); Stephen Breyer, Breaking the Vicious 
Circle: Toward Effective Risk Regulation, Harv. Univ. Press, Cambridge, 
MA (1993); Harvard Center for Risk Analysis, Reform of Risk Regulation: 
Achieving More Protection at Less Cost (Mar. 1995); The Business 
Roundtable, Toward Smarter Regulation (1994).
    \54\ See March 8, 1995 testimony of Frederick L. Webber, President 
and Chief Executive Officer, Chemical Manufacturers Association 
(quoting Testimony of Stephen Breyer before the Senate Committee on 
Energy and Natural Resources, November 9, 1993, at p. 2 ``Our 
regulatory system badly prioritizes the health and environmental risks 
we face.''))
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    Subsection (b) provides definitions for the purpose of this 
section:
    (1) ``Comparative risk analysis'' means a process to 
systematically estimate, compare, and rank the size and 
severity of risks to provide a common basis for evaluating 
strategies for reducing or preventing those risks.\55\ This 
analysis evaluates risks across agencies and ranks dissimilar 
risks--environmental, health, and safety.
    \55\ This definition is similar to one offered in the OSTP report 
Science, Risk, and Public Policy. The report defines policy trade-offs, 
and stakeholder concerns. The goal is to conduct a broad examination of 
governmental policies and expenditures to reduce risk.'' (p. 11).
---------------------------------------------------------------------------
    (2) The term ``covered agency'' includes the same 
regulatory agencies that are covered under the risk assessment 
requirements in subchapter III: (A) the Environmental 
Protection Agency; (B) the Department of Labor; (C) the 
Department of Transportation; (D) the Food and Drug 
Administration; (E) the Department of Energy; (F) the 
Department of the Interior; (G) the Department of Agriculture; 
(H) the Consumer Product Safety Commission; (I) the National 
Oceanic and Atmospheric Administration; (J) the United States 
Army Corps of Engineers; and (K) the Nuclear Regulatory 
Commission.
    (3) ``Effect'' means a deleterious change in the condition 
of: (A) a human or other living thing (including, but not 
limited to, death, cancer, or other chronic illness, decreased 
reproductive capacity, or disfigurement); or (B) an inanimate 
thing important to human welfare (including destruction, 
degeneration, the loss of intended function, and increased 
costs for maintenance).
    (4) ``Irreversibility'' means the extent to which a return 
to conditions before the occurrence of an effect are either 
very slow or will never occur.
    (5) ``Likelihood'' means the estimated probability that an 
effect will occur.
    (6) ``Magnitude'' means the number of individuals or the 
quantity of ecological resources or other resources that 
contribute to human welfare that are affected by exposure to a 
stressor.
    (7) ``Seriousness'' means the intensity of effect, the 
likelihood, the irreversibility, and the magnitude.
    Subsection (c) specifies that the covered agencies should 
set priorities and use resources to focus on those risks 
determined to be most serious and that can be addressed in a 
cost-effective manner while achieving the greatest overall net 
reduction in risk. In identifying the greatest risks, agencies 
should consider the likelihood, irreversibility of the effect, 
and the scope and magnitude of effect. By identifying both the 
incremental costs of remedial action and the incremental 
benefits of risk reduction as factors to prioritize resources, 
the Committee intends that the agencies not devote all their 
resources to a few risks that, while the most serious, may be 
extremely expensive to reduce. Rather, agencies should balance 
both factors and look for opportunities to achieve the greatest 
protection of human health, safety and the environment with the 
least resources. Finally, when evaluating cost-effectiveness 
the agencies should consider both the public resources required 
to address the risk.
    The priorities identified must be incorporated into the 
agency budget, strategic planning, regulatory agenda, 
enforcement, and, as appropriate, research activities. When 
submitting its budget request to Congress each agency must 
describe the risk prioritization results and explicitly 
identify how the requested budget and regulatory agenda reflect 
those priorities.
    Subsection (d) requires the Director of the Office of 
Management and Budget to: (1) have an accredited scientific 
body conduct a comparative risk analysis of risks regulated 
across all agencies; and (2) have an accredited scientific body 
conduct a study of the methodologies for using comparative risk 
to rank dissimilar human health, safety, and environmental 
risks.\56\ The comparative risk analysis is to be conducted 
through an open process, utilizing expertise in toxicology, 
biology, engineering, medicine, industrial hygiene and 
environmental effects. The Committee also recognizes that 
experts in the relevant social sciences may be needed to help 
incorporate public values into the process. The analysis should 
be conducted consistent with the risk assessment and 
characterization principles in sections 635 and 636 of this 
title. The methodologies and scientific determinations made in 
the analysis are to be subjected to external peer review and 
made available for public comment. The results of the 
comparative risk analysis are to be presented in a manner that 
distinguishes between the scientific conclusions and any policy 
or value judgments embodied in the comparisons.\57\
    \56\ The need for a national comparative risk analysis was one of 
the chief recommendations of the Report of the Harvard Group on Risk 
Management Reform entitled Reform of Risk Regulation: Achieving More 
Protection at Less Cost (Mar. 1995). The Harvard report states that the 
purpose of such an analysis would be ``to learn how diverse risks 
should be compared, how ordinary citizens should participate in risk 
ranking, what inherent limitations to the process might be, and how 
guidelines can be developed to govern a broad-based process of risk-
based priority setting in the federal government.'' (p. 27).
    \57\ This provision is supported by the 1993 Carnegie Commission 
Risk and the Environment report. The report recommends that agencies 
``experiment with different mechanisms for integrating societal values 
into the process of setting risk-based regulatory priorities.'' (p. 
89). The report authors believe that value choices should not be made 
covertly by unaccountable ``experts.'' The report offers that ``One 
possibility is for the experts to make explicit, to the extent 
possible, all value judgments and their relative weights in the ranking 
process.'' (p. 89).
    The 1995 NAPA report supports the Carnegie Commission 
recommendation. The NAPA report states: ``Because comparing risks is a 
value-laden process as well as a technical challenge, EPA should 
conduct its comparative risk analyses as policy exercises with the 
active engagement of the public or its representatives. Doing so would 
provide legitimate results that would become a base for agency 
priorities and budget proposals.'' (p. 49).
    Subsection 6(d)(3) requires that the methodological study 
and the comparative risk analysis be completed and a report 
submitted to Congress and the President no later than 3 years 
after the date of the enactment of the Act. The comparative 
risk analysis must be reviewed and revised at least every 5 
years thereafter for a minimum of 15 years following the 
release of the first analysis.
    Because comparative risk analysis is still a relatively new 
science, particularly when used to compare dissimilar risks, 
subsection 6(d)(4) requires that, even while the comparative 
risk analysis is being conducted, a study be done to improve 
the methods and use of comparative risk analysis. The study 
should be sufficient to provide the President and agency heads 
guidance in allocating resources across agencies and among 
programs to achieve the greatest degree of risk prevention and 
reduction. The Committee anticipates that this study will draw 
upon the experiences of the first comparative risk analysis 
conducted under this legislation, as well as the analyses 
already conducted by numerous states.
    Subsection 6(e) requires each covered agency to submit a 
report to Congress and the President no later than 24 months 
after the date of enactment of the Act, and every 24 months 
thereafter. The reports should describe how the agencies have 
complied with subsection (c) and present the reasons for any 
departure from the requirement to establish priorities. The 
reports should identify the obstacles to prioritizing their 
activities and resources in accordance with the priorities 
identified. At this time, each agency should also recommend 
those legislative changes to programs or statutory deadlines 
needed to assist the agency in implementing those priorities.
    The Committee views this report back to Congress as the 
most critical element in readjusting the Federal government's 
priorities so that we can truly achieve the greatest degree of 
protection for health, safety and the environment with our 
resources. Congress needs this information to make the 
necessary course correction changes to make this possible.

                    section 7. regulatory accounting

    The Committee is concerned that too little attention has 
been paid to the cumulative costs of regulation. Unlike tax-
and-spend programs, regulatory programs impose costs that are 
not accounted for in government budget figures. There is an 
illusion that these costs end with the businesses and 
governments directly regulated. But inevitably, these costs are 
passed on to the American consumer and taxpayer in one form or 
another, including higher prices, lower wages, higher taxes and 
reduced government services.
    Although the cumulative regulatory burden is enormous, 
there currently is no process for establishing priorities and 
forcing tradeoffs among different regulations and program 
goals. Government spending programs face some discipline 
through the budgetary process because, first, costs are 
documented and, second, spending limits crate an incentive to 
set priorities and spend tax dollars in a cost-effective way. 
However, there is no formal process for tracking regulatory 
costs or budgeting those costs. As a result, government is too 
insensitive to the cumulative costs of regulation and the need 
to set rational and attainable priorities.\58\
    \58\ See The Business Roundtable, Toward Smarter Regulation (1994).
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    A number of scholars and government officials have been 
interested in working toward the concept of a ``regulatory 
budget'' to address these concerns. Each agency could be 
limited to a fixed level of regulatory costs that it could 
impose on the economy each year. If an agency reached its 
regulatory budget ceiling, the agency could not impose 
additional regulations until it repealed or modified existing 
regulations to offset the cost increase from the new 
regulations. Alternatively, the government could offset the new 
cost from another agency.
    However, the regulatory budget is unworkable today. Simply 
put, there are not adequate data of the costs and benefits of 
regulation to construct a regulatory budget. That problem could 
be overcome by this section because it will require agencies to 
compile the costs and benefits of regulation. However, 
questions would remain about the propriety of using overarching 
ceilings to limits specific actions to implement specific 
statutory requirements.
    While a regulatory budget is unworkable and open to debate, 
the Committee decided to establish a regulatory accounting 
system to track the cumulative costs and benefits of 
regulation. In approving section 7, the Committee does not pass 
judgment on the regulatory budget. The Committee believes that 
information on the annual costs and benefits of Federal 
regulatory programs will be useful in itself for agencies to 
evaluate their programs and set more rational priorities to 
achieve the greatest benefits at the least cost. It also will 
make government more sensitive to the cumulative regulatory 
burden--estimated by Professor Tom Hopkins to cost the average 
American household over $6,000 per year. Over time, the 
information generated from the regulatory accounting system 
could make a true regulatory budget more technically feasible.
    Section 7 includes provisions for: (a) definitions; (b) 
accounting statement; (c) associated report to Congress; (d) 
guidance from the Office of Management and Budget; (e) 
recommendations from the Congressional Budget Office; and (f) 
judicial review.
    Subsection (a) outlines the following definitions:
    (1) The term ``agency'' means any executive department, 
military department, Government corporation, Government 
controlled corporation, or other establishment in the Executive 
Branch of the Government (including the Executive Office of the 
President), or any independent regulatory agency, but shall not 
include: (A) the General Accounting Office; (b) the Federal 
Election Commission; (c) the governments of the District of 
Columbia and of the territories and possessions of the United 
States, and their various subdivisions; or (D) government-owned 
contractor-operated facilities, including laboratories engaged 
in national defense research and production activities. This 
broad definition reflects the Committee's intent to require an 
accounting of the wide panoply of regulatory costs and 
benefits.
    (2) The term ``regulation'' means an agency statement of 
general applicability and future effect designed to implement, 
interpret, or prescribe law or policy or describing the 
procedures or practice requirements of an agency. The term 
shall not include: (A) administrative actions governed by 
sections 556 and 557 of title 5, United States Code; (B) 
regulations issued with respect to a military or foreign 
affairs function of the United Stats; or (C) regulations 
related to agency organization, management, or personnel. This 
definition of ``regulation'' differs from that used in the rest 
of this legislation in a number of important respects, 
including the following: the regulatory accounting provision 
covers both major and non-major rules; it includes tax rules 
and other rules that create transfer costs; and it includes 
banking rules, as well as FCC and Federal Election Commission 
rules.
    In subsection (b), the President is required to prepare and 
submit to Congress every 2 years an accounting statement that 
estimates the annual costs of Federal regulatory programs and 
corresponding benefits in accordance with this subsection. 
Costs and benefits are not specifically defined, and should 
track the broad definitions in section 621.
    The accounting statement should include the following 
groups of costs: (I) the annual expenditure of national 
economic resources for each regulatory program, including at 
least the following categories: private sector costs; Federal 
sector costs; and State and local government costs; and (II) 
such other quantitative and qualitative measures of costs as 
the President considers appropriate.
    The accounting statement also should provide a sufficient 
picture of the many benefits of regulation. Recognizing the 
inherent difficulty of quantifying and categorizing many 
benefits, the legislation provides only very general guidance 
on how to account for benefits. The Committee expects that the 
agencies will exercise reasonable discretion in implementing 
this requirement. The object is not to unduly burden the 
agencies with accounting procedures. The goal is to provide the 
President, Congress and the public with a statement of program-
specific and cumulative regulatory benefits to all for informed 
debate on where to set our regulatory priorities in light of 
limited resources and other important priorities.
    The estimated benefits should include such quantitative and 
qualitative measures of benefits as the President considers 
appropriate. Any estimates of benefits concerning reduction in 
human health, safety, or environmental risks shall present the 
most plausible level of risk practical, along with a statement 
of the reasonable degree of scientific certainty. In short, 
agencies should attempt to present a clear picture of the risk 
reduction benefits of social regulations.
    Each accounting statement shall cover, at a minimum, the 5 
fiscal years beginning on October 1 of the year in which the 
report is submitted and may cover any fiscal year preceding 
such fiscal years for purpose of revising previous estimates.
    The President shall provide notice and opportunity for 
comment for each accounting statement. The President may 
delegate to an agency the requirement to provide notice and 
opportunity to comment for the portion of the accounting 
statement relating to that agency.
    The President shall propose the first accounting statement 
under this subsection no later than 2 years after the effective 
date of this Act and shall issue the first accounting statement 
in final form no later than 3 years after such effective date. 
Such statement shall cover, at a minimum, each of the fiscal 
years beginning after the effective date of this Act.
    At the same time as the President submits an accounting 
statement, OMB shall submit to Congress a report associated 
with the accounting statement. The associated report shall 
contain, in accordance with this subsection: (A) analyses of 
impacts; and (B) recommendations for reform. These 
recommendations should be sensitive to incremental costs and 
benefits of regulations or programs, the cumulative regulatory 
burden, and the importance of other national priorities. The 
associated report must address a number of issues. First, the 
report should examine the cumulative economic and social impact 
on the economy of Federal regulatory programs covered in the 
accounting statement. Factors to be considered in the report 
shall include impacts on the following: (i) The ability of 
State and local governments to provide essential services, 
including police, fire protection, and education; (ii) Small 
business; (iii) Productivity; (iv) Wages; (v) Economic growth; 
(vi) Technological innovation; (vii) Consumer prices for goods 
and services; (viii) Such other factors considered appropriate 
by the President.
    Again, the Committee does not intend to bog down the 
agencies in highly prescriptive analytical requirements. The 
Committee does not intend to mandate that each item in the 
report be the product of extremely expensive econometric 
models, if the benefit of more detailed information would not 
warrant the resources required. On the other hand, great 
advances in economic modelling have been made, and these models 
should be used where they would provide valuable information on 
the costs or benefits of regulation. The underlying goal is to 
promote better informed decisionmaking and to make government 
more sensitive to the cumulative regulatory burden. The 
Committee expects that the agencies and OMB will exercise a 
rule of reason in fulfilling the requirements of this section. 
Where valid and accurate analyses are available from outside 
sources, they should be used. The report should summarize any 
independent analyses of regulatory impacts prepared by persons 
commenting during the comment period on the accounting 
statement.
    The report also must include: (A) A summary of 
recommendations of the President for reform or elimination of 
any Federal regulatory program or program element that does not 
represent sound use of national economic resources or otherwise 
is inefficient; and (B) A summary of any recommendations for 
such reform or elimination of Federal regulatory programs or 
program elements prepared by persons commenting during the 
comment period on the accounting statement.
    OMB, in consultation with the Council of Economic Advisers 
and the agencies, must develop guidance for the agencies: (1) 
to standardize measures of costs and benefits in accounting 
statements prepared pursuant to this section and section 3 of 
this legislation, including: (A) detailed guidance on 
estimating the costs and benefits of major rules; and (B) 
general guidance on estimating the costs and benefits of all 
other rules that do not meet the thresholds for major rules; 
and (2) to standardize the format of the accounting statements.
    After each accounting statement and associated report 
submitted to Congress, the Director of the Congressional Budget 
Office shall make recommendations to the President: (1) for 
improving accounting statements prepared pursuant to this 
section, including recommendations on level of detail and 
accuracy; and (2) for improving associated reports prepared 
pursuant to this section, including recommendations on the 
quality of analysis.
    No requirements under this section shall be subject to 
judicial review in any manner.

                       section 8. effective date

    Except as otherwise provided in this legislation, this Act 
shall take effect 180 days after the date of the enactment of 
this Act.
                     V. Regulatory Impact Statement

    Pursuant to paragraph 11(b), rule XXVI of the Standing 
Rules of the Senate, the Committee, after due consideration, 
concludes that S. 291 will have a significant regulatory 
impact.

                            VI. Cost Impact

                                     U.S. Congress,
                               Congressional Budget Office,
                                       Washington, DC, May 8, 1995.
Hon. William V. Roth, Jr.,
Chairman, Committee on Governmental Affairs,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 291, the Regulatory 
Reform Act of 1995.
    Enactment of S. 291 could affect direct spending. 
Therefore, pay-as-you-go procedures would apply to the bill.
    If you wish further details on this estimate, we will be 
pleased to provide them.
            Sincerely,
                                         June E. O'Neill, Director.
    Enclosure.

               congressional budget office cost estimate

    1. Bill number: S. 291.
    2. Bill title: Regulatory Reform Act of 1995.
    3. Bill status: As ordered reported by the Senate Committee 
on Governmental Affairs on March 22, 1995.
    4. Bill purpose: S. 291 would impose additional 
requirements on federal agencies that issue regulations. These 
provisions would apply to most agency rules expected to have an 
effect on the economy of at least $100 million annually. The 
bill would require all agencies to prepare preliminary as well 
as final cost-benefit analyses and would require 11 specified 
agencies to prepare preliminary risk analyses as well as final 
risk analyses.
    S. 291 also would require all agencies to review their 
major rules within ten years (with a possible extension to 
fifteen years) of such rules' promulgation. This review would 
include a cost-benefit analysis of the rule over its lifetime 
and a determination by the agency as to whether the rule is 
justified. If an agency fails to meet the ten-or fifteen-year 
deadline for a rule, then that rule would become void.
    In addition, this legislation would require each agency to 
prepare an accounting statement that estimates the annual costs 
and benefits to both the public sector and the private sector 
of all the agency's regulatory programs. This statement would 
be submitted to the Congress every two years and would cover 
the current year and the four succeeding years.
    5. Estimated cost to the Federal Government: Few of the 
agencies that would be affected by this bill have had time to 
study systematically the additional cost that its 
implementation would impose. Most agencies already conduct 
cost-benefit analyses and other analyses for regulations 
expected to have an economic impact greater than $100 million 
annually. The bill's additional review requirements, however, 
would generate new costs.
    The cost of the federal government would depend on how the 
agencies fulfill the bill's requirements. For example, costs to 
review rules will depend on whether the agencies complete the 
review within ten years or fifteen years. We do not expect the 
bill's costs to be very large in the aggregate, however, 
because some of the requirements imposed by S. 291 are already 
being done by agencies, at least to some extent. For instance, 
some of the initial regulatory analysis currently performed by 
agencies would fulfill the bill's requirements for 
``preliminary'' risk assessments and cost-benefit analyses. 
Based on limited information from agencies, CBO estimates that 
the incremental costs of S. 291 would probably range from $10 
million to $20 million annually, although they could total up 
to $50 million annually.
    6. Comparison with spending under current law: CBO 
estimates that enactment of this bill would add $10 million to 
$20 million annually to the cost of issuing regulations.
    7. Pay-as-you-go considerations: Section 252 of the 
Balanced Budget and Emergency Deficit Control Act of 1985 sets 
up pay-as-you-go procedures for legislation affecting direct 
spending or receipts through 1998. Enactment of S. 291 could 
affect direct spending; therefore, pay-as-you-go procedures 
would apply to the bill.
    Some of the additional regulatory requirements of S. 291 
could lead to a delay in the implementation of regulation 
relating to the collection of user fees or other charges. In 
addition, regulations that authorize the collection of fees 
could be voided if agencies fail to meet the review deadline. 
CBO cannot estimate the potential magnitude of any such 
effects.
    8. Estimated cost to State and local governments: How 
enactment of S. 291 would affect the budgets of state and local 
governments is unclear. If regulations that would impose 
additional requirements on state and local governments are 
delayed by the enactment of these provisions, then costs to 
these entities would be less. It is also possible, however, 
that some regulatory actions that would otherwise provide 
relief to state and local governments could be delayed, thereby 
increasing their costs for various activities. CBO has no basis 
for predicting the direction, magnitude, or timing of such 
impacts.
    9. Estimate comparison: On May 8, 1995, CBO prepared a cost 
estimate for S. 343, as ordered reported by the Senate 
Committee on the Judiciary on April 27, 1995. Like S. 291, S. 
343 would require agencies to review rules and to perform most 
of the same regulatory analyses as S. 291. However, the 
provisions of S. 343 would apply to rules with an economic 
impact of $50 million or more annually. Since S. 343 would 
affect a much larger number of rules than S. 291, its estimated 
costs are much greater.
    10. Previous CBO estimate: None.
    11. Estimate prepared by: Mark Grabowicz.
    12. Estimate approved by: Paul N. Van de Water, Assistant 
Director for Budget Analysis.
                          VII Additional Views

    Significant, meaningful regulatory reform is a goal that 
has been shared by the Members of this Committee for well over 
a decade. Enactment of this legislation will finally allow us 
to achieve that goal. We heartily commend the work of the 
Chairman in continuing the Committee's work on these matters; a 
number of us were here in 1981 when the Senate approved 
comparable legislation, S. 1080, by a vote of 94-0. We were all 
disappointed in the failure of that legislation to be enacted 
into law, and we are hopeful that this legislation will have a 
more successful outcome.
    We join with Senator Roth and the other Republican members 
of the Committee in supporting this legislation because we 
believe it is a tough but fair regulatory reform proposal. It 
is tough because it requires by law that every proposed major 
rule be subject to a cost-benefit analysis and, where 
appropriate, a risk assessment. It requires that each agency 
assess, where not inconsistent with the statute, whether the 
benefits of the rule justify the costs of implementing it, and 
determine how the rule is likely to achieve the objectives of 
the rulemaking in the most cost-effective manner. The bill is 
tough because, by statute, it resolves once and for all the 
role of the President in overseeing the regulatory process. It 
gives the President the authority to oversee cost-benefit 
analysis and risk assessment, and it recognizes the significant 
contribution the President can make to rational rulemaking. The 
bill is tough because it allows Congress to review and stop any 
major rule before it takes effect. The bill is tough because 
the cost-benefit analysis and risk assessment are judicially 
reviewable as part of the whole rulemaking record. It also 
provides for judicial review of an agency's determination of 
whether a rule meets the $100 million economic impact test and 
for remand of a rule if the agency fails to do the cost-benefit 
analysis or risk assessment. The bill is tough because it 
requires agency review of all existing major rules, and renders 
them unenforceable should the agency fail to review them as 
required by this legislation.
    The bill is fair because it recognizes that many benefits 
are not quantifiable and that decisions about benefits and 
costs are by necessity not an exact science but an exercise of 
agency judgment. The bill is fair because, while it mandates 
much needed risk assessment, it is not so prescriptive as to 
micromanage agencies or freeze the further development of 
scientific methods. It is fair because it requires that to the 
extent the President oversees the rulemaking process, that 
oversight must be conducted openly with public accountability. 
The bill is fair because it does not subject all rules to 
congressional review, only the significant rules. It is fair 
because it uses information as a tool for assessing agency 
performance and makes that information available to everyone to 
judge and challenge. The bill is fair because it does not 
overwhelm the rulemaking process by requiring cost-benefit 
analysis and risk assessment for less than truly significant 
rules. The bill is fair because, while requiring agency 
analysis and certification of whether the benefits of the rule 
justify the costs, it does not override the statutory scheme 
upon which the rule is based.
    We support this legislation, because it is an appropriate 
blend of strength and reason. It tries to achieve the necessary 
balance between the public's concern over too much government 
and the public's strong support for regulations to protect the 
environment and public health and safety. Whether we have been 
successful in actually achieving that balance, we will not know 
until the legislation is implemented. Some of us have concerns 
that, especially in a time of significant downsizing, we are 
asking too much of the agencies, beyond what they can deliver 
and still meet their responsibilities to protect the public and 
the national interest. Some agencies, for example, may need 
significant new staff resources to meet the tough requirements 
of cost-benefit analysis and risk assessment that this bill 
establishes. We are confident, however, that we have created an 
open process, and to the extent there are problems, they will 
be known to the Congress and to the public.
    We are also confident that regulation has played a vital 
role in making our country as liveable a place to call home as 
it is. Our clean air, clean water, quality food, safe and 
effective medical devices and medicine, the safety of our 
children's toys, and the beauty and challenge of our 
recreational opportunities are all products of the regulatory 
programs we have established over the past 30 years. We should 
be proud of that legacy, and we are. At the same time, we are 
well aware of the excesses of regulation and that too often we 
in Congress and in the agencies go too far--not without good 
intentions, but certainly without adequate information and 
forethought. And that is what we must change. That is the 
purpose of this legislation.
    In the confusion that may develop in the debate between the 
regulatory reform bill reported by the Judiciary Committee and 
this bill reported by our committee, no one should lose sight 
of the dramatic difference this legislation will make to the 
regulatory process. Make no mistake about this bill; this is 
tough reform. Just because it does not try to paralyze the 
regulatory process does not make it weak. It chooses reform 
over revolution, and the reform is significant and overarching. 
Without destroying the positive aspects of government action, 
this legislation makes the regulatory process more open, more 
thoughtful, and more effective.

                                   John Glenn.
                                   Carl Levin.
                                   Joseph Lieberman.
                                   Byron Dorgan.
                                   Sam Nunn.
                                   David Pryor.
                                   Daniel Akaka.
                     VIII. Changes in Existing Law

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
S. 291 as reported are shown as follows (existing law proposed 
to be omitted is enclosed in brackets, new matter is printed in 
italic, and existing law in which no change is proposed is 
shown in roman):

                           UNITED STATES CODE

          * * * * * * *

             TITLE 5--GOVERNMENT ORGANIZATION AND EMPLOYEES

                     PART I--THE AGENCIES GENERALLY
Chapter                                                             Sec.
    1. Organization...........................................       101
     * * * * * * *
    7. Judicial Review........................................       701
    8. Congressional Review of Agency Rulemaking..............       801
    9. Executive Reorganization...............................       901
     * * * * * * *


            [CHAPTER 6--THE ANALYSIS OF REGULATORY FUNCTIONS


[Sec.
[601. Definitions.
[602. Regulatory agenda.
[603. Initial regulatory flexibility analysis.
[604. Final regulatory flexibility analysis.
[605. Avoidance of duplicative or unnecessary analyses.
[606. Effect on other law.
[607. Preparation of analyses.
[608. Procedure for waiver or delay of completion.
[609. Procedures for gathering comments.
[610. Periodic review of rules.
[611. Judicial review.
[612. Reports and intervention rights.]
             CHAPTER 6--THE ANALYSIS OF REGULATORY FUNCTIONS


                     SUBCHAPTER I--REGULATORY ANALYSIS

Sec.
601. Definitions.
602. Regulatory agenda.
603. Initial regulatory flexibility analysis.
604. Final regulatory flexibility analysis.
605. Avoidance of duplicative or unnecessary analyses.
606. Effect on other law.
607. Preparation of analysis.
608. Procedure for waiver or delay of completion.
609. Procedures for gathering comments.
610. Periodic review of rules.
611. Judicial review.
612. Reports and intervention rights.

                  SUBCHAPTER II--ANALYSIS OF AGENCY RULES

621. Definitions..
622. Rulemaking cost-benefit analysis.
623. Judicial review.
624. Deadlines for rulemaking.
625. Agency review of rules.
626. Public participation and accountability.

                     SUBCHAPTER III--RISK ASSESSMENTS

631. Findings and purposes.
632. Definitions.
633. Applicability.
634. Savings provisions.
635. Principles for risk assessment.
636. Principles for risk characterization.
637. Peer review.
638. Guidelines, plan for assessing new information, and report.
639. Research and training in risk assessment.
640. Interagency coordination.
640a. Plan for review of risk assessments.
640b. Judicial review.
640c. Deadlines for rulemaking.

                    SUBCHAPTER IV--EXECUTIVE OVERSIGHT

641. Definition.
642. Procedures.
643. Promulgation and adoption.
644. Delegation of authority.
645. Public disclosure of information.
646. Judicial review.
                   SUBCHAPTER I--REGULATORY ANALYSIS

                         Sec. 601. Definitions

    For purposes of this chapter--
          * * * * * * *

                       [Sec. 611. Judicial review

    [(a) Except as otherwise provided in subsection (b), any 
determination by an agency concerning the applicability of any 
of the provisions of this chapter to any action of the agency 
shall not be subject to judicial review.
    [(b) Any regulatory flexibility analysis prepared under 
sections 603 and 604 of this title and the compliance or 
noncompliance of the agency with the provisions of this chapter 
shall not be subject to judicial review. When an action for 
judicial review of a rule is instituted, any regulatory 
flexibility analysis for such rule shall constitute part of the 
whole record of agency action in connection with the review.
    [(c) Nothing in this section bars judicial review of any 
other impact statement or similar analysis required by any 
other law if judicial review of such statement or analysis is 
otherwise provided by law.]
Sec. 611. Judicial review

  (a)(1) Except as provided in paragraph (2), no later than 1 
year after the effective date of a final rule with respect to 
which an agency--
          (A) certified, pursuant to section 605(b), that such 
        rule would not have a significant economic impact on a 
        substantial number of small entities; or
          (B) prepared a final regulatory flexibility analysis 
        pursuant to section 604,
an affected small entity may petition for the judicial review 
of such certification or analysis in accordance with this 
subsection. A court having jurisdiction to review such rule for 
compliance with section 553 of this title or under any other 
provision of law shall have jurisdiction to review such 
certification or analysis.
  (2)(A) Except as provided in subparagraph (B), in the case of 
a provision of law that requires that an action challenging a 
final agency regulation be commenced before the expiration of 
the 1-year period provided in paragraph (1), such lesser period 
shall apply to a petition for the judicial review under this 
subsection.
  (B) In a case in which an agency delays the issuance of a 
final regulatory flexibility analysis pursuant to section 
608(b), a petition for judicial review under this subsection 
shall be filed no later than--
          (i) 1 year; or
          (ii) in a case in which a provision of law requires 
        that an action challenging a final agency regulation be 
        commenced before the expiration of the 1-year period 
        provided in paragraph (1), the number of days specified 
        in such provision of law,
after the date the analysis is made available to the public.
  (3) For purposes of this subsection, the term `affected small 
entity' means a small entity that is or will be adversely 
affected by the final rule.
  (4) Nothing in this subsection shall be construed to affect 
the authority of any court to stay the effective date of any 
rule or provision thereof under any other provision of law.
  (5)(A) In a case in which an agency certifies that such rule 
would not have a significant economic impact on a substantial 
number of small entities, the court may order the agency to 
prepare a final regulatory flexibility analysis pursuant to 
section 604 if the court determines, on the basis of the 
rulemaking record, that the certification was arbitrary, 
capricious, an abuse of discretion, or otherwise not in 
accordance with law.
  (B) In a case in which the agency prepared a final regulatory 
flexibility analysis, the court may order the agency to take 
corrective action consistent with section 604 if the court 
determines, on the basis of the rulemaking record, that the 
final regulatory flexibility analysis was prepared by the 
agency without complying with section 604.
  (6) If, by the end of the 90-day period beginning on the date 
of the order of the court pursuant to paragraph (5) (or such 
longer period as the court may provide), the agency fails, as 
appropriate--
          (A) to prepare the analysis required by section 604; 
        or
          (B) to take corrective action consistent with section 
        604 of this title,
the court may stay the rule or grant such other relief as it 
deems appropriate.
  (7) In making any determination or granting any relief 
authorized by this subsection, the court shall take due account 
of the rule of prejudicial error.
  (b) In an action for the judicial review of a rule, any 
regulatory flexibility analysis for such rule (including an 
analysis prepared or corrected pursuant to subsection (a)(5)) 
shall constitute part of the whole record of agency action in 
connection with such review.
  (c) Nothing in this section bars judicial review of any other 
impact statement or similar analysis required by any other law 
if judicial review of such statement or analysis is otherwise 
provided by law.''.
          (2) Effective date.--The amendment made by paragraph 
        (1) shall take effect on the effective date of this 
        Act, except that the judicial review authorized by 
        section 611(a) of title 5, United States Code (as added 
        by subsection (a)), shall apply only to final agency 
        rules issued after such effective date.
  (c) Presidential Authority.--Nothing in this Act shall limit 
the exercise by the President of the authority and 
responsibility that the President otherwise possesses under the 
Constitution and other laws of the United States with respect 
to regulatory policies, procedures, and programs of 
departments, agencies, and offices.
          * * * * * * *

                SUBCHAPTER II--ANALYSIS OF AGENCY RULES

Sec. 621. Definitions

  For purposes of this subchapter the definitions under section 
551 shall apply and--
          (1) the term ``benefit'' means the reasonably 
        identifiable significant favorable effects, including 
        social, environmental and economic benefits, that are 
        expected to result directly or indirectly from 
        implementation of a rule or an alternative to a rule;
          (2) the term ``cost'' means the reasonably 
        identifiable significant adverse effects, including 
        social, environmental, and economic costs that are 
        expected to result directly or indirectly from 
        implementation of, or compliance with, a rule or an 
        alternative to a rule;
          (3) the term ``cost-benefit analysis'' means an 
        evaluation of the costs and benefits of a rule, 
        quantified to the extent feasible and appropriate and 
        otherwise qualitatively described, that is prepared in 
        accordance with the requirements of this subchapter at 
        the level of detail appropriate and practicable for 
        reasoned decisionmaking on the matter involved, taking 
        into consideration the significance and complexity of 
        the decision and any need for expedition;
          (4)(A) the term ``major rule'' means--
                  (i) a rule or a group of closely related 
                rules that the agency proposing the rule, the 
                Director, or a designee of the President 
                reasonably determines is likely to have a gross 
                annual effect on the economy of $100,000,000 or 
                more in reasonably quantifiable direct and 
                indirect costs; or
                  (ii) a rule or a group of closely related 
                rules that is otherwise determined to be a 
                major rule by the agency proposing the rule, 
                the Director, or a designee of the President on 
                the ground that the rule is likely to result 
                in--
                          (I) a substantial increase in costs 
                        or prices for wage earners, consumers, 
                        individual industries, nonprofit 
                        organizations, Federal, State, local, 
                        or tribal government agencies, or 
                        geographic regions;
                          (II) significant adverse effects on 
                        wages, economic growth, investment, 
                        productivity, innovation, the 
                        environment, public health or safety, 
                        or the ability of enterprises whose 
                        principal places of business are in the 
                        United States to compete in domestic or 
                        export markets;
                          (III) a serious inconsistency or 
                        interference with an action taken or 
                        planned by another agency;
                          (IV) the material alteration of the 
                        budgetary impact of entitlements, 
                        grants, user fees, or loan programs, or 
                        the rights and obligations of 
                        recipients thereof; or
                          (V) a significant impact on a sector 
                        of the economy, or disproportionate 
                        costs to a class of persons and 
                        relatively severe economic, social, and 
                        environmental consequences for the 
                        class; and
          (B) the term ``major rule'' shall not include--
                  (i) a rule that involves the internal revenue 
                laws of the United States;
                  (ii) a rule or agency action that authorizes 
                the introduction into, or removal from, 
                commerce, or recognizes the marketable status, 
                of a product; or
                  (iii) a rule exempt from notice and public 
                comment procedure under section 553 of this 
                title;
          (5) the term ``market-based mechanism'' means a 
        regulatory program that--
                  (A) imposes legal accountability for the 
                achievement of an explicit regulatory 
                objective, including the reduction of 
                environmental pollutants or of risks to human 
                health, safety, or the environment, on each 
                regulated person;
                  (B) affords maximum flexibility to each 
                regulated person in complying with mandatory 
                regulatory objectives, and such flexibility 
                shall, where feasible and appropriate, include 
                the opportunity to transfer to, or receive 
                from, other persons, including for cash or 
                other legal consideration, increments of 
                compliance responsibility established by the 
                program; and
                  (C) permits regulated persons to respond at 
                their own discretion in an automatic manner, 
                consistent with subparagraph (B), to changes in 
                general economic conditions and in economic 
                circumstances directly pertinent to the 
                regulatory program without affecting the 
                achievement of the program's explicit 
                regulatory mandates under subparagraph (A);
          (6) the term `performance standard' means a 
        requirement that imposes legal accountability for the 
        achievement of an explicit regulatory objective, such 
        as the reduction of environmental pollutants or of 
        risks to human health, safety, or the environment, on 
        each regulated person;
          (7) the term `risk assessment' has the same meaning 
        as such term is defined under section 632(5); and
          (8) the term `rule' has the same meaning as in 
        section 551(4) of this title, and shall not include--
                  (A) a rule of particular applicability that 
                approves or prescribes for the future rates, 
                wages, prices, services, corporate or financial 
                structures, reorganizations, mergers, 
                acquisitions, accounting practices, or 
                disclosures bearing on any of the foregoing;
                  (B) a rule relating to monetary policy 
                proposed or promulgated by the Board of 
                Governors of the Federal Reserve System or by 
                the Federal Open Market Committee;
                  (C) a rule relating to the safety or 
                soundness of federally insured depository 
                institutions or any affiliate of such an 
                institution (as defined in section 2(k) of the 
                Bank Holding Company Act of 1956 (12 U.S.C. 
                1841(k)); credit unions; the Federal Home Loan 
                Banks; government-sponsored housing 
                enterprises; a Farm Credit System Institution; 
                foreign banks, and their branches, agencies, 
                commercial lending companies or representative 
                offices that operate in the United States and 
                any affiliate of such foreign banks (as those 
                terms are defined in the International Banking 
                Act of 1978 (12 U.S.C. 3101)); or a rule 
                relating to the payments system or the 
                protection of deposit insurance funds or Farm 
                Credit Insurance Fund; or
                  (D) a rule issued by the Federal Election 
                Commission or a rule issued by the Federal 
                Communications Commission pursuant to sections 
                312(a)(7) and 315 of the Communications Act of 
                1934.

Sec. 622. Rulemaking cost-benefit analysis

  (a) Before publishing notice of a proposed rulemaking for any 
rule (or, in the case of a notice of a proposed rulemaking that 
has been published on or before the effective date of this 
subchapter, no later than 30 days after such date), each agency 
shall determine whether the rule is or is not a major rule 
within the meaning of section 621(4)(A)(i) and, if it is not, 
determine whether it is a major rule under section 
621(4)(A)(ii). For the purpose of any such determination, a 
group of closely related rules shall be considered as one rule.
  (b)(1) If an agency has determined that a rule is not a major 
rule, the Director or a designee of the President may, as 
appropriate, determine that the rule is a major rule no later 
than 30 days after the publication of the notice of proposed 
rulemaking for the rule (or, in the case of a notice of 
proposed rulemaking that has been published on or before the 
effective date of this subchapter, no later than 60 days after 
such date).
  (2) Such determination shall be published in the Federal 
Register, together with a succinct statement of the basis for 
the determination.
  (c)(1)(A) When the agency publishes a notice of proposed 
rulemaking for a major rule, the agency shall issue and place 
in the rulemaking file an initial cost-benefit analysis, and 
shall include a summary of such analysis in the notice of 
proposed rulemaking.
  (B)(i) When the Director or a designee of the President has 
published a determination that a rule is a major rule after the 
publication of the notice of proposed rulemaking for the rule, 
the agency shall promptly issue and place in the rulemaking 
file an initial cost-benefit analysis for the rule and shall 
publish in the Federal Register a summary of such analysis.
  (ii) Following the issuance of an initial cost-benefit 
analysis under clause (i), the agency shall give interested 
persons an opportunity to comment pursuant to section 553 in 
the same manner as if the draft cost-benefit analysis had been 
issued with the notice of proposed rulemaking.
  (2) Each initial cost-benefit analysis shall contain--
          (A) an analysis of the benefits of the proposed rule, 
        including any benefits that cannot be quantified, and 
        an explanation of how the agency anticipates that such 
        benefits will be achieved by the proposed rule, 
        including a description of the persons or classes of 
        persons likely to receive such benefits;
          (B) an analysis of the costs of the proposed rule, 
        including any costs that cannot be quantified, and an 
        explanation of how the agency anticipates that such 
        costs will result from the proposed rule, including a 
        description of the persons or classes of persons likely 
        to bear such costs;
          (C) an identification (including an analysis of costs 
        and benefits) of an appropriate number of reasonable 
        alternatives allowed under the statute granting the 
        rulemaking authority for achieving the identified 
        benefits of the proposed rule, including alternatives 
        that--
                  (i) require no government action;
                  (ii) will accommodate differences among 
                geographic regions and among persons with 
                differing levels of resources with which to 
                comply; and
                  (iii) employ voluntary programs, performance 
                standards, or market-based mechanisms that 
                permit greater flexibility in achieving the 
                identified benefits of the proposed rule and 
                that comply with the requirements of 
                subparagraph (D);
          (D) an assessment of the feasibility of establishing 
        a regulatory program that operates through the 
        application of market-based mechanisms;
          (E) an explanation of the extent to which the 
        proposed rule--
                  (i) will accommodate differences among 
                geographic regions and among persons with 
                differing levels of resources with which to 
                comply; and
                  (ii) employs voluntary programs, performance 
                standards, or market-based mechanisms that 
                permit greater flexibility in achieving the 
                identified benefits of the proposed rule;
          (F) a description of the quality, reliability, and 
        relevance of scientific or economic evaluations or 
        information in accordance with the cost-benefit 
        analysis and risk assessment requirements of this 
        chapter;
          (G) if not expressly or implicitly inconsistent with 
        the statute under which the agency is proposing the 
        rule, an explanation of the extent to which the 
        identified benefits of the proposed rule justify the 
        identified costs of the proposed rule, and an 
        explanation of how the proposed rule is likely to 
        substantially achieve the rulemaking objectives in a 
        more cost-effective manner than the alternatives to the 
        proposed rule, including alternatives identified in 
        accordance with subparagraph (C); and
          (H) if a major rule subject to subchapter III 
        addresses risks to human health, safety, or the 
        environment--
                  (i) a risk assessment in accordance with this 
                chapter; and
                  (ii) for each such proposed or final rule, an 
                assessment of incremental risk reduction or 
                other benefits associated with each significant 
                regulatory alternative considered by the agency 
                in connection with the rule or proposed rule.
  (d)(1) When the agency publishes a final major rule, the 
agency shall also issue and place in the rulemaking file a 
final cost-benefit analysis, and shall include a summary of the 
analysis in the statement of basis and purpose.
  (2) Each final cost-benefit analysis shall contain--
          (A) a description and comparison of the benefits and 
        costs of the rule and of the reasonable alternatives to 
        the rule described in the rulemaking, including the 
        market-based mechanisms identified under subsection 
        (c)(2)(C)(iii); and
          (B) if not expressly or implicitly inconsistent with 
        the statute under which the agency is acting, a 
        reasonable determination, based upon the rulemaking 
        file considered as a whole, whether--
                  (i) the benefits of the rule justify the 
                costs of the rule; and
                  (ii) the rule will achieve the rulemaking 
                objectives in a more cost-effective manner than 
                the alternatives described in the rulemaking, 
                including the market-based mechanisms 
                identified under subsection (c)(2)(C)(iii).
  (e)(1) The analysis of the benefits and costs of a proposed 
and a final rule required under this section shall include, to 
the extent feasible, a quantification or numerical estimate of 
the quantifiable benefits and costs. Such quantification or 
numerical estimate shall be made in the most appropriate units 
of measurement, using comparable assumptions, including time 
periods, shall specify the ranges of predictions, and shall 
explain the margins of error involved in the quantification 
methods and in the estimates used. An agency shall describe the 
nature and extent of the nonquantifiable benefits and costs of 
a final rule pursuant to this section in as precise and 
succinct a manner as possible. An agency shall not be required 
to make such evaluation primarily on a mathematical or 
numerical basis.
  (2)(A) In evaluating and comparing costs and benefits and in 
evaluating the risk assessment information developed under 
subchapter III, the agency shall not rely on cost, benefit, or 
risk assessment information that is not accompanied by data, 
analysis, or other supporting materials that would enable the 
agency and other persons interested in the rulemaking to assess 
the accuracy, reliability, and uncertainty factors applicable 
to such information.
  (B) The agency evaluations of the relationships of the 
benefits of a proposed and final rule to its costs shall be 
clearly articulated in accordance with this section.
  (f) As part of the promulgation of each major rule that 
addresses risks to human health, safety, or the environment, 
the head of the agency or the President shall make a 
determination that--
          (1) the risk assessment and the analysis under 
        subsection (c)(2)(H) are based on a scientific 
        evaluation of the risk addressed by the major rule and 
        that the conclusions of such evaluation are supported 
        by the available information; and
          (2) the regulatory alternative chosen will reduce 
        risk in a cost-effective and, to the extent feasible, 
        flexible manner, taking into consideration any of the 
        alternatives identified under subsection (c)(2) (C) and 
        (D).
  (g) The preparation of the initial or final cost-benefit 
analysis required by this section shall only be performed under 
the direction of an officer or employee of the agency. The 
preceding sentence shall not preclude a person outside the 
agency from gathering data or information to be used by the 
agency in preparing any such cost-benefit analysis or from 
providing an explanation sufficient to permit the agency to 
analyze such data or information. If any such data or 
information is gathered or explained by a person outside the 
agency, the agency shall specifically identify in the initial 
or final cost-benefit analysis the data or information gathered 
or explained and the person who gathered or explained it, and 
shall describe the arrangement by which the information was 
procured by the agency, including the total amount of funds 
expended for such procurement.
  (h) The requirements of this subchapter shall not alter the 
criteria for rulemaking otherwise applicable under other 
statutes.
Sec. 623. Judicial review

  (a) Compliance or noncompliance by an agency with the 
provisions of this subchapter and subchapter III shall not be 
subject to judicial review except in connection with review of 
a final agency rule and according to the provisions of this 
section.
  (b) Any determination by a designee of the President or the 
Director that a rule is, or is not, a major rule shall not be 
subject to judicial review in any manner.
  (c) The determination by an agency that a rule is, or is not, 
a major rule under section 621(4)(A)(i) shall be set aside by a 
reviewing court only upon a clear and convincing showing that 
the determination is erroneous in light of the information 
available to the agency at the time the agency made the 
determination. Any determination by an agency that a rule is, 
or is not, a major rule under section 621(4)(A)(ii) shall not 
be subject to judicial review in any manner.
  (d) If the cost-benefit analysis or risk assessment required 
under this chapter has been wholly omitted for any major rule, 
a court shall vacate the rule and remand the case for further 
consideration. If an analysis or assessment has been performed, 
the court shall not review to determine whether the analysis or 
assessment conformed to the particular requirements of this 
chapter.
  (e) Any cost-benefit analysis or risk assessment prepared 
under this chapter shall not be subject to judicial 
consideration separate or apart from review of the agency 
action to which it relates. When an action for judicial review 
of an agency action is instituted, any regulatory analysis for 
such agency action shall constitute part of the whole 
administrative record of agency action for the purpose of 
judicial review of the agency action, and shall, to the extent 
relevant, be considered by a court in determining the legality 
of the agency action.

Sec. 624. Deadlines for rulemaking

  (a) All deadlines in statutes that require agencies to 
propose or promulgate any rule subject to section 622 or 
subchapter III during the 2-year period beginning on the 
effective date of this section shall be suspended until the 
earlier of--
          (1) the date on which the requirements of section 622 
        or subchapter III are satisfied; or
          (2) the date occurring 6 months after the date of the 
        applicable deadline.
  (b) All deadlines imposed by any court of the United States 
that would require an agency to propose or promulgate a rule 
subject to section 622 or subchapter III during the 2-year 
period beginning on the effective date of this section shall be 
suspended until the earlier of--
          (1) the date on which the requirements of section 622 
        or subchapter III are satisfied; or
          (2) the date occurring 6 months after the date of the 
        applicable deadline.
  (c) In any case in which the failure to promulgate a rule by 
a deadline occurring during the 2-year period beginning on the 
effective date of this section would create an obligation to 
regulate through individual adjudications, the deadline shall 
be suspended until the earlier of--
          (1) the date on which the requirements of section 622 
        or subchapter III are satisfied; or
          (2) the date occurring 6 months after the date of the 
        applicable deadline.

Sec. 625. Agency review of rules

  (a)(1)(A) No later than 9 months after the effective date of 
this section, each agency shall prepare and publish in the 
Federal Register a proposed schedule for the review, in 
accordance with this section, of--
          (i) each rule of the agency that is in effect on such 
        effective date and which, if adopted on such effective 
        date, would be a major rule; and
          (ii) each rule of the agency in effect on the 
        effective date of this section (in addition to the 
        rules described in clause (i)) that the agency has 
        selected for review.
  (B) Each proposed schedule required under subparagraph (A) 
shall be developed in consultation with--
          (i) the Administrator of the Office of Information 
        and Regulatory Affairs; and
          (ii) the classes of persons affected by the rules, 
        including members from the regulated industries, small 
        businesses, State and local governments, and 
        organizations representing the interested public.
  (C) Each proposed schedule required under subparagraph (A) 
shall establish priorities for the review of rules that, in the 
joint determination of the Administrator of the Office of 
Information and Regulatory Affairs and the agency, most likely 
can be amended or eliminated to--
          (i) provide the same or greater benefits at 
        substantially lower costs;
          (ii) achieve substantially greater benefits at the 
        same or lower costs; or
          (iii) replace command-and-control regulatory 
        requirements with market mechanisms or performance 
        standards that achieve substantially equivalent 
        benefits at lower costs or with greater flexibility.
  (D) Each proposed schedule required by subparagraph (A) shall 
include--
          (i) a brief explanation of the reasons the agency 
        considers each rule on the schedule to be a major rule, 
        or the reasons why the agency selected the rule for 
        review;
          (ii) a date set by the agency, in accordance with 
        subsection (b), for the completion of the review of 
        each such rule; and
          (iii) a statement that the agency requests comments 
        from the public on the proposed schedule.
  (E) The agency shall set a date to initiate review of each 
rule on the schedule in a manner that will ensure the 
simultaneous review of related items and that will achieve a 
reasonable distribution of reviews over the period of time 
covered by the schedule.
  (2) No later than 90 days before publishing in the Federal 
Register the proposed schedule required under paragraph (1), 
each agency shall make the proposed schedule available to the 
Director or a designee of the President. The President or that 
officer may select for review in accordance with this section 
any additional rule.
  (3) No later than 1 year after the effective date of this 
section, each agency shall publish in the Federal Register a 
final schedule for the review of the rules referred to in 
paragraphs (1) and (2). Each agency shall publish with the 
final schedule the response of the agency to comments received 
concerning the proposed schedule.
  (b)(1) Except as explicitly provided otherwise by statute, 
the agency shall, pursuant to subsections (c) through (e), 
review--
          (A) each rule on the schedule promulgated pursuant to 
        subsection (a);
          (B) each major rule promulgated, amended, or 
        otherwise continued by an agency after the effective 
        date of this section; and
          (C) each rule promulgated after the effective date of 
        this section that the President or the officer 
        designated by the President selects for review pursuant 
        to subsection (a)(2).
  (2) Except as provided pursuant to subsection (f), the review 
of a rule required by this section shall be completed no later 
than the later of--
          (A) 10 years after the effective date of this 
        section; or
          (B) 10 years after the date on which the rule is--
                  (i) promulgated; or
                  (ii) amended or continued under this section.
  (c) An agency shall publish in the Federal Register a notice 
of its proposed action under this section with respect to a 
rule being reviewed. The notice shall include--
          (1) an identification of the specific statutory 
        authority under which the rule was promulgated and an 
        explanation of whether the agency's interpretation of 
        the statute is expressly required by the current text 
        of that statute or, if not, whether it is within the 
        range of permissible interpretations of the statute;
          (2) an analysis of the benefits and costs of the rule 
        during the period in which it has been in effect;
          (3) an explanation of the proposed agency action with 
        respect to the rule, including action to repeal or 
        amend the rule to resolve inconsistencies or conflicts 
        with any other obligation or requirement established by 
        any Federal statute, rule, or other agency statement, 
        interpretation, or action that has the force of law; 
        and
          (4) a statement that the agency seeks proposals from 
        the public for modifications or alternatives to the 
        rule which may accomplish the objectives of the rule in 
        a more effective or less burdensome manner.
  (d) If an agency proposes to repeal or amend a rule under 
review pursuant to this section, the agency shall, after 
issuing the notice required by subsection (c), comply with the 
provisions of this chapter, chapter 5, and any other applicable 
law. The requirements of such provisions and related 
requirements shall apply to the same extent and in the same 
manner as in the case of a proposed agency action to repeal or 
amend a rule that is not taken pursuant to the review required 
by this section.
  (e) If an agency proposes to continue without amendment a 
rule under review pursuant to this section, the agency shall--
          (1) give interested persons no less than 60 days 
        after the publication of the notice required by 
        subsection (c) to comment on the proposed continuation; 
        and
          (2) publish in the Federal Register notice of the 
        continuation of such rule.
  (f) Any agency, which for good cause finds that compliance 
with this section with respect to a particular rule during the 
period provided in subsection (b) of this section is contrary 
to an important public interest may request the President, or 
the officer designated by the President pursuant to subsection 
(a)(2), to establish a period longer than 10 years for the 
completion of the review of such rule. The President or that 
officer may extend the period for review of a rule to a total 
period of no more than 15 years. Such extension shall be 
published in the Federal Register with an explanation of the 
reasons therefor.
  (g) If the agency fails to comply with the requirements of 
subsection (b)(2), the rule for which rulemaking proceedings 
have not been completed shall cease to be enforceable against 
any person.
  (h) Nothing in this section shall relieve any agency from its 
obligation to respond to a petition to issue, amend, or repeal 
a rule, for an interpretation regarding the meaning of a rule, 
or for a variance or exemption from the terms of a rule, 
submitted pursuant to any other provision of law.

Sec. 626. Public participation and accountability

  In order to maximize accountability for, and public 
participation in, the development and review of regulatory 
actions each agency shall, consistent with chapter 5 and other 
applicable law, provide the public with opportunities for 
meaningful participation in the development of regulatory 
actions, including--
          (1) seeking the involvement, where practicable and 
        appropriate, of those who are intended to benefit from 
        and those who are expected to be burdened by any 
        regulatory action;
          (2) providing in any proposed or final rulemaking 
        notice published in the Federal Register--
                  (A) a certification of compliance with the 
                requirements of this chapter, or an explanation 
                why such certification cannot be made;
                  (B) a summary of any regulatory analysis 
                required under this chapter, or under any other 
                legal requirement, and notice of the 
                availability of the regulatory analysis;
                  (C) a certification that the rule will 
                produce benefits that will justify the cost to 
                the Government and to the public of 
                implementation of, and compliance with, the 
                rule, or an explanation why such certification 
                cannot be made; and
                  (D) a summary of the results of any 
                regulatory review and the agency's response to 
                such review, including an explanation of any 
                significant changes made to such regulatory 
                action as a consequence of regulatory review;
          (3) identifying, upon request, a regulatory action 
        and the date upon which such action was submitted to 
        the designated officer to whom authority was delegated 
        under section 644 for review;
          (4) disclosure to the public, consistent with section 
        634(3), of any information created or collected in 
        performing a regulatory analysis required under this 
        chapter, or under any other legal requirement; and
          (5) placing in the appropriate rulemaking record all 
        written communications received from the Director, 
        other designated officer, or other individual or entity 
        relating to regulatory review.
                    SUBCHAPTER III--RISK ASSESSMENTS

Sec. 631. Findings and purposes

  (a) The Congress finds that:
          (1) Environmental, health, and safety regulations 
        have lead to dramatic improvements in the environment 
        and have significantly reduced risks to human health; 
        except--
                  (A) many regulations have been more costly 
                and less effective than necessary; and
                  (B) too often, regulatory priorities have not 
                been based upon a realistic consideration of 
                risk, risk reduction opportunities, and costs.
          (2) The public and private resources available to 
        address health, safety, and environmental risks are not 
        unlimited. Those resources should be allocated to 
        address the greatest needs in the most cost-effective 
        manner and to ensure that the incremental costs of 
        regulatory options are reasonably related to the 
        incremental benefits.
          (3) To provide more cost-effective protection to 
        human health, safety, and the environment, regulatory 
        priorities should be supported by realistic and 
        plausible scientific risk assessments and risk 
        management choices that are grounded in cost-benefit 
        principles.
          (4) Risk assessment has proved to be a useful 
        decisionmaking tool, except--
                  (A) improvements are needed in both the 
                quality of assessments and the characterization 
                and communication of findings;
                  (B) scientific and other data must be better 
                collected, organized, and evaluated; and
                  (C) the critical information resulting from a 
                risk assessment must be effectively 
                communicated in an objective and unbiased 
                manner to decision makers, and from decision 
                makers to the public.
          (5) The public stakeholders should be involved in the 
        decisionmaking process for regulating risks. The public 
        has the right to know about the risks addressed by 
        regulation, the amount of risk reduced, the quality of 
        the science used to support decisions, and the cost of 
        implementing and complying with regulations. Such 
        knowledge will allow for public scrutiny and will 
        promote the quality, integrity, and responsiveness of 
        agency decisions.
  (b) The purposes of this subchapter are to--
          (1) present the public and executive branch with the 
        most realistic and plausible information concerning the 
        nature and magnitude of health, safety, and 
        environmental risks to promote sound regulatory 
        decisions and public education;
          (2) provide for full consideration and discussion of 
        relevant data and potential methodologies;
          (3) require explanation of significant choices in the 
        risk assessment process that will allow for better 
        public understanding; and
          (4) improve consistency within the executive branch 
        in preparing risk assessments and risk 
        characterizations.

Sec. 632. Definitions

  For purposes of this subchapter, the definitions under 
sections 551 and 621 shall apply and:
          (1) The term `covered agency' means each of the 
        following:
                  (A) The Environmental Protection Agency.
                  (B) The Department of Labor.
                  (C) The Department of Transportation.
                  (D) The Food and Drug Administration.
                  (E) The Department of Energy.
                  (F) The Department of the Interior.
                  (G) The Department of Agriculture.
                  (H) The Consumer Product Safety Commission.
                  (I) The National Oceanic and Atmospheric 
                Administration.
                  (J) The United States Army Corps of 
                Engineers.
                  (K) The Nuclear Regulatory Commission.
                  (L) Any other Federal agency considered a 
                covered agency under section 633(b).
          (2) The term ``emergency'' means a situation that is 
        immediately impending and extraordinary in nature, 
        demanding attention due to a condition, circumstance or 
        practice reasonably expected to cause death, serious 
        illness or severe injury to humans, or substantial 
        endangerment to private property or the environment if 
        no action is taken.
          (3) The term ``estimates of risk'' means numerical 
        representations of the potential magnitude of harm to 
        populations or the probability of harm to individuals, 
        including, as appropriate, those derived by considering 
        the range and distribution of estimates of dose-
        response (potency) and exposure, including appropriate 
        statistical representation of the range and most likely 
        exposure levels, and the identification of the 
        populations or subpopulations addressed. When 
        appropriate and practicable, a description of any 
        populations or subpopulations that are likely to 
        experience exposures at the upper end of the 
        distribution should be included.
          (4) The term ``hazard identification'' means 
        identification of a substance, activity, or condition 
        as potentially causing harm to human health, safety, or 
        the environment.
          (5) The term ``risk assessment'' means--
                  (A) identifying, quantifying to the extent 
                feasible and appropriate, and characterizing 
                hazards and exposures to those hazards in order 
                to provide structured information on the nature 
                of threats to human health, safety, or the 
                environment; and
                  (B) the document containing the explanation 
                of how the assessment process has been applied 
                to an individual substance, activity, or 
                condition.
          (6) The term ``risk characterization'' means the 
        integration, synthesis, and organization of hazard 
        identification, dose-response and exposure information 
        that addresses the needs of decision makers and 
        interested parties. The term includes both the process 
        and specific outputs, including--
                  (A) the element of a risk assessment that 
                involves presentation of the degree of risk in 
                any regulatory proposal or decision, report to 
                Congress, or other document that is made 
                available to the public; and
                  (B) discussions of uncertainties, conflicting 
                data, estimates of risk, extrapolations, 
                inferences, and opinions.
          (7) The term ``screening analysis'' means an analysis 
        that arrives at a qualitative estimate or a bounding 
        estimate of risk that permits the risk manager to 
        accept or reject some management options, or permits 
        establishing priorities for agency action. Such term 
        includes an assessment performed by a regulated party 
        and submitted to an agency under a regulatory 
        requirement.
          (8) The term ``substitution risk'' means a reasonably 
        likely increased risk to human health, safety, or the 
        environment from a regulatory option designed to 
        decrease other risks.

Sec. 633. Applicability

  (a) Except as provided in subsection (c), this subchapter 
shall apply to all risk assessments and risk characterizations 
prepared by, or on behalf of, or prepared by others and adopted 
by any covered agency in connection with a major rule 
addressing health, safety, and environmental risks.
  (b)(1) No later than 18 months after the effective date of 
this section, the President, acting through the Director of the 
Office of Management and Budget, shall determine whether other 
Federal agencies should be considered covered agencies for the 
purposes of this subchapter. Such determination, with respect 
to a particular Federal agency, shall be based on the impact of 
risk assessment documents and risk characterization documents 
on--
          (A) regulatory programs administered by that agency; 
        and
          (B) the communication of risk information by that 
        agency to the public.
  (2) If the President makes a determination under paragraph 
(1), the provisions of this subchapter shall apply to any 
affected agency beginning on a date set by the President. Such 
date may be no later than 6 months after the date of such 
determination.
  (c)(1) This subchapter shall not apply to risk assessments or 
risk characterizations performed with respect to--
          (A) an emergency determined by the head of an agency;
          (B) a health, safety, or environmental inspection or 
        individual facility permitting action; or
          (C) a screening analysis.
  (2) This subchapter shall not apply to any food, drug, or 
other product label, or to any risk characterization appearing 
on any such label.

Sec. 634. Savings provisions

  Nothing in this subchapter shall be construed to--
          (1) modify any statutory standard or requirement 
        designed to protect human health, safety, or the 
        environment;
          (2) preclude the consideration of any data or the 
        calculation of any estimate to more fully describe risk 
        or provide examples of scientific uncertainty or 
        variability; or
          (3) require the disclosure of any trade secret or 
        other confidential information.

Sec. 635. Principles for risk assessment

  (a) The head of each covered agency shall ensure that risk 
assessments and all of the components of such assessments--
          (1) provide for a systematic means to structure 
        information useful to decision makers;
          (2) provide, to the maximum extent practicable, that 
        policy-driven default assumptions be used only in the 
        absence of relevant available information;
          (3) promote involvement from all stakeholders;
          (4) provide an opportunity for public input 
        throughout the regulatory process; and
          (5) are designed so that the degree of specificity 
        and rigor employed is commensurate with the 
        consequences of the decision to be made.
  (b) A risk assessment shall, to the maximum extent 
practicable, clearly delineate hazard identification from dose-
response and exposure assessment and make clear the 
relationship between the level of risk and the level of 
exposure to a hazard.

Sec. 636. Principles for risk characterization

  In characterizing risk in any risk assessment document, 
regulatory proposal, or decision, each covered agency shall 
include in the risk characterization, as appropriate, each of 
the following:
          (1)(A) A description of the exposure scenarios used, 
        the natural resources or subpopulations being exposed, 
        and the likelihood of those exposure scenarios.
          (B) When a risk assessment involves a choice of any 
        significant assumption, inference, or model, the 
        covered agency or instrumentality preparing the risk 
        assessment shall--
                  (i) identify the assumptions, inferences, and 
                models that materially affect the outcome;
                  (ii) explain the basis for any choices;
                  (iii) identify any policy decisions or 
                policy-based default assumptions;
                  (iv) indicate the extent to which any 
                significant model has been validated by, or 
                conflicts with, empirical data; and
                  (v) describe the impact of alternative 
                choices of assumptions, default options or 
                mathematical models.
          (C) The major sources of uncertainties in the hazard 
        identification, dose-response and exposure assessment 
        phases of the risk assessment.
          (D) To the extent feasible, the range and 
        distribution of exposures and risks derived from the 
        risk assessment should be included as a component of 
        the risk characterization.
          (2) When a covered agency provides a risk assessment 
        or risk characterization for a proposed or final 
        regulatory action, such assessment or characterization 
        shall include a statement of any significant 
        substitution risks, when information on such risks has 
        been made available to the agency.

Sec. 637. Peer review

  (a) The head of each covered agency shall develop a 
systematic program for independent and external peer review 
required under subsection (b). Such program shall be applicable 
throughout each covered agency and--
          (1) shall provide for the creation of peer review 
        panels that--
                  (A) consist of members with expertise 
                relevant to the sciences involved in regulatory 
                decisions and who are independent of the 
                covered agency; and
                  (B) are broadly representative and balanced 
                and, to the extent relevant and appropriate, 
                may include persons affiliated with Federal, 
                State, local, or tribal governments, small 
                businesses, other representatives of industry, 
                universities, agriculture, labor consumers, 
                conservation organizations, or other public 
                interest groups and organizations;
          (2) shall not exclude any person with substantial and 
        relevant expertise as a panel member on the basis that 
        such person represents an entity that may have a 
        potential interest in the outcome, if such interest is 
        fully disclosed to the agency, and in the case of a 
        regulatory decision affecting a single entity, no peer 
        reviewer representing such entity may be included on 
        the panel;
          (3) shall provide for a timely completed peer review, 
        meeting agency deadlines, that contains a balanced 
        presentation of all considerations, including minority 
        reports and an agency response to all significant peer 
        review comments; and
          (4) shall provide adequate protections for 
        confidential business information and trade secrets, 
        including requiring panel members to enter into 
        confidentiality agreements.
  (b)(1)(A) Except as provided under subparagraph (B), each 
covered agency shall provide for peer review in accordance with 
this section of any risk assessment or cost-benefit analysis 
that forms the basis of any major rule that addresses risks to 
the environment, health, or safety.
  (B) Subparagraph (A) shall not apply to a rule or other 
action taken by an agency to authorize or approve any 
individual substance or product.
  (2) The Director of the Office of Management and Budget may 
order that peer review be provided for any risk assessment or 
cost-benefit analysis that is likely to have a significant 
impact on public policy decisions or would establish an 
important precedent.
  (c) Each peer review under this section shall include a 
report to the Federal agency concerned with respect to the 
scientific and technical merit of data and methods used for the 
risk assessments or cost-benefit analyses.
  (d) The head of the covered agency shall provide a written 
response to all significant peer review comments.
  (e) All peer review comments or conclusions and the agency's 
responses shall be made available to the public and shall be 
made part of the administrative record for purposes of judicial 
review of any final agency action.
  (f) No peer review shall be required under this section for 
any data, method, document, or assessment, or any component 
thereof, which has been previously subjected to peer review.

Sec. 638. Guidelines, plan for assessing new information, and report

  (a)(1)(A) As soon as practicable and scientifically feasible, 
each covered agency shall adopt, after notification and 
opportunity for public comment, guidelines to implement the 
risk assessment and risk characterization principles under 
sections 635 and 636, as well as the cost-benefit analysis 
requirements under section 622, and shall provide a format for 
summarizing risk assessment results.
  (B) No later than 12 months after the effective date of this 
section, the head of each covered agency shall issue a report 
on the status of such guidelines to the Congress.
  (2) The guidelines under paragraph (1) shall--
          (A) include guidance on use of specific technical 
        methodologies and standards for acceptable quality of 
        specific kinds of data;
          (B) address important decisional factors for the risk 
        assessment, risk characterization, and cost-benefit 
        analysis at issue; and
          (C) provide procedures for the refinement and 
        replacement of policy-based default assumptions.
  (b) The guidelines, plan and report under this section shall 
be developed after notice and opportunity for public comment, 
and after consultation with representatives of appropriate 
State agencies and local governments, and such other 
departments and agencies, organizations, or persons as may be 
advisable.
  (c) The President shall review the guidelines published under 
this section at least every 4 years.
  (d) The development, issuance, and publication of risk 
assessment and risk characterization guidelines under this 
section shall not be subject to judicial review.

Sec. 639. Research and training in risk assessment

  (a) The head of each covered agency shall regularly and 
systematically evaluate risk assessment research and training 
needs of the agency, including, where relevant and appropriate, 
the following:
          (1) Research to reduce generic data gaps, to address 
        modelling needs (including improved model sensitivity), 
        and to validate default options, particularly those 
        common to multiple risk assessments.
          (2) Research leading to improvement of methods to 
        quantify and communicate uncertainty and variability 
        among individuals, species, populations, and, in the 
        case of ecological risk assessment, ecological 
        communities.
          (3) Emerging and future areas of research, including 
        research on comparative risk analysis, exposure to 
        multiple chemicals and other stressors, noncancer 
        endpoints, biological markers of exposure and effect, 
        mechanisms of action in both mammalian and nonmammalian 
        species, dynamics and probabilities of physiological 
        and ecosystem exposures, and prediction of ecosystem-
        level responses.
          (4) Long-term needs to adequately train individuals 
        in risk assessment and risk assessment application. 
        Evaluations under this paragraph shall include an 
        estimate of the resources needed to provide necessary 
        training.
  (b) The head of each covered agency shall develop a strategy 
and schedule for carrying out research and training to meet the 
needs identified in subsection (a).

Sec. 640. Interagency coordination

  (a) To promote the conduct, application, and practice of risk 
assessment in a consistent manner and to identify risk 
assessment data and research needs common to more than 1 
Federal agency, the Director of the Office of Management and 
Budget, in consultation with the Office of Science and 
Technology Policy, shall--
          (1) periodically survey the manner in which each 
        Federal agency involved in risk assessment is 
        conducting such risk assessment to determine the scope 
        and adequacy of risk assessment practices in use by the 
        Federal Government;
          (2) provide advice and recommendations to the 
        President and Congress based on the surveys conducted 
        and determinations made under paragraph (1);
          (3) establish appropriate interagency mechanisms to 
        promote--
                  (A) coordination among Federal agencies 
                conducting risk assessment with respect to the 
                conduct, application, and practice of risk 
                assessment; and
                  (B) the use of state-of-the-art risk 
                assessment practices throughout the Federal 
                Government;
          (4) establish appropriate mechanisms between Federal 
        and State agencies to communicate state-of-the-art risk 
        assessment practices; and
          (5) periodically convene meetings with State 
        government representatives and Federal and other 
        leaders to assess the effectiveness of Federal and 
        State cooperation in the development and application of 
        risk assessment.
  (b) The President shall appoint National Peer Review Panels 
to review every 3 years the risk assessment practices of each 
covered agency for programs designed to protect human health, 
safety, or the environment. The Panels shall submit a report to 
the President and the Congress at least every 3 years 
containing the results of such review.

Sec. 640a. Plan for review of risk assessments

  (a) No later than 18 months after the effective date of this 
section, the head of each covered agency shall publish a plan 
to review and revise any risk assessment published before the 
expiration of such 18-month period if the covered agency 
determines that significant new information or methodologies 
are available that could significantly alter the results of the 
prior risk assessment.
  (b) A plan under subsection (a) shall--
          (1) provide procedures for receiving and considering 
        new information and risk assessments from the public; 
        and
          (2) set priorities and criteria for review and 
        revision of risk assessments based on such factors as 
        the agency head considers appropriate.
Sec. 640b. Judicial review

  The provisions of section 623 relating to judicial review 
shall apply to this subchapter.

Sec. 640c. Deadlines for rulemaking

  The provisions of section 624 relating to deadlines for 
rulemaking shall apply to this subchapter.
                   SUBCHAPTER IV--EXECUTIVE OVERSIGHT

Sec. 641. Definition

  For purposes of this subchapter, the definitions under 
sections 551 and 621 shall apply.

Sec. 642. Procedures

  The Director or other designated officer to whom authority is 
delegated under section 644 shall--
          (1) establish procedures for agency compliance with 
        this chapter; and
          (2) monitor, review, and ensure agency implementation 
        of such procedures.
Sec. 643. Promulgation and adoption

  (a) Procedures established pursuant to section 642 shall only 
be implemented after opportunity for public comment. Any such 
procedures shall be consistent with the prompt completion of 
rulemaking proceedings.
  (b)(1) If procedures established pursuant to section 642 
include review of any initial or final analyses of a rule 
required under this chapter, the time for any such review of 
any initial analysis shall not exceed 60 days following the 
receipt of the analysis by the Director, a designee of the 
President, or by an officer to whom the authority granted under 
section 642 has been delegated pursuant to section 644.
  (2) The time for review of any final analysis required under 
this chapter shall not exceed 60 days following the receipt of 
the analysis by the Director, a designee of the President, or 
such officer.
  (3)(A) The times for each such review may be extended for 
good cause by the President or such officer for an additional 
30 days.
  (B) Notice of any such extension, together with a succinct 
statement of the reasons therefor, shall be inserted in the 
rulemaking file.

Sec. 644. Delegation of authority

  (a) The President shall delegate the authority granted by 
this subchapter to the Director or to another officer within 
the Executive Office of the President whose appointment has 
been subject to the advice and consent of the Senate.
  (b) Notice of any delegation, or any revocation or 
modification thereof shall be published in the Federal 
Register.

Sec. 645. Public disclosure of information

  The Director or other designated officer to whom authority is 
delegated under section 644, in carrying out the provisions of 
section 642, shall establish procedures (covering all employees 
of the Director or other designated officer) to provide public 
and agency access to information concerning regulatory review 
actions, including--
          (1) disclosure to the public on an ongoing basis of 
        information regarding the status of regulatory actions 
        undergoing review;
          (2) disclosure to the public, no later than 
        publication of, or other substantive notice to the 
        public concerning a regulatory action, of--
                  (A) all written communications, regardless of 
                form or format, including drafts of all 
                proposals and associated analyses, between the 
                Director or other designated officer and the 
                regulatory agency;
                  (B) all written communications, regardless of 
                form or format, between the Director or other 
                designated officer and any person not employed 
                by the executive branch of the Federal 
                Government relating to the substance of a 
                regulatory action;
                  (C) a record of all oral communications 
                relating to the substance of a regulatory 
                action between the Director or other designated 
                officer and any person not employed by the 
                executive branch of the Federal Government; and
                  (D) a written explanation of any review 
                action and the date of such action; and
          (3) disclosure to the regulatory agency, on a timely 
        basis, of--
                  (A) all written communications between the 
                Director or other designated officer and any 
                person who is not employed by the executive 
                branch of the Federal Government;
                  (B) a record of all oral communications, and 
                an invitation to participate in meetings, 
                relating to the substance of a regulatory 
                action between the Director or other designated 
                officer and any person not employed by the 
                executive branch of the Federal Government; and
                  (C) a written explanation of any review 
                action taken concerning an agency regulatory 
                action.

Sec. 646. Judicial review

  The exercise of the authority granted under this subchapter 
by the Director, the President, or by an officer to whom such 
authority has been delegated under section 644 shall not be 
subject to judicial review in any manner.
          CHAPTER 8--CONGRESSIONAL REVIEW OF AGENCY RULEMAKING

Sec. 801. Congressional review of agency rulemaking

  (a) For purposes of this chapter, the term--
          (1) ``major rule'' means a major rule as defined 
        under section 621(4) of this title and as determined 
        under section 622 of this title; and
          (2) ``rule'' (except in reference to a rule of the 
        Senate or House of Representatives) is a reference to a 
        major rule.
  (b)(1) Upon the promulgation of a final major rule, the 
agency promulgating such rule shall submit to the Congress a 
copy of the rule, the statement of basis and purpose for the 
rule, and the proposed effective date of the rule.
  (2) A rule submitted under paragraph (1) shall not take 
effect as a final rule before the latest of the following:
          (A) The later of the date occurring 45 days after the 
        date on which--
                  (i) the Congress receives the rule submitted 
                under paragraph (1); or
                  (ii) the rule is published in the Federal 
                Register.
          (B) If the Congress passes a joint resolution of 
        disapproval described under subsection (i) relating to 
        the rule, and the President signs a veto of such 
        resolution, the earlier date--
                  (i) on which either House of Congress votes 
                and fails to override the veto of the 
                President; or
                  (ii) occurring 30 session days after the date 
                on which the Congress received the veto and 
                objections of the President.
          (C) The date the rule would have otherwise taken 
        effect, if not for this section (unless a joint 
        resolution of disapproval under subsection (i) is 
        approved).
  (c) A major rule shall not take effect as a final rule if the 
Congress passes a joint resolution of disapproval described 
under subsection (i), which is signed by the President or is 
vetoed and overridden by the Congress.
  (d)(1) Notwithstanding any other provision of this section 
(except subject to paragraph (2)), a major rule that would not 
take effect by reason of this section may take effect if the 
President makes a determination and submits written notice of 
such determination to the Congress that the major rule should 
take effect because such major rule is--
          (A) necessary because of an imminent threat to health 
        or safety, or other emergency;
          (B) necessary for the enforcement of criminal laws; 
        or
          (C) necessary for national security.
  (2) An exercise by the President of the authority under this 
subsection shall have no effect on the procedures under 
subsection (i) or the effect of a joint resolution of 
disapproval under this section.
  (e)(1) Subsection (i) shall apply to any major rule that is 
promulgated as a final rule during the period beginning on the 
date occurring 60 days before the date the Congress adjourns 
sine die through the date on which the succeeding Congress 
first convenes.
  (2) For purposes of subsection (i), a major rule described 
under paragraph (1) shall be treated as though such rule were 
published in the Federal Register (as a rule that shall take 
effect as a final rule) on the date the succeeding Congress 
first convenes.
  (3) During the period between the date the Congress adjourns 
sine die through the date on which the succeeding Congress 
first convenes, a rule described under paragraph (1) shall take 
effect as a final rule as otherwise provided by law.
  (f) Any rule that takes effect and later is made of no force 
or effect by the enactment of a joint resolution under 
subsection (i) shall be treated as though such rule had never 
taken effect.
  (g) If the Congress does not enact a joint resolution of 
disapproval under subsection (i), no court or agency may infer 
any intent of the Congress from any action or inaction of the 
Congress with regard to such major rule, related statute, or 
joint resolution of disapproval.
  (h) If the agency fails to comply with the requirements of 
subsection (b) for any rule, the rule shall cease to be 
enforceable against any person.
  (i)(1) For purposes of this subsection, the term `joint 
resolution' means only a joint resolution introduced after the 
date on which the rule referred to in subsection (b) is 
received by Congress the matter after the resolving clause of 
which is as follows: ``That Congress disapproves the rule 
submitted by the ____________ relating to ______________, and 
such rule shall have no force or effect.'' (The blank spaces 
being appropriately filled in.)
  (2)(A) In the Senate, a resolution described in paragraph (1) 
shall be referred to the committees with jurisdiction. Such a 
resolution shall not be reported before the eighth day after 
its submission or publication date.
  (B) For purposes of this subsection, the term `submission or 
publication date' means the later of the date on which--
          (i) the Congress receives the rule submitted under 
        subsection (b)(1); or
          (ii) the rule is published in the Federal Register.
  (3) In the Senate, if the committee to which a resolution 
described in paragraph (1) is referred has not reported such 
resolution (or an identical resolution) at the end of 20 
calendar days after its submission or publication date, such 
committee may be discharged on a petition approved by 30 
Senators from further consideration of such resolution and such 
resolution shall be placed on the Senate calendar.
  (4)(A) In the Senate, when the committee to which a 
resolution is referred has reported, or when a committee is 
discharged (under paragraph (3)) from further consideration of, 
a resolution described in paragraph (1), it shall at any time 
thereafter be in order (even though a previous motion to the 
same effect has been disagreed to) for any Senator to move to 
proceed to the consideration of the resolution, and all points 
of order against the resolution (and against consideration of 
the resolution) shall be waived. The motion shall be privileged 
in the Senate and shall not be debatable. The motion shall not 
be subject to amendment, or to a motion to postpone, or to a 
motion to proceed to the consideration of other business. A 
motion to reconsider the vote by which the motion is agreed to 
or disagreed to shall not be in order. If a motion to proceed 
to the consideration of the resolution is agreed to, the 
resolution shall remain the unfinished business of the Senate 
until disposed of.
  (B) In the Senate, debate on the resolution, and on all 
debatable motions and appeals in connection therewith, shall be 
limited to not more than 10 hours, which shall be divided 
equally between those favoring and those opposing the 
resolution. A motion further to limit debate shall be in order 
and shall not be debatable. An amendment to, or a motion to 
postpone, or a motion to proceed to the consideration of other 
business, or a motion to recommit the resolution shall not be 
in order. A motion to reconsider the vote by which the 
resolution is agreed to or disagreed to shall not be in order.
  (C) In the Senate, immediately following the conclusion of 
the debate on a resolution described in paragraph (1), and a 
single quorum call at the conclusion of the debate if requested 
in accordance with the Senate rules, the vote on final passage 
of the resolution shall occur.
  (D) Appeals from the decisions of the Chair relating to the 
application of the rules of the Senate to the procedure 
relating to a resolution described in paragraph (1) shall be 
decided without debate.
  (5) If, before the passage in the Senate of a resolution 
described in paragraph (1), the Senate receives from the House 
of Representatives a resolution described in paragraph (1), 
then the following procedures shall apply:
          (A) The resolution of the House of Representatives 
        shall not be referred to a committee.
          (B) With respect to a resolution described in 
        paragraph (1) of the Senate--
                  (i) the procedure in the Senate shall be the 
                same as if no resolution had been received from 
                the other House; but
                  (ii) the vote on final passage shall be on 
                the resolution of the other House.
  (6) This subsection is enacted by Congress--
          (A) as an exercise of the rulemaking power of the 
        Senate and House of Representatives, respectively, and 
        as such it is deemed to be a part of the rules of each 
        House, respectively, but applicable only with respect 
        to the procedure to be followed in that House in the 
        case of a resolution described in paragraph (1), and it 
        supersedes other rules only to the extent that it is 
        inconsistent with such rules; and
          (B) with full recognition of the constitutional right 
        of either House to change the rules (so far as relating 
        to the procedure of that House) at any time, in the 
        same manner, and to the same extent as in the case of 
        any other rule of that House.
  (j) No requirements under this chapter shall be subject to 
judicial review in any manner.