[Senate Report 105-188]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 364
105th Congress                                                   Report
                                SENATE

 2d Session                                                     105-188
_______________________________________________________________________


 
                THE REGULATORY IMPROVEMENT ACT OF 1998

                               __________

                              R E P O R T

                                 of the

                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                          UNITED STATES SENATE

                             together with

                     ADDITIONAL AND MINORITY VIEWS

                              to accompany


                                 S. 981

                 TO PROVIDE FOR ANALYSIS OF MAJOR RULES





                  May 11, 1998.--Ordered to be printed

(Star Print)



                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                   FRED THOMPSON, Tennessee, Chairman
WILLIAM V. ROTH, Jr., Delaware       JOHN GLENN, Ohio
TED STEVENS, Alaska                  CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine              JOSEPH I. LIEBERMAN, Connecticut
SAM BROWNBACK, Kansas                DANIEL K. AKAKA, Hawaii
PETE V. DOMENICI, New Mexico         RICHARD J. DURBIN, Illinois
THAD COCHRAN, Mississippi            ROBERT G. TORRICELLI, New Jersey
DON NICKLES, Oklahoma                MAX CLELAND, Georgia
ARLEN SPECTER, Pennsylvania
             Hannah S. Sistare, Staff Director and Counsel
                          Paul R. Noe, Counsel
                 Leonard Weiss, Minority Staff Director
              Linda J. Gustitus, Minority Staff Director,
  Subcommittee on International Security, Proliferation, and Federal 
                                Services
                       Lynn L. Baker, 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.................13
 IV. Administration views............................................14
  V. Section-by-section analysis.....................................15
 VI. Regulatory impact statement.....................................59
VII. CBO cost estimate...............................................59
VIII.Additional views................................................64

 IX. Minority views..................................................66
  X. Changes in existing law.........................................85



                                                       Calendar No. 364
105th Congress                                                   Report
                                 SENATE

 2d Session                                                     105-188
_______________________________________________________________________


                 THE REGULATORY IMPROVEMENT ACT OF 1998

                                _______
                                

                  May 11, 1998.--Ordered to be printed

_______________________________________________________________________


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

                              R E P O R T

                             together with

                     ADDITIONAL AND MINORITY VIEWS

                         [To accompany S. 981]

    The Committee on Governmental Affairs, to which was 
referred the bill (S. 981) to provide for the analysis of major 
rules, to make the regulatory process more efficient and 
effective, and for other purposes, having considered the same, 
reports favorably thereon with amendments and recommends by a 
vote of 8-4 that the bill as amended do pass.

                         I. PURPOSE AND SUMMARY

    S. 981 is a bipartisan effort to achieve meaningful and 
lasting improvements to the federal regulatory process through 
important changes in the procedural requirements for issuing 
federal regulations. S. 981 would subject all ``major rules'' 
to rigorous economic and scientific analysis before being 
issued. By elevating the use of modern decisionmaking tools 
such as cost-benefit analysis and risk assessment, the 
legislation would promote more open, better-informed, and more 
accountable regulatory decisions. Upon introduction of S. 981, 
Senator Levin stated:

          Those of us who believe in the benefits of regulation 
        to [protect the environment and the public health and 
        to increase worker safety] have a particular 
        responsibility to make sure that regulations are 
        sensible and cost effective. * * * I believe this bill 
        will improve the regulatory process, will build 
        confidence in the regulatory programs that are so 
        important to this society's well-being, and will result 
        in a better--and I believe--a less contentious 
        regulatory process.\1\
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    \1\ 143 Cong. Rec. S 6742, S 6744 (daily ed. June 27, 1997).

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    In the same vein, Chairman Thompson stated:

          This legislation is an effort by some of us to devise 
        a common solution to the problems of our regulatory 
        system. We have some real political differences among 
        us, but we all share the same goals: clean air and 
        water, injury free workplaces, safe transportation 
        systems, to name a few of the good things that can come 
        from regulation. We also all share the goal of avoiding 
        regulation which unnecessarily interferes in people's 
        lives and businesses, which costs more than it 
        benefits, or which--inadvertently--causes actual harm. 
        * * * The Regulatory Improvement Act will promote the 
        public's right to know how and why agencies regulate, 
        improve the quality of government decisionmaking, and 
        increase government accountability and responsiveness 
        to the people it serves.\2\
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    \2\ Id. at 6749.

    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 (imposing costs over $100 
million or having other material adverse effects). The cost-
benefit analysis would be done at the proposed and final 
rulemaking stages 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);
          An analysis of a reasonable number of regulatory 
        alternatives, including flexible regulatory options;
          A reasonable determination: (1) whether the benefits 
        of the rule are likely to justify the costs; (2) 
        whether the rule is likely to achieve the rule making 
        objectives in a more cost-effective manner, or with 
        greater net benefits, than the other alternatives; and 
        (3) whether the rule adopts a flexible regulatory 
        option.
    If the agency determines that the rule is not likely to 
satisfy these conditions, the agency shall explain the reasons 
for selecting the rule notwithstanding such determination, 
including identifying any statutory provision that required the 
agency to select such rule, and describe any reasonable 
alternative that would satisfy such conditions.

B. Risk assessment

    Agencies would be required to follow risk assessment 
principles for: (1) major rules with the primary purpose of 
addressing risks to health, safety, or the environment; and (2) 
risk assessments not related to a rule making that the OMB 
Director determines would have a substantial impact on a 
significant public policy or on the economy.
    To promote transparent and scientifically objective risk 
assessment, agencies would be required to: identify and explain 
significant assumptions made when estimating risks; notify the 
public about upcoming risk assessments and allow the public to 
submit relevant and reliableinformation; and disclose relevant 
information about the risk, including the range and distribution of the 
risk, including central and high-end estimates, and the corresponding 
exposure scenarios for the potentially exposed population and for any 
highly exposed or sensitive subpopulations. When appropriate scientific 
information is reasonably available, the agency would be required to 
compare the risk being analyzed with other reasonably comparable risks 
familiar to and routinely encountered by the public.

C. Peer review

    Cost-benefit analyses and risk assessments required by the 
Act would be subject to independent peer review.

D. Judicial review

    The legislation would provide for judicial review to ensure 
that agencies conduct required regulatory analyses. The 
regulatory analysis, including the cost-benefit analysis, cost-
benefit determination, and risk assessment, would be included 
in the rulemaking record for purposes of judicial review, and 
would, to the extent relevant, be considered by the court in 
determining whether the final rule is arbitrary or capricious.

E. Guidelines, interagency coordination, and research

    The Director of the Office of Management and Budget 
(``OMB'') would consult with the President's Council of 
Economic Advisors, the Director of the Office of Science and 
Technology Policy (``OSTP''), and the relevant agencies to: 
develop guidelines for cost-benefit analysis, risk assessment, 
and peer review; improve agency analytical practices; and 
arrange for research to improve regulatory analysis.

F. Comparative risk analysis

    OMB, in consultation with OSTP, would arrange for a study 
to compare and rank health, safety, and environmental risks; to 
improve methodologies for comparing various risks; and to make 
recommendations on using comparative risk analysis to set 
agency priorities for reducing such risks. Each relevant agency 
would use the results of the study to inform the agency in the 
preparation of its budget and strategic plans and performance 
plans under the Government Performance and Results Act.

G. Review of existing rules

    Agencies would be required to conduct periodic reviews of 
existing regulations to modernize them and to reduce undue 
regulatory burdens. Agencies would issue 5-year schedules for 
the review of selected economically significant rules.
    To ensure that agencies are more sensitive to the burdens 
of regulation on small businesses and small governments, the 
legislation would amend Section 610 of the Regulatory 
Flexibility Act (``RFA''). Every 5 years, agencies would be 
required to identify their RFA rules and develop review plans. 
Each year, agencies would list the selected rules to be 
reviewed that year. The Chief Counsel for Advocacy of the Small 
Business Administration and the Administrator of the OMB's 
Office of Information and Regulatory Affairs (``OIRA'') would 
oversee the review process.

H. Executive oversight

    OIRA would supervise and oversee implementation of the 
requirements of this legislation and would systematically 
review agencies' regulatory proposals, subject to public 
disclosure requirements.

                             II. BACKGROUND

    Since 1946, the federal regulatory process has been guided 
by the Administrative Procedure Act (``APA''), 5 U.S.C. 
Sec. Sec. 551-558. The APA was enacted following the dramatic 
delegation of discretionary authority to Executive Branch 
agencies stemming from the New Deal. It has served for over 50 
years as the blueprint for how agencies issue regulations.
    With the rapid growth of complex and wide-ranging 
regulatory programs since the late 1960s, the limited 
procedures of the APA have been faced with new challenges. This 
has moved the Committee over the years to review the adequacy 
of the regulatory process. Since 1981, three comprehensive 
bills have been reported by the Committee, though none of these 
has been enacted into law. S. 981, the ``Regulatory Improvement 
Act of 1998,'' is the product of the Committee's work and 
experience in this area. -

A. Executive branch action on regulatory reform

    The Committee's concern about the adequacy and 
effectiveness of the federal regulatory process has paralleled 
a growing interest in centralized control and review by the 
president. The assertion of presidential authority over the 
rulemaking process began in 1971, when President Richard Nixon 
established ``Quality of Life Reviews'' for certain U.S. 
Environmental Protection Agency (``EPA'') regulations. Every 
President since Richard 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 implemented the most dramatic 
reform over the rulemaking process when he issued Executive 
Order 12291 in 1981. This was a significant extension of an 
evolving centralized review process, and it required that all 
rules be reviewed by the Office of Information and Regulatory 
Affairs in the Office of Management and Budget before being 
issued in proposed or final form. It also required that each 
agency analyze the costs and benefits of each major rule and 
that, to the extent permitted by law, agencies issue rules only 
if the potential benefits of the rule outweighed the potential 
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 
Reagan's Executive Orders.
    In 1993, President Bill Clinton replaced E.O. 12291 with 
E.O. 12866, which continues the requirement for 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--and it requires that, to the extent permitted by law, 
agencies issue rules ``only upon a reasoned determination that 
the benefits of the intended regulation justify its costs.'' 
Centralized regulatory review by the President, using OMB, is 
critical to achieving the goals of this legislation: thorough 
analyses of regulatory proposals, balanced consideration of 
diverse viewpoints, effective coordination among agencies, and 
a cost-effective regulatory system.\3\
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    \3\ The Committee's oversight of the regulatory process has been 
continuous and longstanding. When Senator Glenn chaired the Committee, 
he held numerous hearings on President Reagan's Executive Order and the 
Competitiveness Council under President Bush. Senator Thompson held a 
hearing on President Clinton's Executive Order and other initiatives. 
As the Committee has viewed the regulatory process over a long period 
of time and from a variety of perspectives, there has been a consensus 
among a majority of the Committee on the need for a more transparent, 
effective, and accountable centralized review process.
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B. The Need for Regulatory Reform Legislation

    OMB recently reported that there are over 130,000 pages of 
federal regulations, ``with about 60 federal agencies issuing 
regulations at a rate of about 4,000 per year. * * * Federal 
regulations now affect virtually all individuals, businesses, 
State, local and tribal governments, and other organizations in 
virtually every aspect of their lives or operations.'' \4\
---------------------------------------------------------------------------
    \4\ Office of Management and Budget, Office of Information and 
Regulatory Affairs, Report to Congress on the Costs and Benefits of 
Federal Regulations (Sept. 30, 1997). The OMB report was required by 
the Regulatory Accounting Amendment of Senator Ted Stevens, who was 
then the Chairman of the Governmental Affairs Committee. The Stevens 
Regulatory Accounting Amendment was modeled on the earlier and more 
detailed regulatory accounting provision in S. 291, the ``Regulatory 
Reform Act of 1995.'' The Stevens Amendment was contained in Section 
645 of the Treasury, Postal Services and General Government 
Appropriations Act, 1997 (Pub. L. 104-208), 1996 U.S.S.C.A.N. (110 
Stat. 3009): 1088-89.
---------------------------------------------------------------------------
    The Committee is well aware of the importance of sensible 
regulation in improving the quality of life for the American 
people. Regulation can help achieve important social and 
economic goals such as a clean environment, safe products, a 
safe workplace, and reliable economic markets. Over the past 25 
years, the nation has made tremendous progress protecting 
public health, safety, and the environment and improving our 
quality of life. We no longer have rivers catching fire. Our 
air is cleaner.\5\ And American technology and expertise is in 
demand around the world. But more challenges lie ahead.
---------------------------------------------------------------------------
    \5\ See Testimony of Carol M. Browner, Administrator, U.S. 
Environmental Protection Agency, before the Senate Committee on 
Governmental Affairs, S. Hearing 104-419, March 8, 1995.
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    Achieving the benefits of regulatory programs does not come 
without cost. In a recent report to Congress, OMB estimated 
that the annual cost of regulation of the environment, health, 
safety and the economy is about $300 billion.\6\ These costs 
are often passed on indirectly to the American consumer and 
taxpayer through higher prices, diminished wages, increased 
taxes, or reduced government services.\7\ Although deregulation 
in the 1970s and 1980s reduced the burden of economic 
regulation, the total cost of noneconomic or ``social'' 
regulation has been rising substantially. At the same time, 
there is strong public support for the benefits that well-
designed regulations can produce.
---------------------------------------------------------------------------
    \6\ Office of Management and Budget, Office of Information and 
Regulatory Affairs, Report to Congress on the Costs and Benefits of 
Federal Regulations (Sept. 30, 1997). Other studies, which include the 
full costs of paperwork and economic transfers, estimate that 
regulation costs about $700 billion annually. See, e.g., U.S. Small 
Business Administration, The Changing Burden of Regulation, Paperwork, 
and Tax Compliance on Small Business: A Report to Congress (Oct. 1995).
    \7\ See, e.g., Resources for the Future, Public Policies for 
Environmental Protection (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).
---------------------------------------------------------------------------
    As the public demands better results while the costs of 
regulation rise, the need for a smarter, more cost-effective 
approach to regulation is more important than ever. The depth 
of this need is not widely appreciated because the costs of 
regulation are not as obvious as many other costs of 
government, such as taxes, and the benefits of regulation often 
are diffuse. But there is substantial evidence that the current 
regulatory system often misses opportunities for greater 
benefits and lower costs. 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.'' \8\
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    \8\ Testimony of Sally Katzen, Administrator of OIRA, before the 
Senate Committee on Governmental Affairs, S. Hearing 104-372, February 
22, 1995.

    The new challenges facing the regulatory system were not 
envisioned by the drafters of the Administrative Procedure Act 
some 50 years ago. While the APA has successfully adapted to 
many changes in the regulatory process, it was not designed to 
address the current regulatory landscape. Since the APA was 
passed, the goal of much federal regulation has changed from 
curbing monopoly power to addressing risks to the environment, 
health, and safety; the form of most federal regulation has 
changed from adjudication to informal rulemaking; and the scope 
of federal regulation has vastly expanded from single 
industries to economy-wide activity.
    These dramatic changes have brought new problems that must 
be solved: agencies may fail to balance the benefits and costs 
of regulations, fail to find flexible and cost-effective 
solutions, orfail to consider unintended harms. Moreover, the 
rulemaking process is not sufficiently understandable to the public, 
nor is it as accountable as it should be.
    To date, cost-benefit analysis, so important to the 
development of economically significant rules, has been 
generally required only through executive order and not through 
a statutory framework. There are no government-wide 
requirements for conducting risk assessments. Much of the 
analytical work of a rulemaking agency is done before the 
public has the opportunity to comment, and both the policy and 
scientific basis for the agency's choices are often unclear to 
the public, through obscure and hard-to-read rulemaking files 
or through the failure of the agency to make its thinking clear 
and readily available to the public.\9\
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    \9\ See, e.g., Testimony of L. Nye Stevens, Director, Federal 
Management and Workforce Issues, General Government Division, GAO, 
before the Senate Committee on Governmental Affairs, S. Hearing 105-
335, September 12, 1997; Statement of L. Nye Stevens, Director, Federal 
Management and Workforce Issues, General Government Division, GAO, 
before the Senate Committee on Governmental Affairs, February 24, 1998; 
GAO, Regulatory Reform: Changes Made to Agencies' Rules Are Not Always 
Clearly Documented, GAO/GGD-98-31 (Jan. 1998); GAO, Cost-Benefit 
Analysis Can Be Useful in Assessing Environmental Regulations, Despite 
Limitations, GAO/RCED-84-62 (April 6, 1984).
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    S. 981 seeks to address these problems. Central to that 
effort is the use of accurate and thoughtful cost-benefit 
analysis and risk assessment. We know that analyzing the costs 
and benefits of regulatory proposals is no longer an 
intellectual curiosity or academic exercise: it is a necessity. 
In its recent Report to Congress on the Costs and Benefits of 
Federal Regulations, OMB concluded:

          [R]egulations (like other instruments of government 
        policy) have enormous potential for both good and harm. 
        Well-chosen and carefully crafted regulations can 
        protect consumers from dangerous products and ensure 
        they have information to make informed choices. Such 
        regulations can limit pollution, increase worker 
        safety, discourage unfair business practices, and 
        contribute in many other ways to a safer, healthier, 
        more productive, and more equitable society. Excessive 
        or poorly designed regulations, by contrast, can cause 
        confusion and delay, give rise to unreasonable 
        compliance costs in the form of capital investments, 
        labor and on-going paperwork, retard innovation, reduce 
        productivity, and accidentally distort private 
        incentives.
          The only way we know how to distinguish between the 
        regulations that do good and those that cause harm is 
        through careful assessment and evaluation of their 
        benefits and costs. Such analysis can also often be 
        used to redesign harmful regulations so they produce 
        more good than harm and redesign good regulations so 
        they produce even more net benefits.\10\
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    \10\ Office of Management and Budget, Office of Information and 
Regulatory Affairs, Report to Congress on the Costs and Benefits of 
Federal Regulations (Sept. 30, 1997), at 10.

    Current practices in this regard need significant 
improvement. In 1996, Robert Hahn of the American Enterprise 
Institute published one of the most comprehensive analyses of 
the benefits and costs of recent environmental, health, and 
safety regulations.\11\ Hahn concluded that about half the 
final rules analyzed in the study would not pass a cost-benefit 
test. Hahn's study also showed that the quality of federal 
agency cost-benefit analyses varies widely ``from very poor to 
very good'' and that we could ``realize significant gains by 
more carefully targeting regulations.'' In 1997, Richard 
Morgenstern, an EPA official on leave with Resources for the 
Future, published a thorough analysis of 12 major rules from 
EPA subject to economic analysis.\12\ Morgenstern concluded 
that the economic analyses helped reduce the costs of all 12 of 
the rules and, at the same time, helped increase the benefits 
of five of them. Studies by the U.S. General Accounting Office 
(``GAO'') have echoed such findings.\13\
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    \11\ Robert W. Hahn, ``Regulatory Reform: What Do the Government's 
Numbers Tell Us?,'' in Risks, Costs, and Lives Saved, (Robert W. Hahn, 
ed. 1996). See also, Testimony of Robert W. Hahn before the 
Subcommittee on Financial Management and Accountability, Senate 
Committee on Governmental Affairs, S. Hearing 104-825, September 25, 
1996.
    \12\ Resources for the Future, Economic Analyses at EPA (Richard D. 
Morgenstern, ed. 1997).
    \13\ See, e.g., Statement of L. Nye Stevens, Director, Federal 
Management and Workforce Issues, General Government Division, GAO, 
before the Senate Committee on Governmental Affairs, February 24, 1998; 
Testimony of L. Nye Stevens, Director, Federal Management and Workforce 
Issues, General Government Division, GAO, before the Senate Committee 
on Governmental Affairs, September 12, 1997; GAO, Cost-Benefit Analysis 
Can Be Useful in Assessing Environmental Regulations, Despite 
Limitations, GAO/RCED-84-62 (April 6, 1984).
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    There is broad support for reforming the regulatory process 
and the tools to accomplish that goal, including cost-benefit 
analysis, market-based mechanisms, risk-assessment, and 
comparative risk analysis. This support comes from diverse 
sources, such as the National Research Council,\14\ the Harvard 
Center for Risk Analysis,\15\ the American Enterprise 
Institute,\16\ the Brookings Institution,\17\ the Clinton 
Administration,\18\ Justice Stephen Breyer,\19\ the Carnegie 
Commission,\20\ Resources for the Future,\21\ and other think 
tanks, commissions, and independent scholars throughout the 
country.\22\ The strong record on the need for regulatory 
reform and the tools to achieve it has contributed to this 
legislation.
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    \14\ See, e.g., National Research Council, ``Understanding Risk: 
Informing Decisions in a Democratic Society'' (1996); National Research 
Council, ``Science and Judgement in Risk Assessment,'' National Academy 
Press, Washington, D.C. (1994); National Research Council, ``Issues in 
Risk Management,'' 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).
    \15\ See, e.g., Harvard Center for Risk Analysis, Reform of Risk 
Regulation: Achieving More Protection at Less Cost (March 1995); John 
D. Graham, ``Making Sense of Risk: An Agenda for Congress,'' in Risks, 
Costs, and Lives Saved (Robert W. Hahn, ed. 1996); ``The Greening of 
Industry: A Risk Management Approach,'' Harvard University Press (John 
D. Graham & Jennifer Kassalow Hartwell, eds. 1997).
    \16\ See, e.g., American Enterprise Institute & Brookings 
Institution, ``An Agenda for Regulatory Reform'' (Robert W. Hahn & 
Robert E. Litan, eds. 1997); American Enterprise Institute & Brookings 
Institution, ``Improving Regulatory Accountability'' (Robert W. Hahn & 
Robert E. Litan, eds. 1997); American Enterprise Institute, The 
Annapolis Center & Resources for the Future, ``Benefit-Cost Analysis in 
Environmental, Health, and Safety Regulation'' (1996); 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 & Bruce Yandle, eds. 1979); M.J. 
Bailey, ``Reducing Risks to Life: Measurement of Benefits,'' American 
Enterprise Institute, Washington, D.C. (1980); Robert W. Hahn & J.A. 
Hird, ``The Costs and Benefits of Regulation,'' 8 Yale J. on Reg. 233 
(Winter 1991).
    \17\ 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).
    \18\ Office of Management and Budget, Office of Information and 
Regulatory Affairs, Report to Congress on the Costs and Benefits of 
Federal Regulations (Sept. 30, 1997), at 2 (cost-benefit analysis 
significantly enhances the consideration of alternative approaches to 
achieving regulatory goals, ultimately producing more benefits and 
fewer costs); National Performance Review, Creating a Government that 
Works Better and Costs Less, Washington, D.C. (1993); National 
Performance Review, Improving Regulatory Systems, Washington, D.C. 
(Sept. 1993).
    \19\ Stephen Breyer, ``Breaking the Vicious Circle: Toward 
Effective Risk Regulation,'' Harv. Univ. Press, Cambridge, MA (1993); 
Stephen Breyer, Regulation and its Reform (1982).
    \20\ Carnegie Commission on Science, Technology, and Government, 
Risk and the Environment: Improving Regulatory Decisionmaking, 
Washington, D.C. (June 1993).
    \21\ J. Clarence Davies & Jan Mazurek, Pollution Control in the 
United States, Resources for the Future (1998); Paul R. Portney, Public 
Policies for Environmental Protection, Resources for the Future (1990); 
Paul R. Portney, ``Economics and the Clean Air Act,'' 4 J. Econ. 
Perspectives 173 (Fall 1990); Resources for the Future, Worst Things 
First?: The Debate Over Risk-Based National Environmental Priorities, 
Washington, D.C. (Adam N. Finkel and Dominic Golding, eds. 1994).
    \22\ See, e.g., Cass R. Sunstein, ``Congress, Constitutional 
Moments, and the Cost-Benefit State,'' 2 Stan. L. Rev. 247 (1996); Cass 
R. Sunstein, ``Health-Health Tradeoffs,'' 63 U. Chi. L. Rev. 1533 
(1996); Cass R. Sunstein, ``After the Rights Revolution,'' Harv. Univ. 
Press, Cambridge, MA (1990); National Academy of Public Administration, 
Resolving the Paradox of Environmental Protection: An Agenda for 
Congress, EPA & the States, (Sept. 1997); Enterprise for the 
Environment, The Environmental Protection System in Transition: Toward 
a More Desirable Future (Jan. 1998); Marian R. Chertow & Daniel C. 
Esty, Thinking Ecologically: The Next Generation of Environmental 
Policy (1997); Murray L. Weidenbaum, ``Business and Government in the 
Global Marketplace,'' Prentice Hall, Englewood Cliffs, NJ (5th ed. 
1995); W. Kip Viscusi, ``Fatal Tradeoffs: Public and Private 
Responsibilities for Risk,'' Oxford Univ. Press, NY (1990). See also, 
Administrative Conference of the United States, 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).
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C. 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, legislative proposals, and 
oversight of the regulatory process, the Committee has 
developed a broad expertise on the strengths and weaknesses of 
the regulatory process and proposals for reform. This expertise 
has contributed to the development of S. 981.
    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 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 system, from public participation in 
the regulatory process, to the role of congressional 
oversight.\23\ 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 on 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 adequately to account for costs, the possibility of 
alternative regulatory solutions, or no regulation at all.\24\
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    \23\ 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).
    \24\ 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 
      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 \25\ and 97th \26\ Congresses. These led 
to the introduction of S. 1080, the ``Regulatory Reform Act of 
1981,'' which was jointly referred to the Governmental Affairs 
Committee and the Judiciary Committee. After receiving 
unanimous support in Committee, S. 1080 passed the full Senate 
in 1982 by a vote of 94-0. S. 1080 reflected the increasing 
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 often are 
questionable. Although S. 1080 was overwhelmingly endorsed by 
the Senate, it was not acted on in the House of Representatives 
and died there.
---------------------------------------------------------------------------
    \25\ Hearings on Regulatory Legislation, Senate Committee 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).
    \26\ Hearings on Regulatory Reform Legislation of 1981, Senate 
Committee 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).
---------------------------------------------------------------------------
    Early in the 104th Congress, Chairman Bill Roth introduced 
legislation to improve the regulatory process, S. 291, the 
``Regulatory Reform Act of 1995.'' S. 291 contained some of the 
basic elements of S. 1080, such as cost-benefit analysis, 
centralized regulatory review, and periodic review of existing 
rules. S. 291 added other requirements, such as risk assessment 
of major environmental, health and safety rules, regulatory 
accounting, and comparative risk analysis for setting more 
rational regulatory priorities. S. 291 was reported unanimously 
by the Committee.
    Another regulatory reform bill, S. 343, the ``Comprehensive 
Regulatory Reform Act of 1995,''was introduced early in the 
104th Congress. S. 343 covered many of the same issues as S. 1080 and 
S. 291, but differed in some major respects. For example, the cost-
benefit requirements were ``decisional criteria'' that would have 
amended the substantive standards of the statutes authorizing the 
regulations. The decisional criteria would have required agencies to 
select, as a matter of law, the regulatory alternative with the 
greatest net benefits. S. 343 also contained a process to allow parties 
to petition agencies to review existing rules. S. 343 was jointly 
referred to the Governmental Affairs Committee and the Judiciary 
Committee.
    After the Governmental Affairs Committee unanimously passed 
S. 291, the Judiciary Committee reported out S. 343. S. 343 
became the subject of extensive negotiations before it was 
brought to the floor for consideration during the summer of 
1995. The long floor debate ended after three unsuccessful 
cloture votes on S. 343 and a close vote defeating the Glenn-
Chafee substitute amendment, which was based on S. 291.
    Following the contentious regulatory reform debate of the 
104th Congress, Senators Levin and Thompson agreed to work 
together to develop bipartisan reform legislation. S. 981 is 
rooted in past Committee initiatives but has been significantly 
streamlined and modified to reflect advances in administrative 
law, policy, and science. This legislation is grounded in a 
philosophy of greater transparency, better informed decision 
making, and increased accountability. This philosophy was 
supported by the growing Committee record on the shortcomings 
of the regulatory process.
    In 1996, Senator Thompson, then Chairman of the 
Subcommittee on Financial Management and Accountability, 
initiated oversight on the implementation of the 
Administration's Executive Order 12866 and other initiatives to 
reinvent regulation. The Committee heard testimony from many 
witnesses and reviewed investigations of the GAO indicating 
that E.O. 12866 and the Administration's ``Cutting Red Tape'' 
initiative were not performing as well as intended.
    When Senator Thompson became Chairman of the Committee in 
1997, he initiated a series of GAO investigations of the 
regulatory process with Ranking Member John Glenn. These 
investigations reviewed implementation of Title II of the 
Unfunded Mandates Reform Act of 1995; agency efforts to 
eliminate and revise existing regulations; agency documentation 
of changes made to regulatory proposals during the OMB review 
process; and agency use of cost-benefit analysis. All of these 
investigations indicated that the current regulatory process is 
inadequate.\27\
---------------------------------------------------------------------------
    \27\ See GAO, Unfunded Mandates: Reform Act Has Little Effect on 
Agencies' Rulemaking Actions, GAO/CGD-98-30 (Feb. 1998); GAO/GGD-98-30 
(Feb. 1998); GAO, Regulatory Reform: Changes Made to Agencies' Rule Are 
not Always Clearly Documented, GAO/GGD-98-31 (Jan. 1998) (; GAO, 
Regulatory Reform: Agencies' Efforts to Eliminate and Revise Rules 
Yield Mixed Results, GAO/GGD-98-3 (Oct. 1997).
---------------------------------------------------------------------------
    On September 12, 1997 and February 24, 1998, the Committee 
held hearings on S. 981. During these hearings and the 
Committee's drafting process, many individuals representing 
diverse sectors of our society strongly supported the 
legislation, including many State and local government 
organizations; the National Academy of Sciences; the American 
Farm Bureau Federation; many educational organizations; the 
GAO; John Graham, Director of the Harvard Center for Risk 
Analysis; Bob Hahn of the American Enterprise Institute; Bob 
Litan of the Brookings Institution; Warren Belmar, Chair of the 
Administrative Law Section of the American Bar Association; the 
National Federation of Independent Businesses; Paul Portney, 
President of Resources for the Future; former Federal 
regulators; the Alliance for Understandable, Sensible and 
Accountable Regulation; and many other scholars, officials, and 
experts on the regulatory process. Their comments included the 
following:
    Governor George V. Voinovich of Ohio, Chairman of the 
National Governors' Association (``NGA''), and Governor E. 
Benjamin Nelson of Nebraska, Chairman of the NGA Committee on 
Natural Resources, said in their testimony:

          We believe that risk assessment and cost benefit 
        analysis are important tools that can better inform 
        regulatory decisions while improving the protection of 
        public health, safety, and the environment. We believe 
        that the regulatory improvements required by [S. 981] 
        will enable federal officials to do a better job of 
        protecting public health, safety, and the environment 
        in a number of ways.\28\
---------------------------------------------------------------------------
    \28\ Testimony of the Honorable George V. Voinovich, Governor of 
Ohio and Chairman of the National Governors' Association (NGA), and the 
Honorable E. Benjamin Nelson, Governor of Nebraska and Chair of the NGA 
Committee on Natural Resources, before the Senate Committee on 
Governmental Affairs, February 24, 1998.

    Dr. Milton Russell, former Assistant Administrator of EPA, 
---------------------------------------------------------------------------
told the Committee:

          In contrast to previous proposals, which I did not 
        support, I believe that S. 981 casts the correct 
        balance in encouraging appropriate analysis to assure 
        effective and efficient regulation, in avoiding 
        counterproductive, excessive review by the courts, and 
        in ensuring that regulation moves swiftly to 
        implementation to protect the health and safety of the 
        American people and of the environment.\29\
---------------------------------------------------------------------------
    \29\ Testimony of Dr. Milton Russell, Senior Fellow, Joint 
Institute for Energy and Environment, Professor Emeritus of Economics 
at University of Tennessee, before the Senate Committee on Governmental 
Affairs, February 24, 1998.

    Nye Stevens, Director of Federal Management and Workforce 
---------------------------------------------------------------------------
Issues in GAO's General Government Division, said:

          The bill [S. 981] thoughtfully addresses many issues 
        in regulatory management that have long been the 
        subject of controversy. * * * S. 981 contains a number 
        of provisions to improve regulatory management. * * * 
        Passage of S. 981 would provide a statutory foundation 
        for such principles as openness, accountability, and 
        sound science in rulemaking.\30\
---------------------------------------------------------------------------
    \30\ Testimony of L. Nye Stevens, Director, Federal Management and 
Workforce Issues, General Government Division, General Accounting 
Office, before the Senate Committee on Governmental Affairs, September 
12, 1997.

    Dr. Bruce Alberts, President of the National Academy of 
---------------------------------------------------------------------------
Sciences, told the Committee:

          [M]any scientists and engineers who have devoted 
        their careers to working on environmental problems are 
        puzzled as to why anyone might oppose S. 981.\31\
---------------------------------------------------------------------------
    \31\ Testimony of Dr. Bruce Alberts, President, National Academy of 
Sciences, before the Senate Committee on Governmental Affairs, February 
24, 1998.

    These parties and others expressed strong support for the 
need for better use of cost-benefit analysis and risk 
assessment, more serious consideration of flexible regulatory 
approaches, more rational priority-setting, stronger regulatory 
review by OMB, and more serious review of existing regulations.
    Others, including representatives of environmental, public 
safety, and labor groups, opposed the bill. They argued that 
the requirement that agencies state whether the proposed rule 
the agency selected is likely to have benefits that justify the 
costs or is likely to be more cost-effective or have greater 
net benefits than the other regulatory alternatives considered 
by the agency would ``restrict current authority'' \32\ of 
agencies to issue protective regulations and that ``lengthy 
delays in issuing rules due to analytical demands and review 
procedures * * * would sharply increase the time, difficulty, 
and costs of developing new safeguards.''\33\ They also argued 
against the peer review requirements of the bill \34\ and the 
provisions requiring the review of rules.\35\
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    \32\ Testimony of David Hawkins, Senior Attorney, Natural Resources 
Defense Council, before the Senate Governmental Affairs Committee, 
September 12, 1997.
    \33\ Testimony of David Hawkins, Senior Attorney, Natural Resources 
Defense Council, before the Senate Governmental Affairs Committee, 
September 12, 1997.
    \34\ Testimony of David Vladek, Director, Public Citizen Litigation 
Group, before the Senate Governmental Affairs Committee, September 12, 
1997; Testimony of Dr. Franklin E. Mirer, Director of Health and Safety 
Department, United Auto Workers, before the Senate Governmental Affairs 
Committee, February 24, 1998.
    \35\ Testimony of Karen Florini, Senior Attorney, Environmental 
Defense Fund, before the Senate Governmental Affairs Committee, 
February 24, 1998.
---------------------------------------------------------------------------
    The Committee considered at length the concerns raised by 
the witnesses opposed to S. 981. Many of the issues raised by 
the bill's opponents were addressed in the substitute amendment 
offered by Senators Levin and Thompson on February 4, 1998, and 
adopted at the markup. Others were adopted by the Committee as 
amendments during markup. (See Section III.) In the end, the 
Committee disagrees with the analysis of the organizations 
opposing the bill for the reasons identified and explained 
throughout this report.

          III. LEGISLATIVE HISTORY AND COMMITTEE CONSIDERATION

A. Committee Hearings

    On September 12, 1997, the Governmental Affairs Committee 
held its first hearing on S. 981. This hearing built on the 
Committee's extensive hearing record and legislative history on 
regulatory reform from the 104th Congress. Testifying at this 
hearing were Sally Katzen, the Administrator of OMB's Office of 
Information and Regulatory Affairs; L. Nye Stevens, the 
Director of Federal Management and Workforce Issues, General 
Government Division, General Accounting Office; Thomas F. 
Walton, Director of Economic Policy, General Motors 
Corporation, on behalf of the Alliance for Understandable, 
Sensible and Accountable Regulation; Sal Risalvato, a small 
business owner, on behalf of the National Federation of 
Independent Business; James L. Martin, Director, Office of 
State-Federal Affairs, National Governors' Association; Ernest 
Gellhorn, Professor of Law, George Mason University School of 
Law; John D. Graham, Director of the Harvard Center for Risk 
Analysis; C. Boyden Gray, Partner, Wilmer, Cutler and Pickering 
and former White House Counsel to the Presidential Task Force 
on Regulatory Relief; David G. Hawkins, Senior Attorney, 
Natural Resources Defense Council; Paul R. Portney, President, 
Resources for the Future; and David Vladek, Director, Public 
Citizen Litigation Group.
    The Committee held its second regulatory reform hearing on 
February 24, 1998. The first two witnesses were the Honorable 
George Voinovich, Governor of Ohio and President of the 
National Governors' Association, and the Honorable Ben Nelson, 
Governor of Nebraska and Chairman of the Committee on Natural 
Resources, National Governors' Association. Also testifying 
were Dr. Milton Russell, Senior Fellow of the Joint Institute 
for Energy and the Environment and Professor Emeritus at the 
University of Tennessee; Nancy Donley, President, Safe Tables 
Our Priority; Sue Doneth, Member, Safe Tables Our Priority; Dr. 
Lester Crawford, Georgetown Center for Food and Nutrition 
Policy; Michael Resnick, National School Boards Association; 
Dr. Bruce Alberts, President, National Academy of Sciences; 
Warren Belmar, Chair, ABA Administrative Law Committee; Frank 
Mirer, Director of Health and Safety, United Auto Workers; 
Karen Florini, Senior Attorney, Environmental Defense Fund; 
Robert Litan, Director of Economic Studies and Cabot Family 
Chairholder of Economics, Brookings Institution; and Robert 
Hahn, Resident Scholar, American Enterprise Institute.

B. Amendments and Committee Action

    On March 10, 1998, the Committee on Governmental Affairs 
marked up and favorably reported S. 981 in the nature of a 
substitute by a vote of 8 to 4. Voting in the affirmative were 
Senators Thompson, Levin, Nickles, Glenn, Stevens, Cochran, 
Collins, and Brownback. Voting in the negative were Senators 
Lieberman, Akaka, Durbin, and Cleland. In addition, Senators 
Roth and Domenici voted in the affirmative by proxy, and 
Senator Torricelli voted in the negative by proxy.
    Moreover, a number of amendments were offered, debated and 
voted upon. The following were adopted:
    (1) Senator Cleland offered an amendment to clarify the 
savings clause (adopted by voice vote), as amended by Chairman 
Thompson's second degree amendment (adopted 9-5). Voting in the 
affirmative on Chairman Thompson's second degree amendment were 
Senators Roth (by proxy), Collins, Brownback, Domenici, 
Cochran, Nickles, Glenn, Levin, and Thompson. Votingin the 
negative were Senators Lieberman, Akaka, Durbin (by proxy), Torricelli, 
and Cleland.
    (2) Senator Nickles offered an amendment to broaden the 
scope of information considered by agencies when conducting 
risk assessments (adopted by voice vote), as amended by 
Chairman Thompson's second degree amendment (adopted by voice 
vote).
    (3) Senator Nickles offered an amendment to amend the 
definition of ``risk assessment'' to ensure that agency risk 
assessments are scientifically objective and based on the 
weight of the evidence (adopted by voice vote), as amended by 
Senator Levin's second degree amendment (adopted by voice 
vote).
    (4) Senator Nickles offered an amendment to ensure that 
agencies consider and determine whether to adopt flexible 
regulatory options (adopted by voice vote).
    (5) Senator Nickles offered an amendment to ensure that 
agencies describe flexible regulatory options considered and 
provide an explanation if they are not adopted (adopted by 
voice vote).
    (6) Senator Lieberman offered an amendment to encourage 
agencies to consider regulatory options that protect sensitive 
subpopulations, or populations exposed to multiple and 
cumulative risks (adopted by voice vote).

                        iv. administration views

    OMB Director Franklin Raines delivered a letter to the 
Committee the day before the mark-up, expressing the 
Administration's views on S. 981.\36\ Mr. Raines stated that 
the Administration ``believes strongly in responsible 
regulatory reform.'' He said that the bill presented to the 
Committee for mark-up contained ``significant improvements 
over'' the bill as introduced. However, Mr. Raines wrote that 
``[w]hile the substitute is responsive to many of our 
concerns,'' the Administration ``concluded that the bill does 
not yet meet the test we have articulated, and therefore the 
Administration would oppose the bill if it were to be adopted 
in its current form.'' Mr. Raines then proceeded to identify 
seven concerns the Administration has with the bill and 20 
possible amendments that would address those concerns.
---------------------------------------------------------------------------
    \36\ Letter of OMB Director Franklin D. Raines to Chairman Fred 
Thompson, March 6, 1998.
---------------------------------------------------------------------------

                     v. section-by-section analysis

Section 1. Short title

    The name of this legislation is the ``Regulatory 
Improvement Act of 1998''.

Section 2. Findings

    Section 2 lays out eight basic findings by the Committee. 
These findings underscore both the strengths and limitations of 
regulatory analysis and review. The findings also reflect the 
experience and expertise of the Committee, as informed by 
scores of experts, government officials, and stakeholders in 
the regulatory process.\37\ These findings are as follows:
---------------------------------------------------------------------------
    \37\ See, e.g., Letter of Baruch Fishoff, Professor of Social and 
Decision Sciences and Professor of Engineering and Public Policy, 
Carnegie Mellon University, to Chairman Fred Thompson, July 15, 1997, 
S. Hearing 105-535, at 294 (``The Findings are a remarkably succinct 
summary of what we have learned over the past 20 years regarding the 
role of analysis in regulation. We would be much better off as a 
society were the wisdom in them more widely understood and accepted.'')
---------------------------------------------------------------------------
    First, effective regulatory programs provide important 
benefits to the public, including improving the environment, 
worker safety, and public health. Regulatory programs also 
impose significant costs on the public, including individuals, 
businesses, and State, local, and tribal governments.
    Second, improving the ability of Federal agencies to use 
scientific and economic analysis in developing regulations 
should yield increased benefits and more effective protections 
while minimizing costs.\38\
---------------------------------------------------------------------------
    \38\ See, e.g., Testimony of Paul R. Portney, President, Resources 
for the Future, before the Senate Committee on Governmental Affairs, 
September 12, 1997 (Under this legislation, ``we might be able to shave 
off a chunk of the nearly $300 billion OIRA estimates we spend each 
year on environmental, health and safety regulation * * * without 
compromising the benefits we get from regulations. * * * Even a cynical 
public ought to warm to a $30 billion `free lunch' each year that does 
not compromise the quality of their environment or safety of their food 
and other products they consume each year.''); Testimony of John D. 
Graham, Director, Harvard Center for Risk Analysis, before the Senate 
Committee on Governmental Affairs, September 12, 1997.
---------------------------------------------------------------------------
    Third, cost-benefit analysis and risk assessment are useful 
tools to better inform agencies in developing regulations, 
although they do not replace the need for good judgment and 
consideration of values.
    Fourth, the evaluation of costs and benefits must involve 
the consideration of the relevant information, whether 
expressed in quantitative or qualitative terms, including 
factors such as social values, distributional effects, and 
equity.
    Fifth, cost-benefit analysis and risk assessment should be 
presented with a clear statement of the analytical assumptions 
and uncertainties, including an explanation of what is known 
and not known and what the implications of alternative 
assumptions might be.
    Sixth, the public has a right to know about the costs and 
benefits of regulations, the risks addressed, the risks 
reduced, and the quality of scientific and economic analysis 
used to support decisions. Such knowledge will promote the 
quality, integrity and responsiveness of agency actions.
    Seventh, the Administrator of the Office of Information and 
Regulatory Affairs should oversee regulatory activities to 
raise the quality and consistency of cost-benefit analysis and 
risk assessment among all agencies.
    Eighth, the Federal Government should develop a better 
understanding of the strengths, weaknesses, and uncertainties 
of cost-benefit analysis and risk assessment and conduct the 
research needed to improve these analytical tools.
    This legislation is designed to elevate the use of modern 
decisionmaking tools, such as riskassessment and cost-benefit 
analysis, to make the regulatory process more transparent, more 
efficient and effective, and more accountable to the public.

Section 3. Analysis of agency rules

    Section 3(a) substantially amends chapter 6 of title 5, 
United States Code. Section 3(a) creates three new subchapters. 
Subchapter II requires analysis of agency rules, including 
cost-benefit analysis, risk assessment, peer review, and 
guidelines, as well as a comparative risk analysis study. 
Subchapter III requires the review of rules. Subchapter IV 
requires executive oversight of the rule making process. 
Section 3(b) amends Section 610 of the Regulatory Flexibility 
Act, heretofore chapter 6 of title 5 (hereafter subchapter I), 
to promote agency review of rules significantly affecting small 
businesses and small governments. Section 3(c) is a savings 
clause, stating that the current legislation does not limit any 
of the President's constitutional duties and authorities, 
including the authority to review regulatory actions not 
covered by this legislation. 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, III and IV of the bill--the regulatory 
analysis, review of rules, and executive oversight 
requirements. This definition includes the independent 
regulatory agencies within the scope of this legislation. Thus, 
the requirements to identify major rules, to perform cost-
benefit analyses and risk assessments, and to review existing 
rules would apply not only to departments and other executive 
agencies, but also to the independent regulatory agencies, such 
as the Federal Energy Regulatory Commission, the Nuclear 
Regulatory Commission, and the Consumer Product Safety 
Commission.
    This legislation also would require 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 
includes the review of proposed and final major rules by OMB's 
Office of Information and Regulatory Affairs. Since 1981, 
OIRA'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 process voluntary. The Committee believes 
that the provisions of this legislation should apply to all 
Executive Branch agencies, including the independent regulatory 
agencies. The growing need for more efficient and effective 
government regulation, as well as for more coherent management 
of the Executive Branch, supports lowering some walls that have 
separated the independent agencies from other Executive Branch 
agencies.\39\ Specific exemptions are provided within the 
definition of ``rule'' where this Committee or other 
authorizing Committees determined that there would not be 
significant benefits from regulatory analysis or OIRA review.
---------------------------------------------------------------------------
    \39\ See, e.g., ACUS Recommendation 95-3: ``Review of Existing 
Agency Regulations'' (1995); Administrative Law Conference of the 
United States: Recommendation 88-9: ``Presidential Review of Agency 
Rulemaking'' (1988); American Bar Association, Commission on Law and 
the Economy, Federal Regulation: Roads to Reform (1979), at 108; 
American Bar Association, Administrative Law Report No. 110 (1986); 
Peter L. Strauss & Cass R. Sunstein, ``The Role of the President and 
OMB in Informal Rulemaking,'' 38 Admin. L. Rev. 181, 205 (1986).
---------------------------------------------------------------------------

                              Section 3(a)

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

Subchapter II. Regulatory Analysis

    Subchapter II establishes provisions for new definitions 
(sec. 621); applicability and effect (sec. 622); regulatory 
analysis (sec. 623); principles for risk assessments (sec. 
624); peer review (sec. 625); deadlines for rule making (sec. 
626); judicial review (sec. 627); guidelines, interagency 
coordination, and research (sec. 628); and risk-based 
priorities study (sec. 629).

Sec. 621. Definitions

    This section defines certain terms used in regulatory 
analysis. Many of 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 ``Administrator'' means the Administrator of 
the Office of Information and Regulatory Affairs of the Office 
of Management and Budget.
    (2) The term ``benefit'' means the reasonably identifiable 
significant favorable effects, quantifiable and 
nonquantifiable, including social, health, safety, 
environmental, economic, and distributional effects, that are 
expected to result from implementation of, or compliance with, 
a rule.
    The term ``benefit'' has broad meaning. Benefits are the 
favorable effects that are causally related to the rule. In 
other words, benefits are the improvements upon the status quo 
as a result of the rule. Federal agencies issue regulations to 
implement laws passed by Congress. As such, the value of a 
regulation is the extent to which it provides the public 
benefits envisioned by the underlying law. Regulations 
addressing health, safety, or environmental risks, for example, 
provide benefits from reducing risk, and the evaluation of 
those risk-reduction benefits would be based on the risk 
assessment performed under section 624 of this Act.
    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. Benefits also can be 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. The 
identification and evaluation 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 intends agencies to consider direct as well as the 
indirect benefits. Many benefits can be clearly attributed to a 
regulatory action. Many, however, flow in more tangential ways. 
The Committee expects agencies to make areasonably 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 that 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. 
In other words, benefits that cannot be monetarily quantified, 
or even numerically measured, also should be considered and 
explained by the agency.
    At the same time, the definition of benefits is limited to 
those that are ``significant.'' Benefits should be more than 
trivial or de minimis. The Committee does not anticipate that 
agencies will spend valuable resources trying to assess every 
small, remote benefit of a rule; during the cost-benefit 
analysis, only significant benefits need be addressed.
    (3) The term ``cost'' means the reasonably identifiable 
significant adverse effects, quantifiable or nonquantifiable, 
including social, health, safety, environmental, economic, and 
distributional effects, that are expected to result from 
implementation of, or compliance with, a rule. The definition 
of ``cost'' parallels that of ``benefit,'' and the concerns 
expressed above regarding ``benefit'' apply equally here.
    As in the case of ``benefits,'' the Committee intends to 
give broad meaning to the term ``cost.'' Agencies must be 
sensitive to all of the significant costs regulation can 
impose. While compliance costs often comprise a substantial 
portion of total costs, there are other costs of regulation. To 
name a few, these costs include adverse effects on health, 
safety or the environment; such adverse effects increase the 
net cost of a regulatory alternative. Costs also include 
adverse impacts on consumer choice, technological innovation, 
wages, productivity, economic growth, and lower employment. 
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. The concept of ``cost'' for cost-benefit analysis 
includes opportunity costs.\40\ Accordingly, agencies should be 
more sophisticated in cost estimation than only summing up 
compliance costs.
---------------------------------------------------------------------------
    \40\ As Paul Portney told the Committee:

        [T]he sum total of out-of-pocket expenditures is not 
      identical to ``costs'' as economists think of them for a 
      benefit-cost analysis. [Costs] include 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.

Testimony of Paul R. Portney, Resources for the Future, before the 
Senate Committee on Governmental Affairs, February 8, 1995.
    Finally, agencies must identify and evaluate direct and 
indirect costs, as well as quantitative and nonquantitative 
costs. If a rule sets in motion a series of legally required 
actions that result in costs, even if those actions will be 
taken by entities other than the regulatory agency, the agency 
should consider such adverse effects as ``costs'' under this 
Act.\41\
---------------------------------------------------------------------------
    \41\ For example, EPA recently issued a major rule under the Clean 
Air Act to reduce particulate matter and ozone and performed a cost-
benefit analysis for the rule under Executive Order 12866. This rule 
will require states to change their State Implementation Plans 
(``SIPs'') to satisfy the tighter standards. These SIP revisions will 
impose costs that are attributable to the EPA rule and such costs would 
be included in a cost-benefit analysis under this legislation, just as 
EPA was required to include such costs in its cost-benefit analysis 
performed under E.O. 12866.
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    (4) 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 practical for 
reasoned decisionmaking on the matter involved, taking into 
consideration uncertainties, the significance and complexity of 
the decision, and the need to adequately inform the public. 
This definition includes the minimum essential features of 
cost-benefit analysis.
    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 and the need to inform stakeholders and 
the public. This provides the agency with reasonable 
flexibility in the level of detail and rigor that should be 
employed. However, the Committee expects that the analysis will 
follow the basic requirements of this legislation.
    (5) The term ``Director'' means the Director of the Office 
of Management and Budget, acting through the Administrator of 
the Office of Information and Regulatory Affairs. The reason 
for this definition is two-fold. First, the Committee expects 
the Director of OMB, not just the Administrator of OIRA, to be 
directly accountable for the prompt and effective 
implementation of this legislation. Second, the Committee at 
the same time intends to recognize the important role and 
responsibility of OIRA in the regulatory process. Since 1980, 
when the Committee passed the Paperwork Reduction Act, the 
Committee has viewed the Administrator of OIRA as a important 
partner in ensuring that the regulatory process is efficient, 
effective, and accountable. This legislation will further this 
critical role of OIRA.
    (6) The term ``flexible regulatory options'' means 
regulatory options that permit flexibility to regulated persons 
in achieving the objective of the statute as addressed by the 
rule making, including market-based mechanisms, outcome-
oriented performance-based standards, or other options that 
promote flexibility. The Committee believes that flexible 
regulatory options have the potential to be more efficient and 
effective than command-and-control regulation.
    ``Market-based mechanisms'' include regulatory programs or 
requirements that impose legal accountability for achieving the 
regulatory objective on each regulated entity, afford maximum 
flexibility to each regulated entity in meeting mandatory 
regulatory objectives, and allow those regulated entities to 
respond freely to changes in pertinent economic conditions and 
circumstances without undermining the achievement of the 
program's regulatory mandate or requiring a new rulemaking.
    The Committee has heard testimony that some of our greatest 
regulatory successes have beenachieved through market-based 
mechanisms.\42\ One such example is the program for reducing nationwide 
sulfur dioxide emissions, established under Title IV of the Clean Air 
Act. There, Congress imposed directly on sources of emissions explicit 
pollution reduction requirements. The sources were allowed 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 a 
small fraction of the anticipated costs of command-and-control 
regulation and is far ahead of the statutory schedule.\43\
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    \42\ See, e.g., Statement of Paul R. Portney, President, Resources 
for the Future, before the Senate Committee on Governmental Affairs, 
September 12, 1997; Testimony of C. Boyden Gray, Partner, Wilmer, 
Cutler & Pickering and Chairman, Citizens for a Sound Economy, before 
the Senate Committee on Governmental Affairs, September 12, 1997; 
Testimony of Thomas F. Walton, Director of Economic Policy, General 
Motors Corporation, before the Senate Committee on Governmental 
Affairs, September 12, 1997; Testimony of Joseph Goffman, Senior 
Attorney, Environmental Defense Fund, before the Senate Committee on 
Governmental Affairs, March 8, 1995; Testimony of Alan J. Krupnik, 
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, before 
the Senate Committee on Governmental Affairs, March 8, 1995; Testimony 
of Carol M. Browner, Administrator, U.S. Environmental Protection 
Agency, before the Senate Committee on Governmental Affairs, March 8, 
1995.
    \43\ See Testimony of Joseph Goffman, Senior Attorney, 
Environmental Defense Fund, before the Senate Committee on Governmental 
Affairs, March 8, 1995; Testimony of Alan J. Krupnik, Senior Fellow, 
Resources for the Future, before the Senate Committee on Governmental 
Affairs, March 8, 1995; Testimony of Jonathan B. Weiner, Associate 
Professor, School of Law, Duke University, 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, before the Senate Committee on Governmental Affairs, September 
12, 1997.
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    ``Performance-based standards'' include requirements, 
expressed in terms of outcomes or goals instead of prescriptive 
command-and-control measures, that permit discretion and the 
use of market-based mechanisms in determining how best to meet 
specific requirements in particular circumstances. In contrast 
to command-and-control regulation, performance-based standards 
simply establish the ultimate regulatory goal and free 
regulated parties to meet or exceed that goal as they choose. 
Like market-based mechanisms, the Committee requires agencies 
to seriously consider performance-based standards because they 
have similar elements of flexibility, cost-effectiveness, and 
accountability.
    (7) The term ``major rule'' is defined to include two 
categories of significant rules: economically significant and 
other significant rules designated by the Director of OMB.
    The first category of ``major rule'' is defined in 
subsection 621(7)(A) as a rule that the relevant agency or the 
Director of OMB reasonably determines is likely to have an 
annual effect on the economy of $100,000,000 or more in 
reasonably quantifiable costs.'' To be classified as ``major,'' 
such a rule should be reasonably likely to have such an effect 
in any one year following its adoption.
    The Committee's decision to set the threshold for major 
rules at $100 million follows the long-standing tradition under 
centralized executive review of rules. Since President Ford, 
every President has required by executive order the review of 
regulations which impose annual costs on the economy of $100 
million or more. The bill maintains the traditional $100 
million threshold because the Committee believes that it will 
not unduly increase the analytical burden of the agencies and 
that rules of such significance can benefit greatly from 
thorough analysis. All significant costs of a rule should be 
considered in determining whether a rule is ``major'' under 
subsection 621(7)(A).
    Subsection 621(7)(B) provides a second prong to the major 
rule definition. This allows the President, through the OMB 
Director, to subject to cost-benefit analysis those rules 
which, while not imposing costs of $100 million on the economy, 
still have a substantial impact. This category includes rules 
likely to adversely affect, in a material way, the economy, a 
sector of the economy (including small business), productivity, 
competition, jobs, the environment, public health or safety, or 
State, local or tribal governments, or communities.
    Regulatory agencies and the OMB Director should be mindful 
of the disproportionate impact their actions can have on 
certain groups or sectors of the economy, even if the impact on 
the country as a whole is not substantial. This is particularly 
true of small business.\44\ The Committee encourages the 
Director and the agencies to be sensitive to these concerns.
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    \44\ See Statement of Karen Kerrigan, President, Small Business 
Survival Committee, before the Senate Committee on Governmental 
Affairs, September 12, 1997 (citing Small Business Administration study 
showing that the annual regulatory cost per worker for companies with 
less than 20 employees is $5,532).
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    (8) The term ``reasonable alternative'' means a reasonable 
regulatory option that would achieve the objective of the 
statute as addressed by the rule making and that the agency has 
authority to adopt under the statute granting rule making 
authority, including flexible regulatory options.
    Reasonable alternatives embrace the range of options that 
the agency has discretion to consider under the statute 
authorizing the rulemaking. The Committee included flexible 
regulatory options in the definition of ``reasonable 
alternative'' to encourage agencies to seek out such 
alternatives. The agency should consider the range of options 
authorized by the underlying statute to best achieve the 
objective being addressed by the rulemaking. ``Reasonable 
alternatives'' do not include alternatives prohibited by the 
statute authorizing the rule.
    (9) The term ``risk assessment'' means the systematic, 
objective process of organizing hazard and exposure information 
and, based on a careful analysis of the weight of the 
scientific evidence, estimating the potential for specific harm 
to an exposed population, subpopulation, or natural resource 
including, to the extent feasible, a characterization of the 
distribution of risk as well as an analysis of uncertainties, 
variabilities, conflicting information, and inferences and 
assumptions.
    Like the definition of ``cost-benefit analysis,'' the 
definition of ``risk assessment'' includes specific qualitative 
factors which the Committee views as minimum essential features 
of a riskassessment. Specifically, the risk assessment should 
be scientifically ``objective'' \45\ and ``based on a careful analysis 
of the weight of the scientific evidence.'' \46\ Full consideration of 
the weight of the evidence often involves balancing positive and 
negative findings. The definition further requires that the risk 
estimate, to the extent feasible, must contain a characterization of 
the distribution of risk as well as an analysis of uncertainties, 
variabilities, conflicting information, and inferences and assumptions. 
The Committee believes that this type of information is necessary to 
get a complete and meaningful estimate of the risk.
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    \45\ Agency risk assessments should be scientifically objective to 
the extent possible, neither minimizing nor exaggerating the nature and 
magnitude of the risks. Such risk assessments should be more 
transparent and credible, leading to less contentious risk management 
decisions. Such assessments should lead to a more risk-based regulatory 
system, offering the opportunity for greater overall protection with 
the available resources. See Testimony of John D. Graham before the 
Senate Committee on Governmental Affairs, September 12, 1997; Safe 
Drinking Water Act of 1996, Section 103, 42 U.S.C. Sec. 300g-1(b)(3).
    \46\ See Presidential/Congressional Commission on Risk Assessment 
and Risk Management, Risk Assessment and Risk Management in Regulatory 
Decision-Making (``Risk Commission Report''), Vol. 1, at 4, 23, 38.
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    The Committee recognizes that risk assessment is a flexible 
process by which complex technical data are combined and 
analyzed to provide decision makers with useful information to 
make policy decisions. In some decision contexts, such as 
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. The 
Committee believes that the definition adopted by this 
legislation is sufficiently generic to apply to the wide 
variety of risks covered by this legislation. The Committee 
encourages advances in state-of-the-art risk assessment 
practices.
    (10) The term ``rule'' has the same meaning as such term is 
defined in section 551(4) of title 5, United States Code, with 
a number of exclusions.
    First, subparagraph (A) exempts from the definition of 
``rule'' 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; interpretative 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. Yet, 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.
    However, the Committee cautions the agencies that any 
statement of general applicability that actually alters or 
creates rights or obligations of persons outside the agency is 
included in this definition. While informal agency guidance is 
encouraged, agencies should not attempt to evade the 
requirements of this legislation through mischaracterizations 
of such materials.
    Subparagraph (B) 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, pursuant to 
the explicit mandates of the underlying statute with little or 
no agency discretion.
    Subparagraph (C) excludes rules 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.
    This exemption applies to 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 
proceedings, which often involve sophisticated economic 
analysis.
    Subparagraphs (D) and (E) exclude from the legislation's 
scope certain rules relating to monetary policy or to the 
safety or soundness of federally insured depository 
institutions.
    Subparagraph (F) excludes certain rules relating to the 
integrity of the securities or commodities futures markets or 
to the protection of investors in those markets.
    Subparagraph (G) excludes certain rules issued by the 
Federal Election Commission and the Federal Communications 
Commission.
    Subparagraph (H) excludes certain rules required to be 
promulgated at least annually pursuant to statute. This 
exemption would include certain rules that establish, modify, 
open, close, or conduct a regulatory program for a commercial, 
recreational, or subsistence activity related to hunting, 
fishing, or camping.
    Subparagraph (I) excludes certain rules or agency actions 
relating to the public debt or fiscal policy of the United 
States.
    In all of these instances, the Committee believes that the 
analytic requirements of the legislation would not enhance the 
efficiency or effectiveness of these rules.
    Subparagraph (J) exempts from ``rule'' any rule that 
authorizes the introduction into commerce, or recognizes the 
marketable status of, a product. The Committee has been advised 
that adequate procedures and safeguards exist to screen out 
potentially dangerous or undesirable new products. For example, 
the Federal Food, Drug and Cosmetic Act contains detailed 
requirements for obtaining approval to market pharmaceuticals, 
medical devices, and food additives. Similarly, the Toxic 
Substances Control Act contains requirements for authorizing 
the use of new chemicals and new uses of existing chemicals. 
The Committee did not want to disturb those procedures.
    (11) The term ``substitution risk'' means a significant 
increased risk to health, safety, or the environment reasonably 
likely to result from a regulatory option. A regulatory option 
designed to decrease certain risks may sometimes actually 
increase other risks. A substitution risk is an unintended 
adverse consequence. The provisions of S. 981 are intended to 
focus greater attention on the possibility of such adverse 
consequences, including addressing the likelihood of their 
occurrence, estimating the nature and magnitude of their 
impacts, and systematically considering substitution risks as a 
part of sound regulatory policy-making. The agency should 
identify, describe, and evaluate any substitution risks in the 
regulatory analysis. The agency should integrate such risks in 
its analyses and in making the determinations required under 
Section 623(d).
    By ``significant,'' the Committee means that the effect of 
the substitution risk should be important. ``Significant'' does 
not refer to the magnitude of the increase in risk as the term 
``significant risk'' is used or interpreted under various 
environmental, health, and safety statutes; \47\ it refers to 
the relative relationship a risk may have to the effect of a 
rule. A risk need not have a likelihood of a particular level, 
such as one in ten thousand, to be significant. For a 
``significant increased risk'' to qualify as a substitution 
risk, it need not be greater than the original risk reduction 
otherwise being achieved by the rule. By ``reasonably likely to 
result,'' the Committee means that the substitution risk should 
not be hypothetical or implausible. For example, the Committee 
does not intend that attenuated arguments, such as the 
assertion that changes in lifestyle or health care that could 
result from changes in income of individuals potentially 
attributable to a regulatory option, should be considered a 
substitution risk under this legislation.\48\
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    \47\ See Occupational Safety and Health Act, 29 U.S.C. Sec. 651.
    \48\ See Hearing before the Senate Committee on Governmental 
Affairs, ``Risk-Risk Analysis,'' S. Hearing 102-1144 (March 19, 1992); 
GAO, Risk-Risk Analysis: OMB's Review of a Proposed OSHA Rule, GAO/
PEMD-92-33 (May 1992).
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Sec. 622. Applicability and effect

    Section 622 clarifies the scope and effect of this 
legislation. Subsection 622(a) provides that this legislation 
applies to all ``major rules'' through the proposed and final 
rulemaking stages, except as provided in Subsection 623(f).
    Subsection 622(b) clarifies that nothing in Subchapter II 
shall be construed to alter or modify: (1) the substantive 
standards otherwise applicable to a rulemaking under other 
statutes; or (2) an opportunity for judicial review made 
applicable under other statutes. This so-called ``savings 
clause'' clarifies two important points: First, this 
legislation is not intended to override existing statutory 
standards. Second, this legislation does not alter or diminish 
any opportunities for judicial review made applicable under 
other statutes.
    The first part of the savings clause means that the cost-
benefit analysis, risk assessment, and cost-benefit 
determination required by this legislation do not supersede or 
override the substantive standards in the statute under which a 
rule is being issued. In other words, S. 981 does not contain a 
so-called ``supermandate.''
    Subsection 622(b) also clarifies that this legislation does 
not curtail opportunities for judicial review available under 
other statutes. To the extent that another Federal statute 
provides an opportunity for judicial review of agency action, 
that opportunity for judicial review continues to apply.
    Section 622(b) preserves existing opportunities to secure 
judicial review and preserves the nature and scope of judicial 
review provided by another Federal statute.

Sec. 623. Regulatory analysis

            A. Background
    This section lays out the requirements for agencies to 
conduct regulatory analysis, including cost-benefit analysis, 
risk assessment, and substitution risk analysis when issuing 
proposed and final major rules. The Committee believes that 
better use of these important decisionmaking tools will lead to 
a significantly more efficient and effective regulatory 
process.
    The Committee also 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. 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 
intends that the analysis be used by agencies to consider 
alternative regulatory approaches, to compare the benefits and 
costs of such approaches, and to produce better decisions.\49\
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    \49\ When well used, cost-benefit analysis is a highly effective 
tool to increase the efficiency and effectiveness of regulation. See, 
e.g., Resources for the Future, Economic Analysis at EPA, (Richard D. 
Morgenstern, ed. 1997). One EPA study 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.
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    A satisfactory cost-benefit analysis would enable the 
agency to make an informed judgment whether the benefits of the 
rule justify its costs, and whether the rule substantially 
achieves the statutory objectives in the most cost-effective 
manner, or with the greatest net benefits. This determination 
is based on 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 must be summarized in the 
notice of proposed rulemaking.
    The bill requires the cost-benefit analysis to be developed 
by the agency during the development of the rule. The cost-
benefit analysis must 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 must be made public with the statement of 
basis and purpose accompanying the rule. An executive summary 
of the analysis must 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 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 it is open for 
public debate. An agency must have this information before it, 
along with other relevant information, in order to make an 
informed choice.\50\
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    \50\ See, e.g. Risk Commission Report, Vol. 1, pp. 29-36; Vol. 2, 
p. 93.
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            B. Framework for conducting cost-benefit analysis
    The first step, outlined in subsection 623(a), is for 
agencies, before publishing a notice of proposed rulemaking, to 
determine whether the rule is or is not a major rule under 
subsection 621(7)(A)--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 costs. If the rule does not 
fall within subsection 621(7)(A), then the agency must 
determine whether the rule is a major rule under subsection 
621(7)(B).
    If the agency does not determine a rule to be major, 
subsection 623(a)(2) allows the Director of OMB to exercise the 
same authority not later than 30 days after the close of the 
comment period for the rule. 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 
Director'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. Later estimates 
typically apply better data sources more sophisticated 
analyses. This tends to improve the accuracy and reliability of 
estimates, often substantially. 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 623(b)(2) 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 623(b) requires the agency to place an initial 
regulatory analysis \51\ 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. This Subsection reflects the Committee's firm conviction 
that sound analysis of the benefits and costs of various 
alternative regulatory options before the rule is proposed is 
essential to reasoned decision making. An agency needs this 
information, along with other relevant information, to make the 
best regulatory choice.\52\
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    \51\ A regulatory analysis under this legislation encompasses a 
cost-benefit analysis, any risk assessment, and, if applicable a 
substitution risk analysis.
    \52\ The Risk Commission Report emphasizes the importance of 
evaluating the costs and benefits of regulatory options before making a 
decision; this is an essential feature of the Commission's framework 
for environmental health risk management. See Vol 1, at 29-36; Vol. 2, 
at 93-101.
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    According to subsection 623(b)(2), each initial regulatory 
analysis must contain three major items: (1) a cost-benefit 
analysis; (2) a risk assessment, if required; and (3) 
information on any substitution risks.
    Under subsection 623(b)(2)(A), each initial cost-benefit 
analysis shall contain 5 major components:
    (i) An analysis of the benefits of the proposed rule.
    (ii) An analysis of the costs.
    (iii) An evaluation of the relationship of the benefits of 
the proposed rule to its costs, taking into account the results 
of any risk assessment, including the determinations whether 
the identified benefits of the proposed rule justify its 
identified costs; whether the proposed rule is likely to 
substantially achieve the rule making objective in a more cost-
effective manner, or with greater net benefits, than other 
reasonable alternatives considered by the agency; and whether 
the rule adopts a flexible regulatory option.
    (iv) An evaluation of the benefits and costs of a 
reasonable number of reasonable alternatives reflecting the 
range options that would achieve the objectives of the statute 
as addressed by the rulemaking, including alternatives that 
require no government action; provide flexibility for small 
entities under the Regulatory Flexibility Act; provide 
flexibility for State, local or tribal agencies delegated to 
administer a Federal program; employ flexible regulatory 
options; and assure protection of sensitive subpopulations, or 
populations exposed to multiple and cumulative risks.
    (v) A description of the scientific or economic evaluations 
or information on which the agency substantially relied in the 
cost-benefit analysis and risk assessment, and an explanation 
of how the agency reached the determinations under subsection 
(d).
    In addition to the cost-benefit analysis, if the rule 
requires a risk assessment under section 624, that assessment 
must be incorporated into the regulatory analysis under 
subsection 623(b)(2)(B).
    Finally, Subsection 623(b)(2)(C) requires the agency to 
identify and evaluate substitution risks. The analysis of 
substitution risks is an important part of the rational 
decisionmaking framework established by this legislation. The 
Committee believes that if an agency properly identifies and 
evaluates the potentially adverse health, safety, or 
environmental effects of a regulatory option, the agency will 
be best prepared to make a regulatory decision that accounts 
for such substitution risks. The Committee is concerned that 
government has not always been sensitive to substitution risks 
caused or exacerbated by certain regulatory actions.\53\ The 
agency must explicitly identify a substitution risk, provided 
there is reasonably available scientific information on the 
risk, such as in the scientific literature or as provided 
during the public comment period. The phrase ``reasonably 
available to the agency'' connotes that the agency is expected 
to engage in an affirmative and reasonably thorough search for 
information on potential substitution risks, but the search 
does not have to be exhaustive.
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    \53\ Cass R. Sunstein, ``Health-Health Tradeoffs,'' 63 U. Chi. L. 
Rev. 1533 (1996). See also, John D. Graham & Jonathan Weiner, Risk 
Versus Risk: Tradeoffs in Protecting Health and the Environment, Harv. 
Univ. Press (1995). One example of the substitution risk problem 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 asbestos raised the 
risk to the public because asbestos fibers became airborne during 
removal. Removing the asbestos also delayed the opening of many schools 
and other buildings. See Gregg Easterbrook, A Moment on the Earth: The 
Coming Age of Environmental Optimism, 250-53 (1995); Stephen Breyer, 
Breaking the Vicious Circle: Toward Effective Risk Regulation, 12-13 
(1993).
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            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 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 possible solutions.
    The agencies should identify the statutory authority relied 
upon to promulgate the regulation. The agency should briefly 
explain why its proposals are within its statutory jurisdiction 
and is consistent with congressional intent. A similar analysis 
should be done for each significant alternative.
            2. Benefits
    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 considered by the agency, including 
an attempt to balance and compare those costs and benefits. 
Subsections 623(b)(2)(A)(i), (A)(iii), (A)(iv), and (c)(2) 
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 also can 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 analyses will 
assign numerical values to all projected benefits. The agencies 
should use a rule of reason. When some aspect of a benefit 
cannot be quantified, the agency should describe the benefit in 
detail, state what significance it attributes to the 
nonquantifable aspects of the benefit, and explain the basis 
for its conclusion of this point. Those benefits that cannot be 
quantified should 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 also should be 
specified. The cost, benefit, or risk assessment information 
relied on by the agency, whether quantifiable or 
nonquantifiable, should be supported by materialthat would 
allow the public to assess the accuracy, reliability, and validity of 
such information.
    The agency should bear in mind that, just as markets may 
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 real-world results of the rule in the cost-benefit 
analysis.
            3. Costs
    Subsections 623(b)(2)(A)(ii), (A)(iii), and (A)(iv) 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 significant direct and indirect costs and 
adverse effects which may result from the rule.
    Agencies should estimate the total costs of compliance and 
opportunity costs. Agencies also should estimate costs to 
government units, including costs of compliance, 
administration, enforcement, or lost tax revenue.
    It is conceivable that some agency actions could impose 
costs in the form of new risks to public health, safety, or the 
environment. These 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.
    Agencies should consider lost benefits as a cost. 
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.
            4. Alternatives
    Subsection 623(b)(2)(A)(iv) requires the preliminary cost-
benefit analysis to contain a brief description of alternatives 
that reflect the range of the agency's discretion for achieving 
the objective of the statute as addressed by the rulemaking. 
Agencies must consider alternatives proposed by the public, but 
they also should take the initiative to develop alternatives 
that could achieve the statutory objective as addressed by the 
rulemaking 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 a ``reasonable number'' of such alternative 
approaches, particularly flexible options. The legislation 
focuses the agency's discussion on a ``reasonable number'' of 
alternatives so that agencies are not forced to engage in 
limitless or wasteful discussions of theoretical regulatory 
alternatives. At the same time, the Committee cautions the 
agencies against using this provision to justify ignoring 
compelling alternatives or using the cost-benefit analysis as a 
post-hoc rationalization for a pre-determined political 
decision.
    Under this subsection, the agency should evaluate the 
benefits and costs of a reasonable number of reasonable 
alternatives reflecting the range of the agency's discretion, 
including, where feasible,\54\ alternatives that--(I) require 
no government action; (II) provide flexibility for small 
entities under the Regulatory Flexibility Act; (III) provide 
flexibility for State, local or tribal agencies delegated to 
administer a Federal program; and (IV) employ flexible 
regulatory options; and (V) assure protection of sensitive 
subpopulations, or populations exposed to multiple and 
cumulative risks.
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    \54\ The qualifier ``where feasible'' in Subsection 
623(b)(2)(A)(iv) reflects the Committee's intent that the alternatives 
must be both legally feasible, as well as technically feasible.
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    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,\55\ market, judicial, state, or local regulatory 
mechanisms that could adequately resolve the problem identified 
by the agency for action.
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    \55\ Some agencies have successfully used voluntary programs, such 
as EPA's 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.
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    In recent years, agencies have developed a number of 
innovative regulatory techniques to make regulatory programs 
less costly and more effective. For example, performance-based 
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.
    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 
and costly to both stakeholders and governments, and can create 
disincentives to innovation. Command-and-control regulation is 
frequently less effective and more costly than more flexible 
approaches.
            5. Analysis of flexible regulatory options
    The specific reference in section 623(d)(1)(C) to consider 
flexible regulatory options, such as market-based mechanisms 
and performance-based standards, reflects not only the 
Committee's belief in the importance of considering these 
options to design regulatory programs, but also the specific 
steps agencies must follow so that these options will be 
consistently considered when formulating major rules. When the 
agency is developing a major rule, subsection 623(d)(1)(C) 
requires the agency to determine whether the rule adopts a 
flexible regulatory option. Subsection 623(d)(2)(C) requires 
the agency to describe any flexible regulatory option 
considered by the agency and to explain why that option was not 
adopted. If agencies fulfill the requirement of setting forth 
the extent to which the designs of proposed regulatory programs 
incorporate flexibleregulatory options, then each rulemaking 
process, as well as the record created therein, necessarily should 
reflect discussion and analysis of flexible regulatory options. Since 
the Committee believes that such alternatives have the potential to 
produce better performing and more cost-effective regulatory programs, 
then flexible regulatory options will be an important standard against 
which agency design efforts can be judged.
            6. Scientific or economic evaluations or information
    Subsection 623(b)(2)(A)(v) has 2 major purposes. First, it 
promotes the public's right to know the key information 
underlying important regulatory decisions. Second, it helps 
protect against the use of invalid scientific or economic 
assumptions by requiring an agency to describe what information 
the agency relied on in making its cost-benefit determinations 
under section 623(d), and to explain how that information 
supported the agency's conclusions. This requirement is 
intended to help ensure the accuracy and scientific validity of 
the data and studies upon which the agency relies.
            7. Cost-benefit determinations
    Subsections 623(b)(2)(A)(iii) & (iv) and 623(d) are the 
heart of the cost-benefit requirements of this legislation. 
They take the agencies one step beyond the descriptive 
exercises of other subsections. They serve the critical goals 
of promoting the public's right to know how and why agencies 
make important regulatory decisions; enhancing the quality of 
information underlying agency decisions; and increasing the 
accountability of government to the public it is there to 
serve.
    Subsection 623(d) requires that, in the final cost-benefit 
analysis for a major rule, the agency must make a three-fold 
determination based on the whole rulemaking record: (1) whether 
the benefits of the rule justify its costs; (2) whether the 
rule will achieve the rulemaking objective in a more cost-
effective manner, or with greater net benefits, than the other 
alternatives before the agency; and (3) whether the rule adopts 
a flexible regulatory option. This requirement mirrors that in 
subsection 623(b)(2)(A)(iii) for the preliminary cost-benefit 
analysis issued in connection with the notice of proposed 
rulemaking for a major rule.
    In the first requirement, the choice of the word 
``justify'' is an important one. It conveys 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.
    The second requirement, that the rule ``achieve the 
rulemaking objectives in a more cost-effective manner, or with 
greater net benefits, than the other reasonable alternatives 
considered by the agency'' also is not a purely ``objective'' 
quantitative exercise. The agency is not 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.\56\
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    \56\ The concept of ``cost-effectiveness'' is fully consistent with 
providing protective and responsible regulatory standards. Cost-
effectiveness does not require the smallest incremental ratio of cost 
to effectiveness when mutually exclusive alternatives are compared. See 
Hearing before the Senate Committee on Governmental Affairs, September 
12, 1997, at 300-01 (Letter of John D. Graham, Harvard Center for Risk 
Analysis).
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    The third requirement, discussed above, reflects the 
Committee's intent to promote flexible regulatory options. Such 
options hold great promise to be more efficient and effective 
than traditional command-and-control approaches.
    The Committee is aware that there are limits to quantifying 
certain benefits, as well as costs. However, 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 623(b)(2)(A)(iii) and 623(d). An agency's cost-
benefit determinations must be ``reasonable.'' By imposing this 
requirement of reasonableness, the Committee intends that the 
agency will engage in ``reasoned decision making.'' To satisfy 
this standard, an agency must explore a reasonable range of 
alternatives, apply clearly articulate and understandable 
criteria, and explain the reasons why it has reached the 
determinations required under subsections 623(b)(2)(A)(iii) and 
623(d).
    The Committee realizes 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. Although nonquantifiable, such costs and 
benefits are not to be ignored; they must be described in the 
cost-benefit analysis, identified in as precise a manner as 
possible, and considered in making the determinations required 
by section 623(d). The determinations need not be made 
primarily on a numerical or mathematical basis.
    The Committee recognizes that regulations sometimes 
implement Congressional policy choices that are not consistent 
with efficiency criteria. For example, Congress may provide an 
economic incentive to create networks and infrastructure 
facilities available to Americans in both rural and urban 
areas. This policy choice may impose minor quantifiable costs 
on the entire population in order to provide significant 
nonquantifiable benefits to discrete populations and to ensure 
that the country benefits from truly national networks, 
infrastructure, services, and opportunities therefrom. The 
Committee does not intend that the provisions of this 
legislation, particularly the cost-benefit analysis 
requirements, override Congress' policy choice.
    Where quantifiable costs and benefits are provided, they 
should be made in the most appropriate units of measurement and 
specify the ranges of predictions and explain the margin of 
error involved in the quantification methods and in the 
estimates used. For example, a hypothetical cost-benefit 
analysis might describe one of the quantifiable benefits of a 
regulation as ``cases of serious injury reduced.'' The most 
precise estimate 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.
    However, the Committee reiterates that benefits and costs 
need not always be expressed in monetary terms. Nonetheless, 
reducing costs and benefits to common units of measurement can 
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 
whereappropriate. 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.
    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. The 
significant assumptions and uncertainties in the analysis 
should be prominently displayed, a requirement paralleling the 
directive in subsection 627(d) that the agency's evaluation of 
cost-benefit relationships be ``reasonable.''
    Subsection 623(e) provides a practical mechanism to provide 
the public with better information about regulatory decisions. 
That information needs to be provided in a way that is 
understandable and accessible to the public. In the past, the 
critical information underlying rulemakings often has been 
buried in long, technical documents in large agency rulemaking 
files.\57\ This does not serve the public's interest, nor does 
it serve the interests of Congress, stakeholders, or the 
President. In fact, it could inhibit communication among 
relevant decision makers inside and outside the agency, whether 
they be technical experts, legal counsel or policy makers. 
Subsection 623(e) addresses this problem by requiring a 
succinct executive summary of the regulatory analysis. The 
Committee intends that the executive summary be a useful tool 
to communicate the important information about the rulemaking 
to the public, stakeholders, Congress, the President, and the 
relevant decision makers. The minimal information to be 
provided includes: (1) the benefits and costs of the rule, and 
any determinations required under subsection 623(d); (2) the 
results of any risk assessment; (3) the benefits and costs of 
reasonable alternatives; and (4) the key assumptions and 
scientific information upon which the agency relied. In 
addressing the key scientific information and assumptions, the 
agency should discuss significant uncertainties and the quality 
of the science or economics that is the basis of the regulatory 
analysis, including whether experts are divided over competing 
paradigms.
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    \57\ See Testimony of L. Nye Stevens, Director, Federal Management 
and Workforce Issues, General Government Division, GAO, before the 
Senate Committee on Governmental Affairs, September 12, 1997; Statement 
of L. Nye Stevens, Director, Federal Management and Workforce Issues, 
General Government Division, GAO, before the Senate Committee on 
Governmental Affairs, February 24, 1998; GAO, Cost-Benefit Analysis Can 
Be Useful in Assessing Environmental Regulations, Despite Limitations, 
GAO/RCED-84-62 (April 6, 1984) (recommending that regulatory analyses 
contain executive summaries that recognize all benefits and costs, 
including nonquantifiable; identify a range of values for benefits and 
costs subject to uncertainty, as well as sources of uncertainty; and 
compare all feasible alternatives); GAO, Air Pollution: Information 
Contained in EPA's Regulatory Impact Analyses Can Be Made Clearer, GAO/
RCED-97-38 (April 1997) (finding deficiencies in EPA regulatory 
analyses and reiterating 1984 GAO recommendations). See also, GAO, 
Regulatory Reform: Changes Made to Agencies' Rules Are Not Always 
Clearly Documented, GAO/GGD-98-31 (Jan. 1998) (finding that selected 
federal agencies usually did not comply with requirements of E.O. 12866 
to identify for the public ``in a complete, clear, and simple manner'' 
the substantive changes made to regulatory actions while under review 
at OMB's OIRA, and to identify the changes made at the suggestion or 
recommendation of OIRA).
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    Subsection 623(f)(1) provides a limited exemption from 
compliance with the requirements of this legislation prior to 
issuance of the rule where: (1) the agency finds that 
conducting the analysis under this legislation before the rule 
becomes effective is impracticable or contrary to an important 
public interest; and (2) the agency publishes the rule in the 
Federal Register with such finding and a succinct explanation 
of the reasons for the finding. The Committee intends to 
provide sufficient flexibility for agencies to respond to a 
true emergency when a rule must be promulgated without awaiting 
completion of the analysis. This exemption closely tracks the 
category of rules exempted from the notice and comment 
procedures of the Administrative Procedure Act, and the 
Committee does not expect this exemption to be used often.
    Subsection 623(f)(2) requires that, if a major rule is 
adopted under subsection 623(f)(1) without prior compliance 
with the legislation, then the agency shall comply with this 
legislation as promptly as possible unless compliance would be 
unreasonable because the rule is, or soon will be, no longer in 
effect.
    Subsection 623(g) incorporates and extends the consultation 
requirements of Section 204 of the Unfunded Mandates Reform Act 
of 1995 (2 U.S.C. Sec. 1534). Agencies must develop, maintain 
and use effective processes and solicit meaningful and timely 
input of State, local and tribal governments (or their 
designated employees with authority to act on their behalf) 
into the development of any regulatory proposals that contain 
significant Federal intergovernmental mandates. Such processes 
and consultations shall be consistent with Section 204 of the 
Unfunded Mandates Reform Act and shall be exempt from the 
Federal Advisory Committee Act. The Committee believes that 
federal agency consultation with State, local, and tribal 
governments before a decision is made will improve the quality, 
fairness, and responsiveness of federal regulations. In many 
respects, State, local, and tribal officials are closer to the 
public; they also are often burdened with unfunded mandates 
imposed by regulations or with implementing and enforcing them. 
The term ``significant regulatory proposal'' is substantially 
broader than the term ``major rule,'' which triggers the cost-
benefit requirements of this legislation. Accordingly, the 
consultation requirements of this legislation apply to agency 
actions exempted from the cost-benefit requirements of this 
legislation.

Section 624. Risk assessment

    Risk assessment is a widely recognized tool to structure 
information for regulatory decision making related to the 
environment, health and safety. 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.
    Fifteen years after publication of the NAS risk report, 
there is general agreement that the risk assessment process 
needs to be refined. The process should be better understood 
and more accountable. Risk assessment can be most useful when 
those who rely on it to inform the risk management process 
understand the strengths and limitations of risk assessment, 
and use it accordingly. Decision makers should at least 
understand that the process must rely onassumptions and cannot 
completely be divorced from assessors' values. Decision makers must 
understand what assumptions were used in the assessment in question, 
and what values they reflect; that the risk estimate is expressed as a 
range and distribution; 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 those 
factors into account in making a decision, along with political, 
economic, and social factors extrinsic to the risk assessment.
    In recent years, many studies have supported the use of 
risk assessment and recommended improvements to the process. In 
1993, the Carnegie Commission on Science, Technology, and 
Government issued ``Risk and the Environment: Improving 
Regulatory Decision Making.'' In 1994, the NAS issued ``Science 
and Judgment in Risk Assessment'' to review and evaluate the 
risk assessment methods of EPA. In March, 1995, the Harvard 
Center for Risk Analysis issued ``Reform of Risk Regulation: 
Achieving More Protection at Less Cost.'' The OSTP also issued 
a brief report entitled, ``Science, Risk, and Public Policy.'' 
In 1997, the Presidential/Congressional Commission on Risk 
Assessment and Risk Management issued the report entitled, 
``Risk Assessment and Risk Management in Regulatory Decision-
Making.'' Many of the risk assessment provisions of this 
legislation are strongly supported by findings and 
recommendations of these and other reports.
    Section 624 defines which agency actions must follow the 
basic principles in this legislation. Subsection (a)(1)(A) 
states that the risk assessment principles of this legislation 
apply to: (i) proposed and final major rules the primary 
purpose of which is to address health, safety, or environmental 
risk; and (ii) risk assessments that the OMB Director 
reasonably determines will have a substantial impact on a 
significant public policy or on the economy. The Committee 
recognizes that some risk assessments can have a significant 
effect even though they are not associated with a major rule. 
Under Subsection (a)(1)(A)(ii), such ``stand alone'' risk 
assessments also would have to comply with the risk principles 
of S. 981 if the OMB Director determines that the risk 
assessment will have a substantial impact on public policy or 
on the economy. This could occur, for example, where a risk 
assessment may establish the basis for significant regulatory 
actions at the Federal, state, or international level.
    The Committee intends to promote the most advanced and 
scientifically valid techniques for performing the wide variety 
of risk assessments covered by this legislation. The Committee 
does not intend to deter agencies from using the forms of risk 
assessment appropriate to their respective regulatory 
decisions. It does intend that the methodology be credible and 
understandable, and its limitations be made known to the 
public.
    Subsection (a)(1)(B) sets out two general principles for 
risk assessments. This first principle provides that a risk 
assessment shall be conducted in a manner that promotes 
rational and informed risk management decisions and informed 
public input into and understanding of the process. This 
recognizes that risk assessments play an important role as a 
tool for regulatory decision making, as well as for 
communicating information to the public about risks.
    The second general principle provides that in determining 
the scope and level of analysis of a risk assessment, the 
significance and complexity of the decision must be considered 
as well as the need to inform the public adequately; the need 
for expedition; and the nature of the risk being assessed.\58\ 
This provision acknowledges that some risk assessments need to 
be done with greater rigor than others. Differently stated, the 
level of effort required for a risk assessment depends on what 
is at stake. In some cases, very severe risks can be identified 
and managed with relative simple risk assessments because the 
stakeholders agree that the danger is great enough that no 
further analysis is needed. 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. The Committee cautions the agencies 
against construing this provision as excusing noncompliance 
with the provisions of section 624 or other provisions of this 
legislation.
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    \58\ See OSTP report, ``Principles in Devising Risk Policy,'' at 17 
(``The level of effort should be commensurate with the severity of the 
risks and costs to society.'') The Risk Commission Report also supports 
this principle. See Vol. 2, at 63 (``Deciding to go forward with a risk 
assessment is a risk-management decision, and scaling the effort to the 
importance of the problem, with respect to scientific issues and 
regulatory impact, is crucial.''); Vol. 2, at 21 (``The level of detail 
considered in a risk assessment and included in the risk 
characterization should be commensurate with the problem's importance, 
expected health or environmental impact, expected economic or social 
impact, urgency, and level of controversy, as well as with the expected 
impact and cost of protective measures.'').
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    To avoid unnecessary duplication of effort, Subsection 
(a)(2) provides that an agency does not have to prepare a new 
risk assessment for a final rule where: (1) the final rule is 
substantially similar to the proposed rule with respect to the 
risk being addressed; (2) the risk assessment performed for the 
proposed rule is consistent with the provisions in Subchapter 
II; and (3) a new risk assessment is not necessary to address 
comments submitted during the comment period.
    Subsection (b) requires each agency to ``consider * * * all 
reliable and relevant and reasonably available scientific 
information'' and to describe the basis for selecting that 
scientific information. This subsection promotes three basic 
principles. First, the agency must make a thorough search for 
relevant data. The agency should make a reasonable attempt to 
gather data from informed parties and may solicit information 
through the Federal Register. Second, the agency should assess 
whether the data are reliable and relevant. And third, if the 
data are relevant and reliable, the agency should consider all 
those data as appropriate in the risk assessment. Data can be 
``reliable'' if they are well understood and generally 
supported in the scientific community; come from well 
recognized, credible sources; or are of sufficient quality that 
the results could be reproduced.\59\
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    \59\ See Risk Commission Report, Vol. 1, at 38 (``Because so many 
judgments must be based on limited information, it is critical that all 
reliable information be considered. Risk assessors and economists are 
responsible for providing decision-makers with the best technical 
information available or reasonably attainable, including evaluations 
of the weight of the evidence that supports different assumptions and 
conclusions.'')
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    The Committee understands that even reliable data will vary 
in quality, relevancy and applicability. The definition of 
``risk assessment'' in Section 621(9) contemplates that an 
agencywill use a careful analysis of the weight of the evidence 
to evaluate the information it has.\60\ In considering the scientific 
information, the agencies should evaluate the data and apply the 
appropriate weight to them in the risk assessment.
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    \60\ The Risk Commission Report provides examples of the kinds of 
considerations entailed in making judgments on the basis of the weight 
of the scientific evidence in a toxicity study: quality of the toxicity 
study; appropriateness of the toxicity study methods; consistency of 
results across studies; biological plausibility of statistical 
associations; and similarity of results to responses and effects in 
humans. See Vol. 2, at 20.
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    Agencies make assumptions in conducting risk assessments to 
overcome a paucity of data or a lack of scientific 
understanding about such things as causality or basic 
biological mechanisms. As Subsection (b) establishes, the 
agency should consider all relevant, reliable and reasonably 
available data. If the agency concludes that information is not 
relevant or reliable, the agency should explain how and why it 
so concluded. When the agency needs to use assumptions in risk 
assessment, Subsection (c) sets out the appropriate treatment 
of the assumptions.
    Subsection (c) does not dictate which assumptions an agency 
shall use. Rather, it requires the agency to disclose pertinent 
information about the significant assumptions so that anyone 
relying on the risk assessment can better evaluate the validity 
of the assumptions and their effect on the risk assessment. 
Accordingly, for a significant assumption, the agency must: (1) 
identify the scientific basis, and the policy basis (if any), 
as well as the extent to which the assumption is validated by 
or conflicts with empirical data; (2) explain the basis for 
choosing among possible assumptions and/or combining an 
assumption with other assumptions; and (3) describe reasonable 
alternative assumptions that would have had a significant 
effect on the results of the risk assessment, and those that 
were considered but not selected by the agency for use in the 
risk assessment.
    Finally, Subsection (c)(2) establishes the agency's 
obligation to update the assumptions it uses to reflect new 
data or new scientific understandings.\61\ It requires the 
agency to revise its assumptions to incorporate relevant and 
reliable scientific information as it becomes reasonably 
available. Subsection (c)(2) is intended to keep agency 
assumptions current. It is not intended to create a 
counterproductive and never-ending cycle of revisions. It is 
intended to promote credible and reliable risk assessments.
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    \61\ The Committee supports the conclusions of Risk Commission 
Report, which states: ``Agencies should continue to move away from the 
hypothetical . . . toward more realistic assumptions based on available 
scientific data.'' Vol. 2, at iv. As Science and Judgment in Risk 
Assessment 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).
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    Subsection (d) requires that when an agency decides to 
conduct a risk assessment, it must notify the public and 
solicit relevant and reliable data from the public. The agency 
must consider the data in conducting the risk assessment. The 
purpose is to make the process more transparent and 
accountable.\62\
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    \62\ The Committee received comments on the need for a more 
transparent risk assessment process that would allow for greater public 
input. The Risk Commission Report strongly supports stakeholder 
(public) involvement at all stages of risk management. To avoid the 
politicization of risk assessments, however, the Commission noted that 
``stakeholders play an important role in providing information that 
should be used in risk assessments and in identifying specific health 
and ecological concerns'' but should not participate directly in the 
risk assessment itself. See Vol. 2, at 21 (``Stakeholders play an 
important role in providing information that should be used in risk 
assessments and in identifying specific health and ecological concerns 
they would like to see addressed.''); id., at 185.
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    Subsection (e) mandates some of the basic contents of the 
document describing the risk assessment. This subsection and 
subsections (c) and (f) are critical to the transparency in the 
risk assessment. They will allow the public and agency decision 
makers to understand the full scope and dimensions of the 
problem that the agency is addressing. Subsection (e) sets out 
five pieces of information the agency risk assessment must 
disclose:
    (1) A description of the hazard of concern.--That is, the 
problem being addressed.
    (2) A description of the populations or natural resources 
that are the subject of the risk assessment.--Consistent with 
subsection (f), ``populations'' would include the population 
that could be exposed to the hazard and, as appropriate, highly 
exposed or sensitive subpopulations.
    (3) An explanation of the exposure scenarios used in the 
risk assessment, an estimate of the population or natural 
resource corresponding to each exposure scenario, and an 
estimate of the likelihood that the exposure scenario would 
actually occur.--The Committee is aware that the concept of 
``exposure'' has been more associated with assessments of risks 
from pollutants or disease agents. However, the Committee 
believes that it also is applicable to risks from harmful 
events. For example, passengers in a car are exposed to 
passenger side airbag injuries; workers who work around 
electrical machinery are exposed to injuries from inadvertent 
start-ups during repairs; and vehicle passengers or downstream 
residents may be exposed to the potential harm from the 
collapse of a bridge. The Committee broadly interprets the term 
``exposure.''
    (4) A description of the nature and severity of the harm 
that could occur as a result of exposure to the hazard.--By 
``nature'' the Committee means the type of adverse affect, such 
as disease, physical harm or ecosystem damage, that could be 
attributed to the hazard. By ``severity'' the Committee means 
the seriousness of the harm--not the likelihood--including 
whether the harm is reversible.
    (5) A description of the major uncertainties in each 
component of the risk assessment and their influence on the 
results of the assessment.--This requirement will help inform 
the public and agency decision maker how certain the risk is. 
It also will help identify areas where additional research or 
data could significantly improve the quality and reliability of 
the riskassessment.\63\
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    \63\ In ``Science, Risk and Public Policy,'' OSTP emphasized the 
importance of describing the uncertainties inherent in risk 
assessments, stating ``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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    The final product of a risk assessment should be a set of 
numeric estimates which, along with the information required 
under Subsection (e), constitutes the risk characterization. 
Traditionally, agency regulatory decisions have been based on 
the estimate of the risk. Subsection (f) describes the form the 
risk estimate shall take. In the past, risk assessments 
resulted in risk estimates that were a single value, such as 
one-in-ten-thousand, or for some toxicological assessments, a 
``safe'' dose or exposure level. The Committee believes that 
reliance on single point estimates may conceal important 
information from the public and the decision maker, such as the 
degree of uncertainty about the estimate, how different 
populations might be affected differently, or what policy 
judgments are embodied in the estimate. For example, to be 
protective, agencies routinely have used conservative 
assumptions where there were uncertainties or suspected 
variability in exposed individuals. The decision to be 
protective may well be the correct one, but embedding this 
important policy decision in the risk estimate (the 
``science'') is not transparent to the public or agency 
decision makers.\64\
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    \64\ 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.'' (p. 185).
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    The tools of probabilistic risk assessments are now 
sufficiently well-developed that agencies often can supply a 
multidimensional descriptive estimate of the risk--one that 
fully conveys both the range and likely distribution of the 
risk. The risk manager should have as complete a picture of the 
risk as possible, avoiding, for example, the simple 
presentation of a single-point risk estimate that could 
overstate or understate the true risk. Accordingly, Subsection 
(f) requires that ``to the extent scientifically appropriate,'' 
which should be typical, agencies must provide such estimates. 
Specifically, agencies are required to provide:
    (1) The estimate of risk as one or more reasonable ranges 
and, if feasible, probability distributions, reflecting 
variabilities and uncertainties.--By ``reasonable'' the 
Committee intends that the ranges and distributions convey a 
reasonably accurate picture of the risk, one that neither 
overstates nor understates the risk. The reasonable ranges and 
distributions would incorporate all of the data and alternative 
assumptions used in the risk assessment. One of the underlying 
premises of this legislation is that more information leads to 
better decisions. Risk information should at least be presented 
as a range, but this bill reflects the preference that agencies 
should strive to obtain sufficient information to provide 
probability distributions. Such distributions, when accurately 
reflecting variability and uncertainty, give decision makers 
and the public a more complete picture of the risks. 
Accordingly, the bill requires the agency to provide a 
probability distribution where feasible. The reference to ``one 
or more'' ranges and distributions reflects that fact that more 
than one distribution may be needed to reflect fundamental 
uncertainties or to provide specialized information for 
relevant subpopulations, as described in subsection (f)(2).
    (2) The central \65\ and high end estimates for each range 
and distribution and a description of the relevant exposure 
scenario for the potentially exposed population to which the 
range and distribution estimate applies.\66\--The Committee 
believes that the public and the agency decision maker will 
make more informed decisions if they know about the central and 
high-end estimates of each range and distribution and the 
exposure of particularly affected populations.
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    \65\ A ``central estimate of risk'' is: the mean or average of the 
distribution; or a number which contains multiple estimates of risk 
based on different assumptions, weighted by their relative 
plausibility; or any estimate judged to be most representative of the 
distribution. See, e.g., Charles A. Holloway, ``Decision Making Under 
Uncertainty: Models and Choices'' (1979), at 76, 214, 91-127; Theodore 
Colton, ``Statistics in Medicine'' (1974), at 28-31. The central 
estimate should neither understate nor overstate the risk, but rather, 
should provide the risk manager and the public with the expected risk. 
See Science and Judgment in Risk Assessment, at 170-75.
    \66\ See EPA, Policy for Risk Characterization (March 21, 1995), at 
2 (``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) * * *'').
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    (3) A description of qualitative factors that influenced 
the ranges, distribution and likelihood of the risk.--Such 
qualitative factors may include: choice of data sets; choice of 
extrapolation models; choice of statistical cutoff point for 
validity; choice of end point; choice of default assumptions, 
and so on. This paragraph promotes the core philosophy of this 
legislation--namely, that more information and greater 
transparency will improve the quality of agency decision 
making.
    To help the public and the agency decision maker to better 
understand the nature and magnitude of the risks that are the 
subject of a risk assessment, Subsection (g) requires agencies 
to compare the risk to other risks ``familiar to and routinely 
encountered by the general public.'' The agency should disclose 
the critical features of the compared risks, including whether 
they are voluntary or involuntary, newly discovered or well 
understood, and reversible or irreversible.\67\
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    \67\ See, e.g., National Research Council, ``Improving Risk 
Communication'', 165-79 (1989).
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    Comparing risks in this manner helps the agency understand 
whether it is addressing the right problems in the most 
effective way. It also helps the public understand the 
dimensions of therisk and whether the agency is focusing its 
efforts on the right problems.\68\ The Committee intended to underscore 
the public communication value of risk comparisons and therefore 
required that the comparison be familiar to and routinely encountered 
risks. The Committee expects the agencies to select appropriate 
comparisons that provide the best contextual information to the public.
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    \68\ One of the key recommendations of the Commission Report was 
that the problems a regulation is intended to address should be placed 
in their ``public health and ecological context.'' Vol. 1, at 4. For 
example, in the environmental area the Report suggests four questions 
for an agency to ask and answer:
    Is the population exposed to the same pollutant from other sources?
    Is exposure to the pollutant also occurring from other 
environmental media?
    Do other pollutants from the same sources pose additional risks to 
the population of concern?
    How great a risk does the problem pose compared to other similar 
risks that the community? Vol 1, at 9-10.
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Sec. 625. Peer review

    This section specifies that agency heads must develop a 
systematic program for independent peer review of risk 
assessments and cost-benefit analyses conducted for major 
rules.\69\ Central to the peer review program should be 
reviewed by an adequate number of individual experts from 
relevant scientific and technical disciplines, through formal 
or informal devices. Peer reviewers must be selected on the 
basis of their expertise in the sciences or economics relevant 
to the regulatory decision. The participants must be broadly 
representative of the scientific and technical views relevant 
to the decision at hand and independent \70\ of the agency.\71\
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    \69\ Peer review is a widely endorsed component of risk assessment 
and cost-benefit analysis. See, e.g., Risk Commission Report, Vol 2, at 
103 (``Peer review of economic and social science information should 
have as high a priority as peer review of health, ecological, and 
engineering information.''); National Research Council, ``Valuing 
Health Risks, Costs, and Benefits for Environmental Decision Making'' 
(1990), at 207 (``benefit-cost analysis should be subject to 
systematic, consistent, formal peer review''); American Enterprise 
Institute & Brookings Institution, ``An Agenda for Regulatory Reform'' 
(1997), at 13 (the president and Congress should adopt procedures to 
peer review regulatory analyses); John D. Graham, ``Making Sense of 
Risk: An Agenda for Congress,'' in ``Risks, Costs, and Lives Saved'' 
(Robert W. Hahn, ed. 1996); John D. Graham, ``Harnessing Science for 
Environmental Regulation'' (1991). 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).
    \70\ Independence from the agency is not intended to preclude use 
of established advisory committees like the Science Advisory Board at 
EPA. The charter of EPA's Science Advisory Board states that its 
objective is to provide ``independent advice to EPA's Administrator on 
the scientific and technical aspects of environmental problems and 
issues.'' Its membership consists of persons from the private sector 
who serve for two year terms. No full time federal employee is 
permitted to be on the Science Advisory Board, although most members do 
serve as special government employees and are eligible by statute to be 
compensated for their services. Permanent advisory committees and the 
members of such committees, even though they serve as special 
government employees, are not intended to be precluded from serving as 
peer reviewers under S. 981.
    \71\ See Statement of Dr. Bruce Alberts, President of the National 
Academy of Sciences, in Response to Senator Levin's Questions following 
February 24, 1998 Hearing on S. 981.
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    At the same time, the bill allows for a variety of 
approaches to peer review, including the use of informal 
methods. For example, the National Science Foundation (``NSF'') 
uses two principal methods for peer review of proposals, by 
mail and by panel. In its report to the National Science Board 
on the Merit Review System for FY 1997, the NSF reported that 
``In `mail only' reviews, peers are sent proposals and asked to 
submit written comments to NSF by postal mail, facsimile, 
electronic mail, or through FastLane, NSF's Web-based system 
for electronic proposal submission and review.'' Many proposals 
peer reviewed by the National Science Foundation are done so 
using a combination of both mail and panel methods. The peer 
review requirements of S. 981 are intended to allow agencies to 
use peer review procedures that are appropriate for the 
analysis involved.
    The Committee considered in some depth how to draw the line 
with respect to possible conflicts of interest of peer 
reviewers. S. 981 as introduced provided specifically that 
persons with a financial conflict of interest in a rulemaking 
could serve as peer reviewers so long as the conflicts were 
disclosed to the agency. Many persons who commented on the bill 
were not satisfied with that approach as a universal 
requirement. After consulting with individuals with expertise 
on the practices and conflicts standards of leading agencies 
that use peer review widely, including the National Institutes 
of Health, the National Academy of Sciences, the National 
Science Foundation, and EPA, the Committee concluded that 
agencies themselves \72\ can adequately address potential 
conflicts in a fair and impartial manner, which is their 
responsibility today. The Committee is not aware of any 
problems with the current conflict of interest standards being 
used by federal agencies with respect to peer review, and 
expects that agencies new to peer review under S. 981 will seek 
guidance from OMB, OSTP and agencies with expertise in the 
field.
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    \72\ For example, EPA's approach for addressing possible conflicts 
of interest is contained in EPA's recently issued Science Policy 
Council Handbook on peer review. It presents alternative approaches to 
identifying and resolving potential conflicts, depending upon the 
specific situation. The EPA handbook recognizes that ``It is important 
that peer reviewers be selected for independence and scientific/
technical expertise.'' U.S. Environmental Protection Agency, Science 
Policy Council Handbook, EPA 100-B-98-001 (Jan. 1998), at p. 45. Yet 
EPA also acknowledges that ``experts with a stake in the outcome--and 
therefore a potential conflict--may be some of the most knowledgeable 
and up-to-date experts because they have concrete reasons to maintain 
their expertise. Such experts could be used provided the potential 
conflicts of interest are disclosed and the peer review panel or group 
being used as whole is balanced.'' Id., at p. 48.
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    S. 981 requires that agency peer review programs 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 (b)(2) requires the agency to respond 
in writing to all significant peer review comments. The agency 
response must be made available to the public and be part of 
the rulemaking record for purposes of judicial review of any 
final agency action.
    Where the agency head and the OMB Director agree, 
subsection (b)(3) allows them to exempt from the peer review 
requirements a cost-benefit analysis, risk assessment, or any 
component thereof, that previously has been subjected to 
adequate peer review. Subsection (c) provides for a neutral 
referee who can attest to the independence and quality of the 
peer review. For each peer review under this section, the 
agency head shall include in the rulemaking record a statement 
by a Federal officer or employee who is not an employee of the 
rulemaking office or program (1) whether the peer review 
participants reflect the independence and expertise required 
under subsection (b)(1)(A), and (2) whether the agency has 
adequately responded to the peer review comments as required 
under subsection (b)(2).
    Finally, subsection (d) provides that the peer reviews 
required by this section shall not be subject to the Federal 
Advisory Committee Act. With the input of respected scientific 
and technical experts, the Committee determined that a FACA 
exemption would help expedite peer reviews as well as enhance 
their technical rigor. Peer review is not intended to provide 
policy advice or analysis to an agency, and it is not a 
political debate among interested parties.\73\ Moreover, the 
Committee believes that the FACA exemption will reduce the 
rigidity, time, and expense of peer reviews.
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    \73\ See, e.g., Statement of Dr. Bruce Alberts, President of the 
National Academy of Sciences, in Response to Senator Levin's questions 
following February 24, 1998 Hearing on S. 981. As defined by EPA, 
``Peer review is a documented critical review of a specific agency 
major scientific and/or technical work product * * * It is usually 
characterized by a one-time interaction or a limited number of 
interactions by independent peer reviewers.'' See EPA, Science Policy 
Council Handbook, at p. 10.
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Sec. 626. Deadlines for rulemaking

    For a 2-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 regulate through individual adjudications. To 
avoid any constitutional concerns about extending judicial 
deadlines by legislation, subsection (b) authorizes and directs 
the United States to ask the relevant court to extend any 
deadlines imposed by the court.
    The sole purpose of section 626 is to give agencies time to 
make a reasonable effort to faithfully fulfill the requirements 
of this legislation. The Committee understands that the 
legislation asks for better quality and greater openness in 
many analyses already done, and in some cases, creates new 
obligations. 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. 627. Judicial review

    Section 627 establishes the framework for judicial review 
of agency compliance with the regulatory analysis, risk 
assessment, and peer review requirements of this legislation. 
Specifically, Section 627 is addressed solely to judicial 
review of ``[c]ompliance by an agency with the provisions of 
[Subchapter II].'' To the extent that an agency action is being 
challenged on grounds other than alleged noncompliance with the 
provisions of Subchapter II, Section 627 would not apply.\74\
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    \74\ This point is underscored by the savings clause in Section 
622(b), which states: ``Nothing in this subchapter shall be construed 
to alter or modify the * * * opportunity for judicial review made 
applicable under other statutes.''
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    Subsection (a) sets three basic conditions for judicial 
review of agency compliance with the provisions of Subchapter 
II: The judicial review must occur--(1) in connection with 
review of final agency action; (2) in accordance with the 
provisions of Section 627; and (3) in accordance with the 
limitations on timing, venue, and scope of review imposed by 
the statute authorizing the review. In setting forth the third 
condition, the Committee recognizes that in some cases, the 
statute authorizing review may not impose any special 
limitations on timing, venue, or scope of review; in other 
cases, these matters may be addressed in several different 
statutes.
    Subsection (b) governs the availability and standard of 
review of agency ``major rule'' determinations. An agency's 
determination of whether a rule is a major rule--and thus 
subject to the regulatory analysis and risk assessment 
requirements of Subchapter II--is subject to review only in 
connection with review of the final agency action to which it 
applies. At that time, a court may set aside the agency's 
determination of whether the rule is ``major'' only if it is 
shown to be arbitrary or capricious in light of information 
reasonably available at the time the agency made the 
determination.
    In close cases, the Committee would expect that the agency 
would err on the side of good analysis and avoid the risk of 
remand or invalidation of the rule. As a practical matter, the 
agency's major rule determination will be consequential where 
the agency wrongly determines that a rule is not ``major'' and 
does not bother to perform the cost-benefit analysis, cost-
benefit determination, risk assessment, or peer review that 
Subchapter II requires for ``major rules.'' In such a case, 
Section 627(e) would require the court to remand or invalidate 
the rule.
    By contrast, if the agency incorrectly determines that a 
rule is ``major,'' the impact on the ruleitself is not likely 
to be adverse--since a rule would not be remanded or invalidated just 
because an agency performed a cost-benefit analysis and risk 
assessment, made a cost-benefit determination, and provided for peer 
review in circumstances where such action was not statutorily mandated. 
After all, the Executive Branch is free to undertake such actions today 
even where not required to do so by statute. Indeed, that is the 
premise of a series of executive orders on regulatory analysis and 
review that date back to the Carter Administration, that grew in the 
Reagan Administration, and that is currently embodied in Executive 
Order 12866.
    Under subsection (c), a designation by the Director of OMB 
that a rule is a major rule--or the failure to make such a 
designation--is not subject to judicial review. If the Director 
has designated a rule as ``major,'' the requirements of 
Subchapter II that apply to major rules must be met. 
Conversely, if neither the Director nor the agency has 
designated a rule as ``major,'' and the rule does not fall 
within Subsection 621(7)(A), then the requirements of 
Subchapter II would not apply.
    Subsection (d) provides that any cost-benefit analysis, 
cost-benefit determination, or risk assessment required under 
Subchapter II shall not be subject to judicial review separate 
from review of any final rule to which the analysis or 
assessment applies. Such a cost-benefit analysis, cost-benefit 
determination, or risk assessment, however, would be part of 
the rulemaking record, and if the final rule to which they 
apply is brought before a court for review, the court would 
have to consider the analysis, determination, and any 
assessment--to the extent relevant--in determining whether the 
final rule is arbitary, capricious, an abuse of discretion, or 
unsupported by substantial evidence.\75\
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    \75\ ``The ``substantial evidence'' standard would apply in those 
cases where a ``substantial evidence'' standard of review is provided 
by the enabling statute--such as under the Occupational Safety and 
Health Act, 29 U.S.C. Sec. 655(f), or the Toxic Substances Control Act, 
15 U.S.C. Sec. 2618(c)--or where it is required by the Administrative 
Procedure Act, 5 U.S.C. Sec. 706(2)(E).
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    Section 627(e) states that if an agency fails to perform 
the cost-benefit analysis, cost-benefit determination, or risk 
assessment, or to provide for peer review, as required under 
Subchapter II, the court ``shall remand or invalidate the 
rule.'' If an agency fails to perform the cost-benefit 
analysis, cost-benefit determination, risk assessment, or peer 
review, the court would be obliged to invalidate or remand the 
rule. In this respect, S. 981 expands the role of a reviewing 
court by directing that a rule be invalidated in circumstances 
where it might not be invalidated under current law.
    Under Section 627, an agency's failure to comply with a 
specific requirement of S. 981 regarding how to perform a risk 
assessment or cost-benefit analysis would not, in and of 
itself, be grounds for invalidating a rule. That is, a rule 
could not be invalidated simply because a ``how to'' 
requirement of Section 623 (governing cost-benefit analyses) or 
624 (governing risk assessments) was not met. At the same time, 
however, in determining whether the final rule is arbitrary or 
capricious, the court would be free to consider the effect that 
the agency's failure to comply with any such requirement (e.g., 
a failure to consider reliable and reasonably available 
scientific information) had on the rulemaking. In addition, of 
course, the cost-benefit and risk assessment information would 
be available to the court and could be considered in 
determining whether the final rule is arbitrary or capricious.
    The following three scenarios illustrate how the judicial 
review provision of S. 981 is intended to operate.
    Scenario (1): S. 981 requires an agency to identify and 
evaluate reasonably identifiable substitution risks. Suppose 
that during a rulemaking, a person submitted information to the 
agency on the possibility of a substitution risk and the agency 
ignored it. Could that person later argue in a lawsuit 
challenging the rule that the agency action in adopting the 
final rule is arbitrary or capricious simply because the agency 
violated a requirement of S. 981 when it failed to consider a 
legitimate substitution risk?
    No. Failure to comply with a specific procedural 
requirement of S. 981 regarding how to perform a risk 
assessment or cost-benefit analysis would not, in and of 
itself, be grounds for invalidating a rule.
    However, the person could argue that the agency's failure 
to consider the legitimate substitution risk had the effect of 
making the resulting rule arbitrary or capricious--whether or 
not that failure also violated a specific procedural 
requirement of S. 981. Such an argument is available today, and 
would continue to be available after S. 981 is enacted.
    Scenario (2): S. 981 requires agencies, when doing a risk 
assessment, to consider ``reliable and reasonably available 
scientific information.'' If an agency fails to consider such 
information which we know the agency had access to through the 
public comment period, can a person argue that the rule should 
be remanded or invalidated just because the agency violated a 
specific procedural requirement of S. 981 when it failed to 
consider such information?
    No. As indicated in Scenario (1), failure to comply with 
the procedural requirements of S. 981 regarding how to conduct 
a risk assessment is not independent grounds for remanding or 
invalidating a rule.
    On the other hand, the fact that Congress directed agencies 
to follow this requirement is an indication that it is 
important to the development of a risk estimate on which a 
rational and well-informed rulemaking decision can be based. 
Depending on the circumstances of the particular case, a court 
today might conclude that a rule is arbitrary or capricious 
where it is based on a risk assessment that did not consider 
reliable and reasonably available scientific information. 
Nothing in S. 981 is intended to preclude a court from reaching 
the same result in the future. To the contrary, S. 981 
specifically directs agencies to consider ``reliable and 
reasonably available scientific information'' in conducting 
risk assessments, so it does not prevent a court from finding a 
rule to be arbitrary or capricious when such information is 
ignored.
    Scenario (3): S. 981 requires the agency to make a 
determination as to whether the benefits of the rule justify 
the costs. The agency doesn't make that determination. Can a 
person challenge the rule for the failure of the agency to make 
that determination based on the requirement of S. 981?
    Yes. The bill explicitly states that the failure to make 
the determination requires the court to remand or invalidate 
the rule.
    As the foregoing scenarios illustrate, an agency's failure 
to comply with the specific procedural requirements of S. 981 
regarding how to conduct a risk assessment or cost-benefit 
analysis would not, in and of itself, be grounds for 
invalidating a rule. That is, the rule could not be invalidated 
under section 627(d) simply because a procedure required by S. 
981 had been violated. At the same time, the court could 
consider the content of the cost-benefit analysis and risk 
assessment, any omissions in such analyses (such as those 
discussed in the above scenarios), or the arbitrary treatment 
of the content of those analyses, in determining whether the 
final rule isarbitrary or capricious. This is true under 
current law and would continue to be true once S. 981 is enacted.
    In addition, if an agency fails to perform a required cost-
benefit analysis or risk assessment, does not make a cost-
benefit determination, or does not provide for peer review, a 
court would remand or invalidate the rule. In this respect, S. 
981 changes the role of a reviewing court by directing that a 
rule be remanded or invalidated in circumstances where it might 
not be remanded or invalidated under current law.
    In sum, in determining whether a rule is arbitrary or 
capricious, a court would remain free under S. 981--as it is 
under current law--to consider both what the agency did do, as 
reflected in the cost-benefit analysis and risk assessment, and 
what it did not do, such as failing to consider relevant, 
reliable, and reasonably available scientific information. But, 
with the exception of cases covered by Section 627(e)--where 
automatic remand or invalidation of the rule is required--a 
court would not remand or invalidate a rule on the ground that 
the agency simply had not complied with a specific procedure of 
S. 981.

Sec. 628. Guidelines, interagency coordination, and research

    Subsection 628(a)(1) requires the Director of the Office of 
Management and Budget, in consultation with the Council of 
Economic Advisors, the Director of the Office of Science and 
Technology Policy, and relevant agency heads, to develop and 
issue uniform guidelines to implement the cost-benefit 
analysis, risk assessment, and peer review requirements of this 
legislation. Such guidelines should embody, and expand upon, 
principles required by this legislation. The OMB Director is 
responsible for overseeing the implementation of these 
guidelines, and periodically revising them as appropriate and 
as warranted by advances in risk analysis, cost-benefit 
analysis, and related fields.
    No later than 18 months after issuance of those uniform 
guidelines, each agency subject to section 624 is required to 
adopted detailed guidelines under subsection 628(a)(2) for risk 
assessments as required by section 624. Such guidelines shall 
be consistent with the uniform guidelines issued under 
subsection 628(a)(1). The Committee expects each agency to 
revise these risk assessment guidelines as appropriate and as 
warranted by advances in science and risk assessment 
methodology.
    Subsection (a)(3) requires that all guidelines developed 
under subsection (a) must be developed following notice and 
public comment. OMB and the agencies are expected to make 
diligent efforts to solicit input from all informed parties. 
Agencies are not required, however to develop the guidelines 
through the legislative rulemaking process. The Committee was 
concerned that the APA rulemaking process may be too rigid and 
time-consuming for the expeditious development and updating of 
risk assessment guidelines. Accordingly, Subsection (a)(3) 
makes clear that the development, issuance, and publication of 
risk assessment and risk characterization guidelines developed 
under this section are subject only to limited judicial review 
under section 706(1) of title 5. The Committee expects the 
agencies to develop and maintain state-of-the-art guidelines.
    Subsection (b) is designed to improve the conduct, 
application, and practice of cost-benefit analysis and risk 
assessment across all relevant agencies. Subsection (b)(1) 
requires the OMB Director, in consultation with the Council of 
Economic Advisors and the Director of the Office of Science and 
Technology Policy, to oversee periodic evaluations of the 
manner in which agencies are conducting cost-benefit analyses 
and risk assessments. Such a survey will allow for a 
determination of the scope and adequacy of cost-benefit 
analysis and risk assessment practices of the federal agencies. 
It also will promote the injection of new scientific and 
technical advances into the analytical practices of the 
agencies.
    Subsections (b)(3) and (b)(4) require OMB to establish with 
CEA and OSTP appropriate interagency mechanisms to promote 
coordination between agencies and to ensure consistent use of 
state-of-the-art cost-benefit and risk assessment practices.
    Subsection (c)(1) requires OMB, in consultation with the 
agencies, CEA, and OSTP, to develop and periodically evaluate a 
strategy to meet agency needs for research and training in 
cost-benefit analysis and risk assessment. This strategy should 
address the need for research on modeling, the development of 
generic data, use of assumptions, the identification and 
quantification of uncertainty and variability, and other areas. 
OMB also should identify long-term needs to adequately train 
individuals in risk assessment techniques.
    Subsection (c)(2) requires the OMB, in consultation with 
OSTP, to enter a contract with an accredited scientific 
institution, to conduct research to: (1) develop a common basis 
to assist risk communication related to both carcinogens and 
non-carcinogens; and (2) develop methods to appropriately 
incorporate risk assessments into related cost-benefit 
analyses.\76\ The OMB shall enter into the contract no later 
than 6 months after enactment of section 628, and the results 
of the research shall be submitted to OMB and to Congress no 
later than 24 months after the date of enactment.
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    \76\ See Risk Commission Report, Vol 2, at 43, 99.
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Sec. 629. Risk-based priorities study

    The Committee believes that setting risk-based priorities 
offers an excellent opportunity to promote better allocation of 
resources of both the government and the private sector to 
increase the protection of human health, safety and the 
environment. The importance of such a risk-based approach has 
been advocated in numerous studies and publications,\77\ as 
well as in testimony before the Governmental Affairs 
Committee.\78\ The Committee believes that the tool of 
comparative risk analysis can help us find ways to make our 
health, safety and environmental protection dollars go farther 
and provide greater overall protection, saving even more lives 
than the current system.\79\ 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).
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    \77\ See, e.g., J. Clarence Davies & Jan Mazurek, Pollution Control 
in the United States, Resources for the Future (1998), at 101-22; Cass 
R. Sunstein, ``Health-Health Tradeoffs,'' U. Chi. L. Rev. 1533 (1996); 
Resources for the Future, Comparing Environmental Risks (J. Clarence 
Davies, ed. 1996); John D. Graham, ``Making Sense of Risk: An Agenda 
for Congress,'' in Risks, Costs and Lives Saved, (Robert W. Hahn, ed. 
1996); National Academy of Public Administration, Setting Priorities, 
Getting Results (April 1995); Harvard Center for Risk Analysis, Reform 
of Risk Regulation: Achieving More Protection at Less Cost (March 
1995); 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 (1993).
    \78\ See, e.g., Testimony of John D. Graham, Director, Harvard 
Center for Risk Analysis, before the Senate Committee on Governmental 
Affairs, September 12, 1997.
    \79\ 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 (March 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).
---------------------------------------------------------------------------
    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 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).
    The purpose of the analyses required by this section is to 
provide Congress and the President with the information to make 
more informed choices. The Committee anticipates that, among 
other things, these analyses will be useful for identifying 
unaddressed risks, risks borne disproportionately by a segment 
of the population, and research needs. This will provide better 
information for deciding where to focus regulatory efforts and 
agency resources. Finally, conducted through an open process, 
these analyses are likely to enhance public debate about these 
choices and ultimately create greater public confidence in 
government policy. The comparative risk study should compare 
significant risks to human health, safety or the environment 
and make recommendations on setting priorities to reduce them. 
The comparison is limited to ``significant'' risks, and the 
study should examine which of those risks are the most serious 
and most amenable to cost-effective reduction.
    Section 629 furthers the use of comparative risk analysis 
to inform planning and budgetary decision making. To begin, it 
calls for contracting with an accredited scientific institution 
to conduct a study with three components. The first and most 
important component is a comparative risk analysis, which is 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.\80\
---------------------------------------------------------------------------
    \80\ See 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).
---------------------------------------------------------------------------
    Since the purpose is to assist the Federal government in 
evaluating how to use its resources effectively to address the 
most serious problems, to the extent feasible, the comparison 
should include all such risks that are, or could reasonably be, 
addressed by the various agencies and programs whose purpose is 
to protect human health and safety or the environment, 
including natural resources. 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. 
Scientific data alone cannot tell us which risks should be 
addressed first, for example: neurological damage, heart 
disease, or birth defects; a plane crash or cancer. The 
comparative risk analysis should be conducted in a way that 
enables public values to be ascertained and considered. This 
will require public input into 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.
    The second component is a study of methodologies for using 
comparative risk analysis to compare dissimilar risks to 
further development and use of this tool. Because comparative 
risk analysis is still a relatively new science, particularly 
when used to compare dissimilar risks, subsection (a)(2) 
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 Committee anticipates that 
this study will draw on the analyses already conducted by 
numerous states. The results of this part of the study should 
also facilitate risk comparisons required by Section 624(g).
    The third component of the study is a set of 
recommendations on the use of comparative risk analysis for 
setting priorities. These recommendations should provide 
sufficient guidance to enable the President, the agency heads, 
and Congress to evaluate how to better allocate resources 
across agencies and among programs to achieve the most cost-
effective risk prevention and reduction.
    To assure its credibility, the study must be conducted by 
an accredited body selected by the Director of OMB in 
consultation with the Office of Science and Technology Policy. 
Subsection (b) requires that the study provide an opportunity 
for public comment and public participation. For the 
comparative risk analysis to be reliable and credible, the 
Committee thinks it is important that the study be conducted 
through an open process, utilizing expertise in appropriate 
fields, such as 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 principles in Section 624. The methodologies 
and scientific determinations made in the analysis are to be 
subjected to external peer review, in compliance with Section 
625, and made available for public comment. The results of the 
comparative risk analysis under subsection 629(a)(1) should be 
presented in a manner that distinguishes between the scientific 
conclusions and any policy or value judgments embodied in the 
comparisons.\81\
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    \81\ The Carnegie Commission report, Risk and the Environment, 
recommends that agencies ``experiment with different mechanisms for 
integrating societal values into the process of setting risk-based 
regulatory priorities.'' (p. 89). The report states 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: ``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).
---------------------------------------------------------------------------
    The study must be completed within three years following 
enactment of this section. Within one year thereafter, agencies 
are to use the results of the study to inform the agencies in 
the development of their budgets and strategic plans and 
performance plans under the Government Performance and Results 
Act, which should provide an excellent framework for achieving 
more cost-effective risk reduction.
    Finally, to implement any lessons learned from the 
exercise, Subsection 629(d) directs the President to recommend 
legislative changes to assist in setting priorities so that the 
federal government can more effectively and efficiently reduce 
risks to human health, safety, or the environment. The 
Committee views this report to Congress as an important element 
in setting the federal government's priorities so that we can 
achieve the greatest degree of protection for health, safety 
and the environment with our resources. Congress needs this 
information to evaluate its agenda.

Subchapter III. Review of rules

    The Committee believes that for regulatory reform to be 
effective it must not be prospective only. Agencies 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 of existing rules has been required since 1981 under 
Executive Orders 12291, 12498, and 12866; it has met with 
varying degrees of failure. Clearly, getting agencies to review 
existing rules is much easier said than done.
    In the first annual report on Executive Order 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.''\82\ The Vice 
President then launched his ``Cutting Red Tape'' initiative under the 
National Performance Review. Unfortunately, that too proved 
unsuccessful.\83\ The long but disappointing record of Executive Branch 
review efforts necessitates a legislative mandate.
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    \82\ National Performance Review, From Red Tape to Results: 
Creating a Government that Works Better and Costs Less (1993).
    \83\ See, e.g., GAO, Regulatory Reform: Agencies' Efforts to 
Eliminate and Revise Rules Yield Mixed Results (Oct. 1997). See also, 
Testimony of L. Nye Stevens, Director, Federal Management and Workforce 
Issues, General Government Division, General Accounting Office, before 
the Subcommittee in Financial Management and Accountability, Senate 
Committee on Governmental Affairs, September 25, 1996; Testimony of L. 
Nye Stevens, Director, Federal Management and Workforce Issues, General 
Government Division, General Accounting Office, before the Senate 
Committee on Governmental Affairs, September 12, 1997; Statement of L. 
Nye Stevens, Director, Federal Management and Workforce Issues, General 
Government Division, General Accounting Office, before the Senate 
Committee on Governmental Affairs, February 24, 1998.
---------------------------------------------------------------------------
    The Committee believes that it is time that agencies 
deliver on the now long-standing requirement to review existing 
rules. Accordingly, Subchapter III and Section 3(b), discussed 
later in this report, require agencies to review their current 
rules.
    Subchapter III requires the periodic review of economically 
significant rules. The definition of ``economically significant 
rules'' in Section 631 mirrors the definition of ``major rule'' 
in Subsection 621(7) with one important difference--Section 631 
has no exceptions. All economically significant rules should be 
considered by all agencies for possible review.\84\
---------------------------------------------------------------------------
    \84\ See ACUS Recommendation 95-3, ``Review of Existing Agency 
Regulations'' (1995) (all agencies (executive branch or 
``independent'') should develop processes for systematic review of 
existing regulations to determine whether such regulations should be 
retained, modified, or revoked).
---------------------------------------------------------------------------
    Section 632 requires each agency, within 1 year after 
enactment, to publish 5-year plans for the review of the 
economically significant rules the agency selects for review. 
Each schedule must be subject to public comment, and published 
in the Federal Register within 120 days after the close of the 
comment period. The Committee believes the 5-year time frame 
(with an extension of up to 1 year for good cause) is a 
reasonable period of time for an agency to review the rules it 
has selected for review.
    In setting priorities and in selecting which rules to 
review, the agencies must consider the extent to which (1) the 
rule could be revised to be more cost-effective or to increase 
net benefits; (2) the rule is important relative to other rules 
being considered for review; (3) the agency has discretion 
under the statute authorizing the rule to modify or repeal the 
rule. 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 try to review 
related rules at the same time.
    Each schedule, preliminary and final, must include: (1) a 
brief identification and description of each rule selected for 
review; (2) an explanation for selecting each such rule; and 
(3) deadlines for the review of each rule on the schedule--no 
later than 5 years after the publication of the final schedule. 
Subsection (a)(4) requires the agency to publish, no later than 
6 months after each deadline, its determinations about what 
action it will take on each rule, and an explanation for each 
determination. If an agency determines to amend or repeal a 
rule, subsection (a)(5) requires the agency to complete final 
agency action on such rule no later than 2 years after the 
deadline for the rule under subsection (a)(3). The OMB Director 
may extend a deadline for no more than 1 year if the Director 
for good cause finds that compliance with such deadline is 
impracticable and publishes such finding, and a succinct 
explanation therefor, in the Federal Register.
    Subsections (b) and (c) parallel section 5 of Executive 
Order 12866. Subsection (b) requires each agency to identify 
any legislative mandates that require the agency to impose 
rules that are unnecessary, outdated, or unduly burdensome. 
Subsection (c) requires the OIRA Administrator to work with 
interested entities, including small entities and State, local 
and tribal governments, to pursue the objectives of subchapter 
III. Consultation with representatives of State, local, and 
tribal governments shall be governed by the process established 
under section 204 of the Unfunded Mandates Reform Act of 1995 
(2 U.S.C. Sec. 1534) and shall be exempt from the Federal 
Advisory Committee Act. Nothing in this section relieves 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.
    To ensure that the basic requirements of Subchapter III are 
met, judicial review is available under Section 706(1) of this 
title in the event that the agency flaunts these basic 
requirements. The Committee believes that this Subchapter 
establishes a reasonable and effective requirement and finally 
will set agencies on the road of revisiting forgotten, but 
still burdensome, rules.

Subchapter IV. Executive oversight

    This subchapter establishes in law the responsibility of 
the President to supervise the regulatory process of the 
federal agencies. Such responsibility includes coordinating 
agency regulatory policies and procedures, including those 
required by this legislation; developing a process for the 
review of rules covered by this legislation; and developing and 
overseeing an annual government-wide regulatory planning 
process.
    Oversight of the federal regulatory process by the 
President, including review of proposed rules by an office 
designated by the President, has been in effect in one form or 
another for about twenty years. Since 1981, it has been 
conducted in a centralized process by OMB through the Office of 
Information and Regulatory Affairs under Executive Order Nos. 
12291, 12498, and, most recently, 12866. The bill recognizes 
that centralized regulatory review has become an integral part 
of the Federal regulatory process and provides an important 
double-check on the work of the regulatory agencies in the 
effort to achieve efficient and effective regulations. 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 effective and transparent 
regulatory review. Nonetheless, respectful of separation of 
powers, the Committee has placed into statute only a general 
framework of executive oversight, with basic guidelines for 
regulatory review and publicdisclosure. This allows the 
President the flexibility to craft the details and scope of any 
regulatory review scheme, consistent with the requirements of this 
legislation.
    Subchapter IV has four sections: Section 641, definitions; 
Section 642, presidential regulatory review; Section 643, 
public disclosure of information; and Section 644, judicial 
review.
    Section 641 provides several definitions for Subchapter IV. 
First, it applies the same definitions in Section 551 of 
current law and Section 621 of the bill to the provisions in 
Subchapter IV. The section also defines the term ``regulatory 
action'' to include advance notice of proposed rulemaking, 
notice of proposed rulemaking, and final rulemaking, including 
interim final rulemaking. These are the activities for which 
the Director of OMB, acting through the OIRA Administrator, is 
responsible to review and coordinate under this subchapter.
    Section 642 requires the President in 642(a) to establish a 
process for such review and coordination and requires that the 
day-to-day responsibility for that reside in the Director of 
OMB, acting through the Administrator of OIRA. Section 642(b) 
enumerates specific activities that the Director/Administrator 
is required to carry out, namely: the development and oversight 
of uniform regulatory policies and procedures throughout the 
federal government, including those by which each agency shall 
comply with the requirements of this chapter; the development 
of policies and procedures for the review of rulemakings or 
regulatory actions by the Director/Administrator; and the 
development and oversight of an annual government-wide 
regulatory planning process. The planning process in 642(b)(3) 
is to include:
          A summary of and schedule for the promulgation of 
        major rules;
          Agency specific schedules for the review of existing 
        rules required under this legislation;
          A summary of regulatory review actions undertaken in 
        the prior year;
          A list of major rules promulgated in the prior year 
        for which an agency could not make the determinations 
        that the benefits of a rule justify the costs under 
        section 623(d);
          An identification of significant agency noncompliance 
        with this chapter in the prior year; and
          Recommendations for improving compliance with this 
        chapter and increasing the efficiency and effectiveness 
        of the regulatory process.
    Subsection 642(c)(1) limits the length of time for OMB 
review of regulatory actions to 90 calendar days. But 
subsection (c)(2) provides that the 90-day period can be 
extended by either the Administrator of OIRA or at the request 
of the rulemaking agency to the Administrator and that such 
extension must be published promptly in the Federal Register.
    Section 643 mandates important disclosure requirements for 
the OMB review process. This has been an area of particular 
concern to the Committee for almost 20 years, beginning with 
President Reagan's issuance of E.O. 12291. Many in Congress 
were concerned about guaranteeing the openness of the 
regulatory review process to instill public confidence and 
equal access in such review. The Committee held numerous 
hearings over the years on OMB's review process, culminating in 
an agreement in 1986 with then OIRA Administrator, Wendy Gramm, 
over basic disclosure procedures specifically identified in a 
Memorandum to all agencies and made available to the public. 
This debate reemerged in connection with oversight of the 
Council on Competitiveness in 1991-92 and consideration of 
legislation to require disclosure in regulatory review. In 
1996, Senator Thompson, then Chairman of the Subcommittee on 
Financial Management and Accountability, conducted oversight on 
President Clinton's E.O. 12866 on regulatory review. That 
oversight, and related GAO investigations, showed that agencies 
were not complying with the disclosure requirements of E.O. 
12866.\85\
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    \85\ See GAO, Regulatory Reform: Changes Made to Agencies' Rules 
Are Not Always Clearly Documented, GAO/GGD-98-31 (Jan. 1998).
---------------------------------------------------------------------------
    The disclosure procedures in the 1986 Gramm memo were 
included in E.O. 12866 when it was issued in 1993. Also 
included in E.O. 12866 was the additional requirement that the 
public be informed on an ongoing basis as to the status of 
regulatory actions undergoing review (a requirement never 
resolved in the 1986 Gramm memo). Section 643 would codify 
those disclosure procedures developed and agreed to over time. 
Generically, Subsection 643(a) requires the Director of OMB, 
acting through the OIRA Administrator, to establish procedures 
for public and agency access to information concerning the 
review of regulatory actions. Specifically it requires that 
certain elements must be included in such procedures. These 
are:
          Disclosure to the public on an ongoing basis of 
        information regarding the status of regulatory actions 
        undergoing review.
          Disclosure to the public no later than publication of 
        a regulatory action of--
                  (1) all written communications relating to 
                the substance of a regulatory action (including 
                the drafts of proposed and final rules and the 
                associated analyses) between the OIRA 
                Administrator or employees of the Administrator 
                and the regulatory agency;
                  (2) all written communications relating to 
                the substance of a regulatory action between 
                the Administrator and employees of the 
                Administrator and any person not employed by 
                the executive branch of the Federal Government;
                  (3) a list identifying the dates, names of 
                individuals involved, and subject matter 
                discussed in substantive meetings and telephone 
                conversations relating to the substance of a 
                regulatory action between the OIRA 
                Administrator or employees of the Administrator 
                and any person not employed by the Executive 
                Branch; and
                  (4) a written explanation of any review 
                action and the date of any such action.
          Disclosure to the regulatory agency, on a timely 
        basis of--
                  (1) all written communications relating to 
                the substance of a regulatory action between 
                the Administrator or employees of the 
                Administrator and any person not employed by 
                the executive branch of the Federal Government;
                  (2) a list identifying the dates, names of 
                individuals involved, and subject matter 
                discussed in substantive meetings and telephone 
                conversations, relating to the substance of a 
                regulatory action between the Administrator or 
                employees of the Administrator and any person 
                not employed by the Executive Branch; and
                  (3) a written explanation of any review 
                action taken concerning an agency regulatory 
                action and the date of such action.
    Subsection 643(b) requires the rulemaking agency, before 
publication of any proposed or final rule, to include in the 
rulemaking record the following--
          A document identifying in a complete, clear, and 
        simple manner, the substantive changes between the 
        draft submitted to the Administrator for review and the 
        rule subsequently announced.
          A document identifying and describing those 
        substantive changes in the rule that were made as a 
        result of the regulatory review and a statement if the 
        Administrator suggested or recommended no changes.
          All written communications relating to the substance 
        of a regulatory action between the Administrator and 
        the agency during the review of the rule, including 
        drafts of all proposals and associated analyses.
    Finally, Subsection 643(c) requires that a representative 
of the agency submitting the regulatory action shall be invited 
to any meeting relating to the substance of a regulatory action 
under review between the Administrator or employees of the 
Administrator and any person not employed by the Executive 
Branch.
    Section 644 states the exercise of the authority granted 
under this Subchapter by the President, the OMB Director, or 
the OIRA Administrator shall not be subject to judicial review.

Section 3(b). Periodic review of rules

    Subsection 3(b) amends Section 610 of the Regulatory 
Flexibility Act of 1980 (P.L. 96-354) (``RFA'') to reaffirm and 
refine the nearly 18-year statutory responsibility of the 
agencies to review rules with a significant economic impact on 
a substantial number of small entities. As demonstrated by 
testimony and statements provided to this Committee and others, 
the need for periodic review of rules under Section 610 is as 
strong today, if not stronger, than in 1980 when President 
Carter signed the RFA into law.
    In April 1994, the General Accounting Office reviewed 11 
years of Small Business Administration (``SBA'') annual reports 
on the RFA and reported that agency compliance ``varied 
widely.'' In particular, GAO noted that many agencies had 
failed to issue the plans for periodic review of rules under 
Section 610. Moreover, some of the plans that were issued were 
inadequate.\86\
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    \86\ GAO, Regulatory Flexibility Act: Status of Agencies' 
Compliance, GAO/GGD-94-105 (April 27, 1994).
---------------------------------------------------------------------------
    In 1995, the White House Conference on Small Business 
adopted recommendation #183, calling on Congress to provide 
judicial review of agencies' compliance with the RFA. Senator 
Christopher Bond, Chairman of the Senate Committee on Small 
Business, authored legislation to provide judicial review and 
several other important RFA reforms. This legislation, the 
``Small Business Regulatory Enforcement Fairness Act'' of 1995 
(P.L. 104-121), passed the Senate by a 100-0 vote, and 
President Clinton signed it into law on March 29, 1996.
    Section 610(c) of the RFA requires that each agency publish 
in the Federal Register a list of the rules which have ``a 
significant economic impact on a substantial number of small 
entities, which are to be reviewed'' under the RFA during the 
following 12 month period. The list is to include a ``brief 
description of each rule and the need for and legal basis of 
such rule'' and then the agency must ask the public to comment 
on the rule. Despite the latest improvements to the RFA, new 
GAO reports show that few, if any, lists of rules under Section 
610(c) complied with the law. In testimony provided this 
Committee,\87\ GAO reports that in the October 1997 Unified 
Agenda, seven agencies identified a total of 34 entries as 
Section 610 review actions. However, only three entries 
satisfied all the requirements of Subsection 610(c). Similarly, 
GAO reported that in the November 1996 Unified Agenda, three 
agencies identified a total of 21 entries as Section 610 
reviews. None of these entries satisfied the requirements of 
Subsection 610(c). In sum, GAO found that agencies had 
identified only 55 rules for review in these two editions of 
the Unified Agenda.
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    \87\ GAO, Comments on S. 981--The Regulatory Improvement Act of 
1998, GAO/T-GGD/RCED-98-95 (Feb. 24, 1998). See also, GAO, Regulatory 
Flexibility Act: Agencies' Use of the October 1997 Unified Agenda Often 
Did Not Satisfy Notification Requirements, GAO/GGD-98-61R (Feb. 12, 
1998); GAO, Regulatory Flexibility Act: Agencies' Use of the November 
1996 Unified Agenda Often Did not Satisfy Notification Requirements, 
GAO/GGD/OGC-97-77R (April 22, 1997)
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    As GAO has found over the years, the agencies have reviewed 
relatively few rules under Section 610 of the RFA. Given the 
large number of rules that significantly affect small entities, 
the Committee concludes that more rigorous review is needed 
under Section 610.
    Therefore, S. 981 includes an amendment to Section 610 to 
provide the benefits intended by Congress in 1980. Section 3(b) 
of the bill amends the RFA to require agencies to publish new 
plans for the review of rules. Beginning 60 days after the 
effective date, which is 180 days after enactment, and every 
subsequent fifth year, Section 3(b) requires each agency to 
submit to the OIRA Administrator and to the SBA Chief Counsel 
for Advocacy a proposed plan describing the procedures and 
timetable for Section 610 reviews. Sixty days later, proposed 
plans are to be published in the Federal Register for 60-day 
comment. Within 120 days of the proposed plan's publication, 
agencies must submit final plans to OIRA and Advocacy, and 
publish them in the Federal Register 60 days later.
    Adding the requirement that agencies share their draft and 
final plans with OIRA and SBA's Chief Counsel for Advocacy will 
better ensure that agencies consistently interpret the 
requirements of Section 610. This coordination will assist OIRA 
and Advocacy in fulfilling their new statutory responsibility 
in Section 3(b), to work with small entities to help achieve 
the objectives of Section 610. The Committee notes that the GAO 
has recommended that Congress require OIRA and SBA to work 
together to improve agency compliance.\88\
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    \88\ GAO, Regulatory Flexibility Act: Status of Agencies' 
Compliance, GAO/GGD-94-105 (April 27, 1994).
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    Section 3(b) substitutes the requirement that agencies 
review rules within 10 years with the requirement that agency 
plans provide for the review of rules that have a significant 
economic impact on a substantial number of small entities no 
later than 5 years after publication of the plan. If the agency 
head certifies in the Federal Register that more than 5 years 
is needed to review a specific rule in the plan, up to two 
extensions of 1 year each can be obtained.
    Section 3(b) does not amend Subsection 610(b) of the RFA, 
which sets forth the criteria for each Section 610 review. Upon 
completion of the review, Section 3(b) requires the agency to 
``determine whether the rule should be continued without 
change, or should be amended or rescinded, consistent with the 
stated objectives of applicable statutes, to minimize any 
significant economic impact of the rule upon a substantial 
number of small entities.''
    Section 3(b) amends subsection 610(c) to require agencies 
to publish the annual list of the rules to be reviewed under 
the plan during the next fiscal year, rather than during the 
next 12months. Consistent with Congress' original intent in 
1980, this requires agencies to provide small entities with advanced 
notice and the opportunity to participate in the review process.\89\ 
The annual list published by the agency must include: a brief 
description of each rule, the need for and legal basis for each rule, 
and an invitation for public comment. Section 3(b) enhances the notice 
provided small entities by requiring agencies to include the basis for 
the determination that a rule has or will have a significant economic 
impact on a substantial number of small entities. This determination 
should be based on all available information about the rule's impact on 
small entities at the time the rule is being considered for inclusion 
on the fiscal year list.
---------------------------------------------------------------------------
    \89\ Senate Report No. 96-878, at 15.
---------------------------------------------------------------------------
    Improving upon the RFA, Section 3(b) ensures that small 
entities are advised of the outcome of each review conducted 
under Section 610. Not later than 18 months after publication 
of the annual list, the agency is required to publish in the 
Federal Register the determinations made on each rule on the 
list and an explanation of the determination. Agencies should 
include in the Federal Register notice the legal and factual 
basis for their determinations, establishing a record of each 
Section 610 review.

Section 3(c). Presidential authority

    Section 3(c) provides that 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. The President retains the 
authority to extend regulatory analysis and review requirements 
beyond those established in this Act.

Section 3(d). Technical and conforming amendments

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

Section 4. Compliance with the Unfunded Mandates Reform Act of 1995

    To avoid duplicative cost-benefit analyses under the 
Unfunded Mandates Reform Act of 1995, Section 4 states that 
compliance with the cost-benefit provisions of this legislation 
constitutes compliance with the cost-benefit provisions 
applicable to the private sector in sections 202, 205(a)(2) and 
208 of UMRA (2 U.S.C. Sec. Sec. 1532, 1535(a) and 1538).

Section 5. 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, but shall not apply to any agency rule for which a 
notice of proposed rule making is published on or before 60 
days before the date of enactment of this Act.

                    VI. 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. 981 will have a significant regulatory 
impact.

             VII. Congressional Budget Office Cost Estimate

S. 981--Regulatory Improvement Act of 1998

    Summary: S. 981 would amend chapter 6 of Title 5, U.S. 
Code, to require federal agencies to complete specific studies 
as part of the regulatory analysis performed before major rules 
are issued. (The bill would define a major rule as a regulatory 
action expected to have an impact on the economy of $100 
million or more annually.) It would require agencies to conduct 
cost-benefit studies, risk assessments, and peer reviews before 
finalizing certain major rules. In addition, the bill would 
require that agencies select existing major rules for review to 
determine if modifying such rules would reduce the cost of 
compliance for state and local governments and private-sector 
entities. Agency compliance with the regulatory analysis 
provisions of S. 981 would be subject to judicial review in 
certain circumstances.
    Enacting the bill would increase the cost of regulatory 
analysis at federal agencies that regulate health, safety, and 
the environment. Based on information from these agencies, on 
our review of the number and type of major rules issued in 
fiscal year 1997, and on past costs of regulatory analyses, CBO 
estimates that implementing S. 981 would increase the 
government's cost to perform regulatory analyses by between $20 
million and $30 million annually, subject to appropriation of 
the necessary amounts.
    In addition, the bill would increase costs at the Office of 
Information and Regulatory Affairs (OIRA) within the Office of 
Management and Budget (OMB) to write regulations and contract 
for a pair of studies, and at agencies that regulate health, 
safety, and the environment to devise detailed guidelines for 
performing risk-assessment analyses. CBO estimates that 
enacting S. 981 would increase such administrative costs by 
about $5 million over the 1999-2003 period.
    S. 981 could result in additional costs to federal agencies 
beyond those we have estimated. Under S. 981, OMB could require 
that agencies perform risk assessments according to the bill's 
detailed procedures for agency actions, other than major rules, 
that it believes could have a substantial impact on a 
significant public policy or on the economy. CBO assumes, 
however, that the bill's procedures for conducting risk 
assessments would be applied only in the case of major rules. 
If OMB were to require that agencies apply the bill's risk 
assessment procedures to other agency actions that include an 
assessment of risk, the additional costs could be substantial.
    CBO also has not included costs that might be incurred as 
the result of additional judicial review because we have no 
basis for predicting how many regulatory actions might be 
challenged under this bill. While the bill would require that 
agencies review past rules, CBO estimates that such costs would 
not be significant over the next five years because agencies 
are required to review existing rules periodically under 
current law.
    CBO estimates that enacting the bill would not affect 
direct spending or receipts; therefore, pay-as-you-go 
procedures would not apply. The bill contains no 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandates Reform Act of 1995 (UMRA) and would not 
affect the budgets of state, local, or tribal governments.

Estimated cost to the Federal Government

    Much of the regulatory analysis and review that would be 
required by S. 981 is already performed to some degree by 
federal agencies. In addition, the bill would exempt many 
federal regulatory actions from its requirements, including 
rules that apply to or regulate: (1) governmental receipts, (2) 
certain commerce activities, including wages and prices, 
mergers and acquisitions, and accounting practices, (3) 
securities trading, (4) monetary and federal fiscal policy, (5) 
banking, and (6) new products. In addition, the bill would 
exempt certain regulations of the Federal Communications 
Commission and any rule that an agency must issue at least 
annually. Based on a preliminary review of the approximately 60 
major rules issued in fiscal year 1997, CBO estimates more than 
half would be exempt from the bill's requirements because they 
involve some form of economic regulation.
    Agencies also could exempt rules from the bill's provisions 
where the more detailed reviews are either not practical or 
contrary to an important public interest. In such cases, the 
bill would direct the agency to comply with its provisions as 
soon as possible after adopting the rule, unless the rule is 
set to expire.
    CBO expects that enacting S. 981 would have a small impact 
on the cost to perform regulatory analyses for most agencies 
because the bill: (1) would codify much of existing practice, 
(2) would generally not apply to so-called ``minor'' rules, (3) 
would exempt many regulatory provisions from its review, and 
(4) would allow agencies to opt out of itsrequirements in 
certain situations. The bill, however, could significantly increase 
costs for agencies that issue major rules governing health, safety, and 
the environment, such as the Environmental Protection Agency (EPA), the 
Occupational Safety and Health Administration (OSHA), and the 
Departments of Health and Human Services, Transportation, and 
Agriculture.
    CBO estimates that S. 981 would increase the costs of 
issuing new major rules for federal agencies by between $20 
million and $30 million a year. In addition, we estimate the 
bill would increase administrative costs by about $5 million 
over the 1999-2003 period. All costs would be subject to the 
availability of appropriated funds.
    Finally, the bill would establish procedures for agencies 
to review past rules. Periodic review of major rules already is 
required under current law (section 610 of the Regulatory 
Flexibility Act of 1980) and current policy (section 5 of the 
Executive Order 12866), although not as frequently as would be 
called for under S. 981. Under the bill, agencies would have 
considerable discretion in deciding which rules to examine and 
whether to revise or repeal a rule. Based on information 
provided by various agencies, we expect that agencies would 
revise or repeal a rule only if strong and compelling evidence 
existed that a core assumption was in error. Because most such 
regulatory revisions would likely be made under current law, 
CBO expects that agencies would not incur significant 
additional costs over the 1999-2003 period for the review of 
existing regulations.
            Impact on EPA
    Based on information from EPA, CBO estimates the agency 
spends about $120 million annually on regulatory analysis, and 
S. 981 would add $1 million to $2 million to each major 
regulatory action that would be covered by the bill to pay for 
added or improved economic studies and risk assessments. In 
1997, EPA finalized seven major rules that would appear to be 
covered by S. 981. Since the provisions of the bill would also 
apply to preliminary rules, and because the volume of 
regulatory activity fluctuates, we estimate that implementing 
S. 981 would increase the cost of EPA's regulatory analyses by 
$10 million to $15 million annually, assuming appropriation of 
the necessary amounts.
            Impact on other agencies
    In 1997, CBO published a paper that examined the costs of 
85 regulatory impact analyses (RIAs) conducted by selected 
agencies (Regulatory Impact Analysis: Costs at Selected 
Agencies and Implications for the Legislative Process, March 
1997). The cost of these RIAs ranged from as low as $14,000 to 
as high as $6 million, with the time required to complete them 
ranging from six weeks to more than 12 years. (Because the 
paper did not attempt to obtain a representative sample of 
RIAs, it does not indicate the cost of a ``typical'' or 
``average'' RIA.)
    In addition, the paper showed that RIAs were more expensive 
at EPA than at other agencies. Based on that paper, as well as 
on information provided by OSHA and the National Highway 
Traffic Safety Administration (NHTSA), we expect that the 
increase in costs under S. 981 would be greater at EPA than at 
other regulatory agencies. Specifically, we estimate the bill 
would add, on average, less than $1 million per rule to the 
cost of the regulatory analysis for most major rules 
promulgated by agencies other than EPA.
    The increase in cost per rule would likely vary, depending 
on the complexity of the rule. For instance, in fiscal year 
1997, NHTSA issued two major rules, one of which S. 981 would 
exempt. Based on information from NHTSA, CBO estimates that the 
agency spent less than $1 million on the nonexempt rule. 
Because we expect that, on average, the bill would increase the 
costs to perform the regulatory analysis for a rule by less 
than one-half, the additional costs under S. 981 for this rule 
would have amounted to less than $500,000.
    By comparison, OSHA issued one major rule in fiscal year 
1997 and the agency spent about 10 years to complete that rule. 
Based on information from OSHA, CBO estimates that the agency 
spent as much as $5 million performing regulatory analysis of 
the rule. As part of this analysis, OSHA performed numerous 
risk assessments, although those assessments did not include 
all of the information that S. 981 would require, such as 
providing additional information on the ranges and 
distributions of risks addressed by the rule, requesting and 
considering data submitted by the public, and fully documenting 
each assumption. Based on this information, we estimate that by 
broadening the scope and effort of OSHA's analysis, S. 981 
would have added $1 million to $2 million in total over several 
years to the rule's cost. For most major rules issued by OSHA, 
however, we expect that implementing the bill would increase 
costs by less than $1 million per rule.
    Based on our review of the type and number of major rules 
issued during fiscal year 1997, we expect the bill's provisions 
would apply to about 25 rules a year (including those 
promulgated by EPA), although the volume of regulatory activity 
can fluctuate depending on the demands on regulatory agencies. 
(As noted above, agencies issued about 60 major rules in 1997, 
and at least half of those would have been exempt from the new 
review requirements of S. 981. A similar number of major rules 
were issued in 1996.) Thus, CBO estimates that enacting S. 981 
would increase costs for the 15 to 20 nonexempt rules issued by 
agencies other than EPA by between $10 million and $15 million 
annually--about the same amount as the estimated increase in 
EPA's costs.
            Reporting, Oversight, and Implementation Costs
    In addition to the increase in costs to issue new major 
rules, S. 981 would impose several, reporting and oversight 
requirements on the Administration, which would be carried 
mostly by OIRA. Specifically, the bill would require that OIRA: 
(1) issue guidelines for cost-benefit analyses, risk 
assessments, and peer reviews and periodically evaluate agency 
efforts in implementing these guidelines, (2) periodically 
evaluate and develop a strategy to meet agency needs for 
research and training in performing regulatory-impact analyses, 
and (3) contract with accredited scientific institutions to 
study the use of risk assessments and comparative-risk analysis 
in performing regulatory analyses. The bill would require that 
the results of the research on risk assessments be forwarded to 
OMB and the Congress within two years of enactment and that the 
results of the research on comparative-risk analyses be 
forwarded within three years of enactment. CBO estimates that 
implementing these provisions would cost OIRA about $2 million 
over the 1999-2003 period, assuming appropriation of the 
necessary funds.
    In addition, under the bill, the roughly one-half dozen 
agencies that issue health, safety, and environmental 
regulations would have 18 months to adopt detailed guidelines 
for performing risk assessments as part of their regulatory 
impact analyses. In total, CBO estimates that these agencies 
would incur costs of about $3 million over fiscal years 2001 
and 2002 to develop those guidelines.
    Pay-as-you-go considerations: None.
    Intergovernmental and private-sector impact: S. 981 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would not affect the budgets of state, 
local, or tribal governments.
    Previous CBO estimate: CBO prepared an estimate of the 
costs of S. 981 on April 20, 1998. This revised estimate 
clarifies the discussion of the bill's provisions and CBO's 
assumptions, but the estimated costs of S. 981 are unchanged.
    Estimate prepared by: Kim Cawley and John R. Righter.
    Estimate Approved by: Robert A. Sunshine, Deputy Assistant 
Director for Budget Analysis.

                         viii. additional views

                              ----------                              


                   ADDITIONAL VIEWS OF SENATOR GLENN

    I am pleased to be an original co-sponsor of the Regulatory 
Improvement Act of 1998. This legislation, introduced by my 
colleagues Senators Carl Levin and Fred Thompson, reflects a 
bipartisan effort to establish a comprehensive set of analytic 
standards to inform and improve Federal agency rulemaking.
    The hearings held by the Committee on September 12, 1997, 
and on February 24, 1998, established a legislative record 
supporting the need for the legislation and the balance 
reflected in it. The hearings also produced critical commentary 
that led to a number of improvements in the legislation. The 
resulting bill, that has now been ordered reported by the 
Committee, is a good bill that deserves support by the full 
Senate.
    I believe that S. 981 can improve our government and reduce 
regulatory burdens without harming important public 
protections. As I have said many times during our long-running 
regulatory reform debate, true regulatory reform must strike a 
balance between the public's concern over too much government 
and the public's strong support for regulations to protect 
public health and safety, and the environment.
    S. 981 strikes the needed balance, but I must emphasize 
that it is a delicate balance. For example, while I am a firm 
believer in improving the rigor of agency rulemaking decisions, 
both through analysis and OMB review, I also believe that both 
are far from exact sciences and are vulnerable to manipulation 
and bias. I have been convinced of this fact by two decades of 
Committee oversight of the regulatory process.
    First, cost-benefit analysis and risk assessment can help 
an agency in its quest for better rulemaking, but if they 
become controlling factors, their inherently subjective 
limitations, when combined with the prospects of judicial 
review, can stifle important regulatory activity. For example, 
while better estimation of regulatory costs is important, 
studies have found that even after fifteen years or more of 
experience with presidentially required cost-benefit analysis, 
agency practices are inconsistent in substance and procedure. 
Regulatory Reform: Changes Made to Agencies' Rules Are Not 
Always Clearly Documented, GAO/GGD-98-31 (January 1998), and 
Air Pollution: Information Contained in EPA's Regulatory Impact 
Analyses Can Be Made Clearer, GAO/RCED-97-38 (April 1997). 
Specific estimates of future costs, themselves, have been shown 
to be significantly miscalculated. Gauging Control Technology 
and Regulatory Impacts in Occupational Safety and Health, U.S. 
Congress, Office of Technology Assessment, September 1995.
    Second, while OMB regulatory review is also needed to 
coordinate and improve the quality of agency rulemaking, it too 
has its weaknesses. This Committee has documented, for example, 
a lengthy record in previous administrations of undisclosed 
lobbying, undocumented decisions, and unaccountable pressures 
on agencies to change rulemaking decisions. ``Regulatory Review 
Sunshine Act,'' S. Report 102-256 (1992); ``Risk-Risk 
Analysis,'' S. Hearing 102-1144 (1992); Risk-Risk Analysis: 
OMB's Review of a Proposed OSHA Rule, GAO/PEMD-92-33 (May 
1992); ``The Role of the Council on Competitiveness in 
Regulatory Review,'' S. Hearing 102-1135 (1991); ``Federal 
Management Reorganization and Cost Control Act of 1986,'' S. 
Report 99-347 (1986); and ``Oversight of the OMB Regulatory 
Review and Planning Process,'' S. Hearing 99-839 (1986).
    These concerns, in fact, led the Committee to craft many of 
the provisions found in S. 981, from consideration of 
nonquantifiable as well as quantifiable costs and benefits, to 
cost-benefit determination explanations (instead of mandatory 
decisional criteria), to transparency in OMB regulatory review.
    Again, I believe that the provisions of S. 981 are 
sufficiently clear and sufficiently balanced to improve the 
regulatory process, while protecting agency discretion to 
provide needed public protections. My caution is intended only 
to more clearly state, than is set forth in the majority 
report, the need to recognize potential flaws in the regulatory 
process that can jeopardize public protections.
    For this same reason, if changes are made to the bill that 
would restrict agency discretion more than that provided in S. 
981, I would probably find it difficult to support it. On the 
other hand, if it proves legislatively feasible, I believe the 
bill could be strengthened, for example, by the incorporation 
of a number of suggestions made by OMB Director Frank Raines in 
his March 6, 1998, letter to the Committee.
    In conclusion, whatever the outcome of debate on S. 981 by 
the full Senate, at this point, I believe this legislation 
meets my goal of providing a balanced approach to improving the 
Federal regulatory process, while ensuring continued 
protections of public health and safety, and the environment. 
S. 981 is a worthy accomplishment and should be supported.


                                                        John Glenn.

                           ix. minority views

                              ----------                              


   MINORITY VIEWS OF SENATORS LIEBERMAN, AKAKA, DURBIN, TORRICELLI, 
                                CLELAND

    We understand and respect that the goal of our colleagues 
in crafting S. 981 is to improve the regulatory process. 
Senators Lieberman and Akaka, who were members of this 
Committee in the 104th Congress, supported the Roth-Glenn and 
Glenn-Chafee regulatory reform bills; and some of us made clear 
during the markup that it is the specific provisions of S. 981 
that we cannot support because we believe they do not achieve 
the goal of improving the regulatory process.
    We fear that, despite the good intentions of the sponsors, 
the unintended consequences of S. 981 will be to threaten the 
ability of our health and safety agencies to act in a timely 
and decisive manner to protect us and our children. We agree 
with the conclusion reached by OMB Director Franklin Raines in 
his March 6, 1998 letter to Chairman Thompson: the bill does 
not meet the simple test of truly improving the regulatory 
system while not impairing--by creating more litigation, more 
red tape, and more delay--the agencies' ability to do their 
job. In fact, we believe that the provisions of the bill in its 
current form run contrary to the goal of truly improving the 
regulatory system. We do not believe that the American people 
would support such a result. For this reason, we voted against 
S. 981.
    The number one responsibility we have, and what people 
demand from us, is to protect the public we serve from harm. 
That means guarding our national security with a strong 
defense, and keeping our streets safe from crime. But that also 
means protecting people from breathing polluted air, from 
drinking poisonous water, from eating contaminated food, from 
unsafe toys, from hazards in the workplace and on our roads and 
in our air, from being exposed to consumer fraud--in other 
words, protecting people from harms from which they cannot 
protect themselves. And it means ensuring that the laws we have 
passed to provide opportunity for access and participation for 
all our citizens or to protect wildlife are not weakened.
    We often fail to think of these problems as being a threat 
to our safety and well-being because, for the most part, the 
federal government has done a good job in guaranteeing that we 
have clean water and clean air and safe toys. Interestingly, on 
the day in March when this bill was marked up, the Pew Research 
Center for the People and the Press released a survey showing 
that the public actually has a very high degree of confidence 
in the civil servants who run our health, safety, and 
environmental agencies: the favorable ratings of agencies such 
as the Environmental Protection Agency, the Federal Aviation 
Administration, the Federal Drug Administration, and the 
Centers for Disease Control, ranged from 69 percent to 79 
percent. Many politicians would envy these favorable ratings 
for people they sometimes criticize as ``nameless 
bureaucrats''--particularly since the same poll found a 
favorable rating for politicians of only 16 percent.
    We all agree that there are problems with the regulatory 
process. For example, the process is often too slow, and it can 
be inaccessible to the ordinary American trying to understand 
either how to comply with the law or how to take advantage of 
the benefits of a regulation. But when it comes to health and 
safety, the people want a government that works better, not a 
government that does too little too late. When we travel around 
our states, no one comes up to us and says, ``stop trying to 
regulate unsafe children's toys.'' No one says, ``our meat and 
poultry supply is too safe.'' Even business owners, who have 
legitimate concerns about the way in which some regulations are 
written and enforced, say to us, ``I'm a citizen and a parent, 
too. I want to live in a clean environment. I want my kids to 
have safe toys and drink clean water.''
    It is also important to recognize that our laws provide a 
host of procedural protections to make certain that all 
individuals have an opportunity to participate in the 
rulemaking process and then challenge decisions that they 
believe are wrong in a federal court. These procedural due 
process protections are designed to ensure that the ``truth'' 
will emerge from our regulatory process. Guaranteeing that all 
citizens have procedural due process rights with respect to 
rulemaking makes the process of issuing regulations a lengthy 
one. It is, therefore, rare that citizens object that a health 
or safety agency has acted with too much speed on their behalf. 
On the contrary, citizens often complain that agencies do not 
act rapidly enough. Sue Doneth, the mother of a hepatitis A 
victim, and Nancy Donley, whose child died from eating an E. 
Coli contaminated hamburger, spoke eloquently to the Committee 
on this point. So did Dr. Franklin Mirer, Director of the 
Health and Safety Department of the United Automobile, 
Aerospace & Agricultural Implement Workers of America, who 
testified that the current standard setting process at OSHA to 
protect workers from chemical exposure is stalled and failing 
to protect workers.

              there is a better way to improve regulations

    Our point is that when it comes to environmental, consumer, 
and public health protection we need to try to achieve better 
protection ina smarter, more efficient way. We concur with the 
conclusion of our colleagues, Senator Chafee and Senator Baucus, the 
Chairman and Ranking Member of the Environment and Public Works 
Committee in their March 6, 1998 letter to Chairman Thompson, that such 
reforms are generally better accomplished within the framework of a 
specific regulatory statute, rather than in an across the board omnibus 
bill such as S. 981. (A copy of the letter is attached hereto.)
    During the markup, Senator Torricelli provided an excellent 
example of one of the problems with an omnibus bill. He pointed 
out that regulations designed to protect civil rights would be 
included within the scope of the bill; therefore, a cost-
benefit analysis would be required for these regulations. But 
when Senator Torricelli asked how a cost-benefit analysis could 
possibly apply to these type of regulations, the sponsors did 
not have an answer. We believe that is because our nation's 
commitment to civil rights is one of the major ways we define 
what is good about our society. This commitment is not 
``purchased'' liked a TV set, where cost factors may drive the 
decision. Regardless of any costs, all Americans are entitled 
to the protection of our civil rights laws and regulations. 
Similarly, Director Raines points to another example of the 
dangers of over-inclusiveness: some of the provisions in S. 981 
governing how to do a risk assessment may be ill-suited to 
objectives such as an evaluation of risks related to 
airworthiness, environmental and natural resources and worker 
safety. Why would we want to enact a law that forces air safety 
risks to be analyzed by methods that are ill-suited to the 
problem at hand?
    In contrast, statute-by-statute reform does not create 
problems of over-inclusiveness. And it works. Last Congress' 
Safe Drinking Water Act Amendments is an outstanding example of 
a piece of regulatory reform legislation which was very 
targeted and dealt with features unique to the problem of 
drinking water quality. The Congress carefully considered how 
risk assessment and cost-benefit analysis could make the law 
more effective, and incorporated those principles based on the 
overall objectives and operation of that law. For example, an 
issue unique to the Safe Drinking Water Act is the different 
capacities of large and small water systems. As a result, the 
law specifically tailored the EPA Administrator's authority to 
use cost-benefit analysis based on differences in these 
systems. We are concerned that such refinement and targeting 
may be missed in this type of board government-wide proposal 
and, as our colleagues Senators Chafee and Baucus have stated, 
serious unintended consequences may result.
    Last Congress we also passed and the President signed the 
Food Quality Protection Act and the Pipeline Reauthorization 
Act, two bills providing for banking reform, legislation 
providing interstate trucking deregulation, procurement reform 
and pension reform.
    There is no doubt that the statute-by-statute approach may 
be more time-consuming and difficult in the short-run than an 
omnibus bill. The Environment and Public Works Committee spent 
three years on the reauthorization process for the Safe 
Drinking Water Act, listening to all views on how this law was 
or wasn't working. But the result was worth it: the bill passed 
the Senate unanimously with the support of virtually every 
interested group. The importance of that type of consensus 
cannot be overstated. Among other advantages, it makes everyone 
want to work to implement effectively a law that they supported 
and have a stake in. On the other hand, there is no consensus 
with respect to this bill. The testimony of one Committee 
witness, Dr. Frank Mirer of the UAW, indicates just how far 
from consensus we are. He testified that S. 981 ``will make it 
harder to protect workers from serious safety and health 
hazards. It will result in preventable injuries, illnesses and 
deaths on the job.''
    In addition to the statute-by-statute approach, last 
Congress we passed and President Clinton signed a number of 
more targeted regulatory reform bills to address some of the 
problems that members of the business community and state and 
local governments raised about the regulatory process. These 
included the Small Business Regulatory Enforcement Fairness 
Act, the Unfunded Mandates Reform Act, and the 1996 Amendment 
to the Paperwork Reduction Act. The Small Business Regulatory 
Enforcement Fairness Act was designed to increase agency 
sensitivity to the needs and concerns of small businesses. 
Agencies are required to write their regulations so that those 
affected can more easily understand them and know how to 
comply, and agencies must establish programs to provide for the 
reduction and, in some circumstances, for the waiver of 
penalties for violation of requirements by a small entity. It 
provided for enhanced judicial review for decisions affecting 
small businesses. And it also contained provisions for 
Congressional review of agency rulemaking whereby Congress 
acknowledged and assumed more responsibility for the rules that 
agencies issue. The Unfunded Mandates Reform Act includes 
provisions for cost-benefit analysis of major rules. The 
Paperwork Reduction Act was designed, in part, to assure that 
collections of information included in regulations by Federal 
agencies minimize the burden on respondents and maximize their 
usefulness to agencies.
    The Clinton Administration has also undertaken a number of 
initiatives to improve the Federal regulatory system. In 1993, 
President Clinton issued Executive Order No. 12866 setting 
forth a regulatory philosophy that, consistent with existing 
law, regulations should be issued only where necessary and be 
based on a full assessment of costs and benefits of reasonable 
alternatives. This Executive Order is a powerful tool for OMB 
to ensure that agencies' regulations both protect public health 
and make good economic sense, but the Order does not put at 
risk existing laws or add new judicial hurdles for agencies to 
overcome.
    We believe that the appropriate next step for this 
Committee is toconduct oversight hearings to determine if all 
these laws are working to address the concerns raised, if more needs to 
be done and where the gaps, if any, may be.
    Finally, Senator Lieberman has advocated another approach 
to regulatory reform based on an outstanding program at EPA, 
known as X-L (standing for excellence and leadership), that 
allows EPA to grant waivers of environmental requirements if 
companies demonstrate superior environmental performance. S. 
1348, introduced by Senators Lieberman, Daschle, Moynihan, 
Kerrey, and Landrieu and endorsed by the Clinton 
Administration, would provide a statutory framework for a pilot 
program adopting this approach. The goal is to achieve real 
changes in the way we do business in the environmental arena. 
Companies will have lower costs, but we will also have a 
guarantee that the environment will be improved.

                          concerns with s. 981

    Despite our misgivings about this legislation, we have 
remained willing and open to working with the sponsors to try 
and achieve a bill that meets the test articulated by Director 
Raines in his letter and earlier by OIRA Director Sally Katzen 
in her September 27, 1997 testimony before the Committee. In 
his letter, which we attach to these views, Director Raines 
sets forth specific reasons why S. 981 does not meet the test 
of truly improving the regulatory process while not impairing--
by creating more litigation, more red tape and more delay--the 
agencies' ability to do their job. We agree with Director 
Raines. The letter also sets forth specific proposals to 
address the problem areas. At the markup, Senator Lieberman 
discussed (but filing requirements prevented him from offering) 
an amendment that included legislative language incorporating 
all of the Administration proposals.

I. Supermandate

    We believe that the American people strongly oppose any 
efforts which would override, alter or compromise--whether 
explicitly or implicitly--our public health, environmental, 
wildlife, consumer, food safety, disability, automobile and air 
traffic safety laws. For this reason, we sought specific 
guarantees at the markup that this would not be the result of 
S. 981.
    At the markup, Senator Cleland offered an amendment 
designed to ensure that ``nothing in this subchapter shall be 
construed to alter or modify the substantive standards 
otherwise applicable to a rulemaking under other statutes, or 
to limit the range of discretion available under, or in 
construing, other statutes.'' This amendment also was proposed 
in Director Raines' letter. Chairman Thompson offered a second-
degree amendment striking the second part of the amendment 
relating to discretion. Over our objections, the Thompson 
second-degree amendment was adopted and then the Cleland 
amendment passed.
    Obviously, we are pleased that the first portion of this 
amendment was adopted. Although Senator Thompson indicated a 
willingness to continue to work with Senator Cleland, we are 
very concerned about the failure to adopt the second portion of 
the amendment dealing with agency discretion. As Director 
Raines stated: ``The range of discretion available to agencies 
under current law must be expressly preserved to avoid an 
implicit supermandate.''
    What is the danger of an implicit supermandate? Suppose 
Congress enacts a law requiring an agency to set standards to 
ensure that children are protected from unsafe cribs with an 
adequate margin of safety. Our laws generally grant agencies 
discretion in implementing their statutory mandates to protect 
public health, safety, or the environment because Congress does 
not possess the necessary detailed information or expertise to 
make the decision about the most effective approach. In other 
words, an agency might have the discretion to meet the 
statutory mandate in a number of ways: it might determine that 
children can be protected from unsafe cribs by requiring a 
recall if a problem arises with a particular type of crib, by 
requiring warning labels be posted in pediatricians' offices if 
a problem arises, by requiring that warnings be mailed to each 
person who purchased a crib if a problem arises, or by 
requiring new design standards for cribs which will ensure that 
all cribs are safe. We are concerned that the provisions of 
this bill, taken together, would limit the ability of an agency 
head--whether directly or through new pressures created on 
agencies--to select the option that will provide the best 
protection for children: redesigning the crib, despite claims 
that other riskier options are more ``cost-effective''.
    Senator Cleland's amendment sought to make very clear that 
the agency's ability to choose the redesign option would be 
fully preserved. We think the American people would want 
nothing less. At the same time, Senator Cleland's amendment 
made clear that agencies would still be required to perform the 
cost-benefit and other analyses required under S. 981, but that 
existing law determines the degree to which these analyses 
should affect the outcome of the rulemaking.
    The sponsors of this bill repeatedly have indicated that 
they do not intend to change the ability of agencies to make 
the decisions they would make under current law. We are puzzled 
and troubled, therefore, by their rejection of the second part 
of Senator Cleland's amendment.

2. Judicial review

    We think that most members of the Senate would agree that 
we do not want to create more opportunities for litigation. 
Unfortunately, that is what would happen under S. 981.
    We fully support the thorough judicial review that the 
Administrative Procedure Act (APA) provides for all rules. 
Under that Act, an agency's decision will be set aside if it is 
arbitrary, capricious, an abuse of discretion or otherwise not 
in accordance with law. Under the current judicial 
interpretation, courts will find that an agency has passed 
these tests if the agency's analyses, assessment and responses 
to comments have provided the court with a reasoned discussion 
of choices the agency has made, and a sufficient explanation of 
the reasons for those choices so that the court can conclude 
that the agency had a reasonable basis for making its decision. 
Any risk assessment or cost-benefit analysis that is prepared 
must be sufficient to withstand this APA test.
    Our concern about S. 981 is that it provides agencies with 
new, much more burdensome hurdles to overcome. The court is 
given new authority for overturning a rule, based on the fact 
that the cost-benefit or risk assessment did not meet the many 
new requirements of this bill relating to how to perform a 
cost-benefit or risk assessment. In other words, courts must 
judge the quality of these analyses not by the traditional APA 
yardstick of a reasonable explanation, but by a much tougher 
yardstick that is based on an item-by-item examination of 
whether each of the bill's many analytical and procedural 
requirements have been properly carried out. We fear that 
regulated entities will use these new hurdles to tie the agency 
up in litigation for years and that the court will be given new 
authority to overturn rules that today would be judged 
reasonable.
    Of equal importance, we are concerned that S. 981 allows a 
court to review an agency's determination about whether it 
selected the alternative that was more cost-effective or had 
greater net benefits than other alternatives that the agency 
has identified. The bill, therefore, provides another wholly 
new basis for overturning an agency's good rule.
    Let's look at a simple example. Suppose an agency is 
setting standards for reducing lead in drinking water, and it 
has discretion to set the level anywhere from Option 1 (least 
stringent) to Option 5 (most stringent). The costs are 
quantifiable; assume it will cost $100 million to reach Option 
1 and $500 million to reach Option 5. Let's say we can quantify 
some benefits at $120 million, but the most significant 
benefit--avoiding a reduction in a child's IQ--cannot be 
quantified. Let's say the EPA Administrator selects Option 5 
because she believes removing a greater quantity of lead is 
critical to avoiding a reduction in a child's IQ. In other 
words, she says that Option 5 is the alternative with the 
greater net benefits than Option 1 because of the weight she 
accords to protecting a child's IQ, even though the quantified 
net benefits of Option 1 are clearly greater.
    We do not believe that regulated entities should be able to 
challenge the Administrator's determination that Option 5 
provided the greater net benefits than other alternatives or 
that the court should be second-guessing whether the 
Administrator gave proper weight to the value of a child's IQ. 
There is no such standard in current law, we see no reason to 
provide litigants with a new basis for overturning good rules, 
and we oppose giving courts the ability to be the arbiters of 
fundamental value decisions such as the value of a child's IQ, 
the value of avoiding birth defects, or the value of seeing a 
clear Grand Canyon. But this is what might occur under S. 981.
    There is another concern raised by the judicial review 
provisions of S. 981. It's what we've previously referred to as 
unintended consequences. The agencies may choose a less 
protective option in order to avoid the risks of a court fight. 
This could lead to regulations that will be unnecessarily 
weakened, resulting in potential dangers to the public.
    Finally, one of the ironies of this bill is that it could 
actually discourage use of voluntary, incentive-based programs, 
despite the sponsors' clear intention to encourage these 
programs. One of the Committee witnesses, Karen Florini of the 
Environmental Defense Fund, testified that the cost-
effectiveness or net benefits test, combined with judicial 
review, may actually discourage the use of information-based 
and incentive oriented approaches such as the very popular 
Right-to-Know laws. She testified: ``It's typically difficult 
to predict just how, and to what extent, incentives will lead 
to a particular outcome because, by definition, compliance 
isn't mandatory. But if you can only generally describe the 
benefits, how can you do a `net benefits' or `cost-
effectiveness' determination with enough specificity to 
withstand attacks by lawyers seeking to derail the rule.''
    Senator Lieberman offered an amendment at markup to make 
clear that this bill does not give rise to any new bases for 
overturning an agency's rule. The text of the amendment was 
identical to the judicial review provisions in S. 291, the 
regulatory reform bill reported unanimously by this Committee 
in the 104th Congress. Unfortunately, the amendment was 
rejected. The sponsors contend that their intent is to have 
limited judicial review. We, therefore, remain troubled and 
puzzled by their rejection of an amendment which would make 
that intent very clear.

3. Peer review

    We urge our colleagues in the Senate to consult with 
scientists in their states about the peer review provisions in 
this bill. We strongly support a process for ensuring that the 
agencies' approaches to risk assessment are vetted on a regular 
basis with those who are the best in their field and willing to 
devote the time to such a review. But we are concerned that 
this bill does not achieve such a goal and instead will result 
in new processes for peer review without any benefits. The 
reaction of many scientists we have heard from has been 
strongly negative. For example, in a March 3, 1998 letter to 
the sponsors, a group of scientists including representatives 
from all of our states, concluded that S. 981 ``particularly 
the provisions governing participation on `peer review' panels, 
takes a peculiar--and even damaging--approach to science.''
    The bill requires that the peer review panels that will 
pass judgment on the validity of risk assessments and cost-
benefit analyses be independent of the agency. We are concerned 
that the requirement will simply duplicate or displace many 
well-established and well-respected processes already in place 
in agencies for peer review. We note that the Majority Report 
states that the ``independence'' requirement will not preclude 
use of established advisory committees, like EPA's Science 
Advisory Committee. But we are also concerned about the 
interaction of this peer review requirement with other 
established approaches that may not currently be called peer 
review, but serve to provide a similar type of review. For 
example, we heard testimony that under OSHA procedures, 
proposed standards must be presented in a public hearing. OSHA 
must present evidence supporting the proposed standard 
including the health risks, control measures, cost analyses and 
other details. Other participants such as scientific experts, 
unions, and employers also are allowed to testify in the OSHA 
process. Additionally, peer review of cost-benefit analysis 
would be very similar to review already undertaken by OMB's 
review of agency analyses.
    The requirement that the peer review panel be independent 
of the agency could also mean that a scientist from a 
particular university would not be able to participate in the 
peer review if he or she were funded by another part of the 
agency for unrelated research or even if another scientist in 
another part of the university was funded by the agency. 
Additionally, the federal government has some of the best 
scientists in the world and there is no reason to exclude a 
scientist working in one office from serving on the peer review 
panel reviewing a risk assessment done by another office or 
agency. Director Raines pointed out that the independence 
requirement could mean that in some highly specialized areas, 
such as nuclear safety, good peer review would become virtually 
impossible.
    On the other hand, the bill provides no assurance that a 
person with a direct financial interest in the outcome of the 
rulemaking or employed by an entity with a direct financial 
interest in the outcome of the rulemaking will not be allowed 
to serve on a peer review panel. This raises serious concerns 
about potential conflicts of interest.
    The Majority Report indicates that decisions about 
conflicts of interest are best left to agencies. But during the 
September 12 hearing, Senator Lieberman discussed his concern 
about conflict of interest issues that previously had arisen 
with respect to EPA's internal peer review rules relating to 
pesticides.
    Senator Cleland offered an amendment at markup designed to 
address some of these concerns. We were disappointed that the 
sponsors did not accept this amendment, but we are encouraged 
that they indicated a willingness to continue to work with 
Senator Cleland on these issues.
    We are also concerned about the interaction of peer review 
and judicial review. We believe that peer review can plan an 
important role in improving an agency's risk assessment prior 
to the notice of proposed rulemaking. But we do not believe 
that the peer reviewers' comment should be entitled to special 
deference by a court in determining whether an agency's actions 
are arbitrary or capricious. Why should the peer reviewers' 
comments with respect to a rule on food safety be given any 
more weight than the comments of a mother whose child died of 
E. Coli poisoning? Why should the peer reviewers' comments be 
entitled to any more weight with respect to a rule implementing 
the Americans With Disabilities Act than the comments of a 
handicapped person? We are concerned that the Majority Report 
is unclear about the relationship between peer review and 
judicial review, and may, whether intentional or not, accord 
special weight to the peer reviewers.

4. Risk assessment, review of past rules, needless burdens, key 
        definitions, adequate resources

    There are other significant concerns about this bill raised 
in Director Raines' letter (and in a similar manner in Senator 
Chafee's and Senator Baucus' letter) which we share, but will 
not repeat in detail here. Changes to address these areas are 
included in the amendment drafted by Senator Lieberman. They 
are aimed at ensuring that:
    The red tape of reviewing rules does not prevent agencies 
from acting to protect public health. Director Raines' letter 
expresses concern that the provisions in the bill ``creates two 
different, uncoordinated and likely duplicative processes for 
the review of past regulations, imposing a major burden on 
agencies and needless expense on taxpayers.''
    Risk assessment provisions do not impose burdensome 
requirements where those requirements do not enhance major 
rules, would result in endless and costly analytical processes, 
and are ill-suited to objectives such as airworthiness;
    The risk assessment provisions of this bill apply not only 
to rules, but to any risk assessment that the Director of OMB 
determines may have a ``significant impact on public policy or 
the economy.'' We fear this provision might be used to 
significantly delay important actions to protect public health 
and the environment, such as warnings with respect to food 
safety or unsafe beaches.
    The Majority Report adds to our concerns by stating that 
OMB might require application of these provisions where a risk 
assessment ``may establish the basis for a regulatory action at 
the Federal, State or International level.'' If this requires 
our health, safety and environmental agencies to demonstrate 
that their risk assessments may not at some date be the basis 
for a regulatory action somewhere in the world, the provisions 
of this bill might apply to hundreds of risk assessments each 
year and delay important health and safety actions.
    Needless burdens on agencies are avoided where there would 
be no conceivable benefit to the public or regulated entities;
    The definitions ensure clarity, discourage unwarranted 
litigation that would delay new safeguards, and eliminate 
unwarranted burdens on agencies. For example, the bill defines 
benefits to include nonquantifiable benefits. But the term net 
(as in ``net benefits'') is not defined anywhere. Dictionaries 
define the adjective net in mathematical terms, such as the 
amount left over after deductions and allowances have been 
made. It is critical to make clear that the cost-benefit tests 
in the bill do not require a mathematical or numerical 
analysis.
    We are also concerned that the bill and the Majority Report 
may skew the cost-benefit analysis in several ways, such as 
narrowing the range of benefits considered (which could result 
from the detailed instructions on how an agency should conduct 
a benefit analysis) but leaving the cost analysis too open. We 
fear this could lead to results which most of us would find 
wrong. For example, at the markup, Senator Durbin expressed his 
concern that some cost-benefit analyses of anti-smoking 
measures have defined ``costs'' to include society's medical 
bills associated with elderly persons because people will live 
longer if they smoke less. In other words, under this analysis, 
it would be more expensive for people to live longer.
    Second, the Majority Report fails to acknowledge many of 
the uncertainties associated with cost analyses. In a 1995 
study, the Congressional Office of Technology Assessment 
reviewed seven major OSHA regulatory programs and found that in 
no case had regulated companies spent significantly more than 
OSHA had predicted--and in five to the seven they had spent 
less. The study found that industries often adopt advanced or 
innovative control measures which bring down costs 
significantly, but are not anticipated at the time of the 
rulemaking.
    Finally, the Majority Report includes the concept of 
``opportunity costs'' within the definition of costs. Without 
further guidance, this term could lead to very speculative 
costs estimates because it might involve forecasts into the 
future concerning how a project not in existence today would 
have worked out, but for government restrictions. Projections 
of opportunity costs could also lead to time-consuming and 
extensive government information-gathering and analyses about 
companies' financial structures, which some might view as 
intrusive. Difficult confidentiality claims might also arise in 
the context of a public rulemaking, potentially resulting in 
litigation.
    In addition, we are concerned with ensuring that agencies 
have adequate funding to carry out new burdens imposed on them 
and do not have to choose between these new burdens and 
protecting public health, safety, and the environment. Senator 
Durbin offered an amendment at markup that would have ensured 
the availability of adequate resources be established in 
conjunction with the new requirements, but it was rejected.
    In conclusion, we do not question that the sponsors of S. 
981 seek to improve the regulatory process through this bill. 
But we disagree that this result has been achieved in the 
Committee-reported version of this legislation.

                                   Joseph Lieberman.
                                   Daniel K. Akaka.
                                   Dick Durbin.
                                   Robert Torricelli.
                                   Max Cleland.

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

              proposed revisions to the substitute s. 981

1. Judicial review

    a. Delete section 627(d) and substitute the Glenn-Chafee 
review language (modification in italic):
    ``(d) In any proceeding involving judicial review under 
Section 706 or under the statute granting the rulemaking 
authority, the information contained in any cost-benefit 
analysis or risk assessment required under [sections 623, 624, 
. . .] may be considered by the court as part of the 
administrative record as a whole solely for the purpose of 
determining under the statute granting rulemaking authority 
whether the final agency action is arbitrary, capricious, or an 
abuse of discretion or unsupported by substantial evidence 
where that standard is otherwise provided by law. The adequacy 
of compliance or the failure to comply with [sections 623, 624, 
* * * ] shall not be grounds for remanding or invalidating a 
final agency action, unless the agency entirely failed to 
perform a required cost-benefit analysis or risk assessment.''
    b. In 627(e), change ``shall'' to ``may,'' delete reference 
to peer review, and add prejudicial error language (to ensure 
that only errors material to the regulatory outcome are a basis 
for remand).
    c. Provide that judicial review is not applicable to 
Subchapter III other than under section 706(1) of the APA.
    d. Clarify that section 627(b) is not subject to an 
interlocutory order.

2. Implicit supermandate

    a. Delete section 622(b) and replace as follows: ``Nothing 
in this subchapter shall be construed to alter or modify the 
substantive standards otherwise applicable to a rulemaking 
under other statutes, or to limit the range of discretion 
available under, or in construing, other statutes.''

3. Risk assessment

    a. Delete section 624(a)(1)(A)(ii), which broadens the 
applicability of the risk assessment provisions beyond 
rulemaking.
    b. Delete section 624(c)(2) to prevent unending cycle of 
revision, or clarify that new studies must only be considered 
if they are reasonably available before the agency prepares the 
initial risk assessment.
    c. Delete the requirement in section 624(d) requiring 
public notice of intent to perform a risk assessment.
    d. Exclude from the coverage of section 624 those major 
rules that are not premised on the outcome of a risk assessment 
(e.g. MACT, BACT).

4. Peer review

    a. Delete cost-benefit analysis from the coverage of 
requirements for peer review (section 625).
    b. Modify section 625(b)(1)(A)(ii), so that peer review 
participants are independent of the ``program office,'' rather 
than independent of the ``agency.''
    c. Clarify that only one round of peer review is required, 
and that it should be performed at the NPRM stage.

5. Other

    a. Narrow definitions, procedures and disclosure provisions 
to protect the constitutional prerogatives of the President and 
the deliberative process.
          Delete section 641;
          In section 642(a) after ``Such process shall be * * 
        *'' add ``determined by the President and shall be * * 
        *''
          In section 643(a) after ``subchapter'' add ``as 
        determined by the President.'' Delete 643(a)(1) through 
        643(c).
    b. Regarding ``look back'' reviews, delete section 644(b) 
(amending section 610 of title V), which duplicates the review 
of rules section, and delete other references to section 610 in 
the bill. In section 632(a)(1), change ``5th'' to ``10th.'' In 
section 631(1), incorporate the definitions in 621 by reference 
(to capture rule exclusions) and limit to major rules.
    c. Modify post-promulgation analysis requirements (section 
623(f)(2)) by striking everything after ``* * * unreasonable.''
    d. Delete section 628(c)(2) requiring OMB and OSTP to 
contract for research studies.
                                ------                                

                 Committee on Environment and Public Works,
                                     Washington, DC, March 6, 1998.
Hon. Fred Thompson,
Chairman, Committee on Governmental Affairs,
U.S. Senate, Washington, DC 20510.
    Dear Senator Thompson: As Chairman and Ranking Member of 
the Environment and Public Works Committee, we are writing 
regarding the Regulatory Improvement Act of 1998, S. 981.
    We are confident that, in your hands, regulatory reform is 
not a disguised effort to roll back environmental laws, but 
instead a sincere effort to make regulations, including 
environmental regulations, more effective. We share that goal.
    At the same time, we generally believe that such reforms 
are best accomplished within the framework of a specific 
regulatory statute, rather than in an across-the-board omnibus 
bill. Our Committee recently has developed legislation to 
reauthorize the Safe Drinking Water Act and the Endangered 
Species Act. In each case, we considered how risk assessment, 
requirements for sound scientific analysis, and cost-benefit 
analysis could make the law more effective. And in each case, 
we reached different conclusions. For example, in the case of 
the Safe Drinking Water Act, we provided for cost-benefit 
analysis up front, during the process of selecting maximum 
contaminant levels. In the case of the Endangered Species Act, 
we limit the use of cost-benefit analysis to the recovery 
planning process. In each case, the decision was based on a 
careful consideration of the overall objectives and operation 
of the law. We are concerned that an omnibus approach, which 
makes changes across a wide range of statutes, may have serious 
unintended consequences. For this reason, we are particularly 
concerned about the potential impact of S. 981 on environmental 
laws.
    More specifically, we have six main concerns about the 
provisions of the substitute amendment version of S. 981, 
described below.

Decisional criteria

    Section 623(d) of S. 981 requires an agency to determine 
whether a major rule is likely to produce benefits that justify 
the costs. This standard, which is similar to the standard that 
was used in the new Safe Drinking Water Act, should improve 
decision making. However, section 623(d) also requires an 
agency to determine whether the rule is likely to achieve the 
rule making objective ``in a more cost-effective manner, or 
with greater net benefits,'' than other reasonable 
alternatives.
    We are concerned that this second set of tests could 
distort decision making, for two reasons.
    First, a cost-effectiveness test may be biased against more 
protective rules. In environmental regulation, marginal costs 
often rise as protectiveness rises. As a result, a more 
protective regulation often is not as cost-effective as a less 
protective one. For example, assume that one alternative 
environmental standard costs $500 million and saves one 
thousand lives ($500,000/life saved); a second costs $1.5 
billion and saves two thousand lives ($750,000 per life saved). 
The first would be considered more cost effective, even though 
the second may, as a matter of public health policy, be 
preferable, because it saves many more lives at a reasonable 
and justified cost.
    Second, the use of the ``greater net benefits'' standard 
may be biased against regulations, like many environmental 
regulations, that provide substantial non-quantifiable 
benefits. Although S. 981's definition or benefit includes 
nonquantifiable benefits, we are concerned that it will be 
difficult or impossible to take nonquantifiable benefits into 
account as part of a ``netting'' calculation that seems 
inherently focused on quantification.
    We appreciate that section 623(d)(2) allows an agency to 
override the preference for the alternative that is most cost 
effective or provides greater net benefits, as long as the 
agency provides an explanation. However, we believe that the 
preference itself will give agencies an incentive to select 
alternatives that, in some cases, short-change protection of 
human health and the environment. Therefore, we recommend that 
section 623 be modified to either delete the second set of 
tests or, at least, define cost-effectiveness (i.e., as the 
least costly means of achieving a certain level of benefits).

Savings clause

    As you know, we have long been concerned that regulatory 
reform legislation could modify the existing statutory 
standards of environmental laws--in some cases simply producing 
confusion, in other cases seriously weakening existing 
standards. We understand that this is not your intention. 
However, we remain concerned about the absence of a strong 
savings clause along the lines of the 1995 Glenn-Chafee 
amendment, which provided that ``nothing in this Act shall be 
construed to modify any statutory standard or requirement 
designed to protect human health, safety, or the environment.''

Judicial review

    One of our fundamental concerns about omnibus regulatory 
reform legislation has been concern that the legislation not 
create a host of new issues for litigation. This can have two 
harmful consequences. First, it can shift important policy 
decisions inappropriately to the courts (for example, 
determining the value of a human life or cleaner lakes and 
rivers for purposes of cost-benefit analysis). Second, it can 
create new opportunities to delay the implementation of 
regulations necessary to protect human health and the 
environment.
    We appreciate that the judicial review provisions of S. 981 
are significant improvements over those of previous regulatory 
reform bills. But we believe the best approach is to preclude 
judicial review of the application of the new decisional 
criteria and procedural requirements. Alternatively, we 
recommend an approach that more clearly limits the scope of 
judicial review, along the lines of the 1995 Glenn-Chafee 
Amendment.

Peer review

    We believe that peer review can improve the scientific 
information used in developing rules. But we are concerned 
about the peer review provisions of S. 981, for two reasons. 
First, the requirements that peer reviewers be ``independent of 
the agency'' is too broad, and could exclude any scientists who 
have ever been funded by that agency, even for research on 
subjects unrelated to the rule. It could also exclude 
scientists who serve on agencies' own science advisory boards. 
On the other hand, it does not exclude any entity who may 
simply oppose the rule because it will bear substantial 
compliance costs. This is of particular concern under this 
bill, which would apply peer review not only to risk 
assessments, but also to the cost-benefit analysis, which can 
often be highly debatable. We recommend that the bill exclude 
from peer review those ``with significant involvement or 
interest in the outcome of the rule.''
    Second, we are concerned with the new procedural 
requirements of peer review, particularly in light of the fact 
that the agency's compliance with these provisions may be 
subject to judicial review. We acknowledge that an agency's 
failure to perform peer review should be reviewable by the 
court. However, the bill contains specific requirements that 
should not be subject to review, such as the requirement that 
agencies certify the expertise and independence of reviewers, 
and that they certify the adequacy of their own response to 
peer review comments. Accordingly, we recommend that it be made 
explicitly clear that judicial review of compliance with peer 
review requirements applies only to whether or not peer review 
is performed. Further, we recommend that the agency 
certification requirements with regard to peer review be 
deleted.

Other priorities

    We are concerned that the bill emphasizes the economic 
impacts of rules, without also emphasizing other important 
national priorities. For example, in the types of alternatives 
agencies must consider in regulatory analysis, the bill 
specifically lists the ``no action'' or ``voluntary 
compliance'' alternatives, but does not list alternatives that 
emphasize protection of children or sensitive subpopulations. 
To the extent that the bill mandates the consideration of 
specific regulatory options, these priorities should be 
reflected in the list in Sec. 623(b)(2). Similarly, there is 
consideration of costs and benefits that accrue to people, 
without similar consideration of cost and benefits that accrue 
to the environment, including natural resources. We recommend 
that the relevant provisions of the bill be amended to correct 
this.

Cost and delay

    Finally, we are concerned that the various new requirements 
of the bill, taken cumulatively, will make the regulatory 
process more costly, and delay the implementation of 
regulations important to public health and safety. We know that 
you are sensitive to this point, and we recommend that the bill 
be amended to further streamline the provisions regarding risk 
assessment, peer review, and the ``lookback'' process.
    Thank you for considering our concerns. We look forward to 
working with you to address them.
            Sincerely,
                                   Max Baucus.
                                   John H. Chafee.

                    MINORITY VIEWS OF SENATOR AKAKA

    As a supporter of the Glenn/Roth and Glenn/Chafee 
regulatory reform bills offered in the 104th Congress, I do not 
object to reforming the regulatory process. Given the unanimous 
support the latter received during this Committee's markup on 
March 23, 1995, it is evident that there is bipartisan support 
for effective and responsible regulatory reform that balances 
the need to protect the environment and public health and 
safety.
     However, I felt that despite the good intentions of the 
authors of S. 981, the Regulatory Improvement Act of 1998, 
there could be unintended harmful consequences from such a 
comprehensive approach and, therefore, voted against the bill 
during markup on March 10, 1998. S. 981, as reported out of 
Committee, would require any agency proposing a regulation to 
conduct a peer-reviewed, cost-benefit analysis and risk 
assessment if the rule would have an impact on the economy of 
$100 million or more per year. In addition, the Director of the 
Office of Management and Budget could also designate a proposed 
rule a ``major rule,'' thus requiring an agency to follow the 
provisions of S. 981.
    During markup of this measure, amendments were offered by 
Democratic members that would have addressed some of the 
concerns that I have with the bill--concerns that I believe 
could weaken environmental, consumer, and public health 
protections that Americans now enjoy. I have also associated 
myself with the views expressed by Senators Lieberman, Durbin, 
Torricelli, and Cleland relating to our specific concerns with 
S. 981 as detailed in our dissenting minority views. I wish to 
note that Senator Cleland voted against S. 981 in Committee for 
reasons that parallel my views as stated above.
    Given my past support of regulatory reform legislation, the 
decision to support or not support this measure was difficult. 
However, knowing that both Senator John Chafee and Senator Max 
Baucus, the chair and ranking Democrat, respectively, of the 
Senate Committee on Environment and Public Works, expressed 
serious reservations with S. 981 prior to the Committee's 
markup helped tip the balance. Added to the objections of my 
well-respected colleagues, who oversee the Senate Committee 
that is charged with protection of the environment, were the 
concerns of my constituents who opposed various provisions in 
the bill. Unfortunately, the rejection of a broad-range of 
amendments during the Committee's markup failed to address my 
concerns.
    Just prior to the markup, the Administration provided a 
draft substitute bill. Obviously, it was too late to consider 
this substitute, but I am hopeful that the sponsors of S. 981 
will continue to work with the Administration and others to 
craft an acceptable bill. The Clinton Administration has been 
serious in its efforts to initiate actions to improve the 
federal regulatory process, including Executive Order No. 
12866. I am hopeful that the supporters of S. 981 will review 
the Administration substitute proposal presented by Senator 
Lieberman at the markup.

                                                   Daniel K. Akaka.

                       x. 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. 981 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--Analysis of Regulatory Flexibility

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--Regulatory Analysis

621. Definitions.
622. Applicability and effect.
623. Regulatory analysis.
624. Principles for risk assessments.
625. Peer review.
626. Deadlines for rule making.
627. Judicial review.
628. Guidelines, interagency coordination, and research.
629. Risk based priorities study.

                     Subchapter III--Review of Rules

631. Definitions.
632. Review of rules.

                   Subchapter IV--Executive Oversight

641. Definitions.
642. Presidential regulatory review.
643. Public disclosure of information.
644. Judicial review.

                   Subchapter I--Regulatory Analysis

Sec. 601. Definitions

    For purposes of this chapter--

           *       *       *       *       *       *       *


Sec. 610. Periodic review of rules

    [(a) Within one hundred and eighty days after the effective 
date of this chapter, each agency shall publish in the Federal 
Register a plan for the periodic review of the rules issued by 
the agency which have or will have significant economic impact 
upon a substantial number of small entities. Such plan may be 
amended by the agency at any time by publishing the revision in 
the Federal Register. The purpose of the review shall be to 
determine whether such rules should be continued without 
change, or should be amended or rescinded, consistent with the 
stated objectives of applicable statutes, to minimize any 
significant economic impact of the rules upon a substantial 
number of such small entities. The plan shall provide for the 
review of such rules adopted after the effective date of this 
chapter within ten years of the publication of such rules as 
the final rule. If the head of the agency determines that 
completion of the review of existing rules is not feasible by 
the established date, he shall so certify in a statement 
published in the Federal Register and may extend the completion 
date by one year at a time for a total of not more than five 
years.]
    (a)(1)(A) No later than 60 days after the effective date of 
this section (and every fifth year following the year in which 
this section takes effect) each agency shall submit to the 
Administrator of the Office of Information and Regulatory 
Affairs and the Chief Counsel for Advocacy of the Small 
Business Administration a proposed plan describing the 
procedures and timetables for the periodic review of rules 
issued by the agency that have or will have a significant 
economic impact on a substantial number of small entities. No 
later than 60 days after the submission of the proposed plan to 
the Administrator and the Chief Counsel, such plan shall be 
published in the Federal Register and shall be subject to 
public comment for 60 days after the date of publication.
    (B) No later than 120 days after the publication of the 
plan under subparagraph (A), each agency shall submit a final 
plan to the Administrator and the Chief Counsel. No later than 
60 days after the date of such submission of the plan to the 
Administrator and Chief Counsel, each agency shall publish the 
agency's final plan in the Federal Register.
    (C) Each agency's plan shall provide for the review of such 
rules no later than 5 years after publication of the final 
plan.
    (2)(A) Each year, each agency shall publish in the Federal 
Register a list of rules that will be reviewed under the plan 
during the succeeding fiscal year.
    (B) The publication of the list under subparagraph (A) 
shall include--
          (i) a brief description of each rule and the basis 
        for the agency's determination that the rule has or 
        will have a significant economic impact on a 
        substantial number of small entities;
          (ii) the need for and legal basis of each rule; and
          (iii) an invitation for public comment on each rule.
    (3)(A) Each agency shall conduct a review of each rule on 
the list published under paragraph (2) in accordance with the 
plan maintained under paragraph (1) and pursuant to the factors 
under subsection (b). After the completion of the review, the 
agency shall determine whether the rule should be continued 
without change, or should be amended or rescinded, consistent 
with the stated objectives of the applicable statutes, to 
minimize any significant economic impact of the rule upon a 
substantial number of small entities.
    (B) No later than 18 months after the date of the 
publication of the list of rules referred to under paragraph 
(2)(A), each agency shall publish in the Federal Register the 
determinations made with respect to such rules under 
subparagraph (A) and an explanation for each determination.
    (4) If the head of an agency determines that the completion 
of a review of a rule under this subsection is not feasible 
within the period described under paragraph (1)(C), the head of 
the agency
          (A) shall certify such determination in a statement 
        published in the Federal Register; and
          (B) may extend the completion date of the review by 1 
        year at a time for a total of not more than 2 years.
    (b) In reviewing rules to minimize any significant economic 
impact of the rule on a substantial number of small entities in 
a manner consistent with the stated objectives of applicable 
statutes, the agency shall consider the following factors--
          (1) the continued need for the rule;
          (2) the nature of complaints or comments received 
        concerning the rule from the public;
          (3) the complexity of the rule;
          (4) the extent to which the rule overlaps, duplicates 
        or conflicts with other Federal rules, and, to the 
        extent feasible, with State and local governmental 
        rules; and
          (5) the length of time since the rule has been 
        evaluated or the degree to which technology, economic 
        conditions, or other factors have changed in the area 
        affected by the rule.
    [(c) Each year, each agency shall publish in the Federal 
Register a list of the rules which have significant economic 
impact on a substantial number of small entities, which are to 
be reviewed pursuant to this section during the succeeding 
twelve months. The list shall include a brief description of 
each rule and the need for and legal basis of such rule and 
shall invite public comment upon the rule.]
    (c) The Administrator and the Chief Counsel shall work with 
small entities to achieve the objectives of this section.

           *       *       *       *       *       *       *


                   Subchapter II--Regulatory Analysis

Sec. 621. Definitions

    For purposes of this subchapter the definitions under 
section 551 shall apply and--
          (1) the term ``Administrator'' means the 
        Administrator of the Office of Information and 
        Regulatory Affairs of the Office of Management and 
        Budget;
          (2) the term ``benefit'' means the reasonably 
        identifiable significant favorable effects, 
        quantifiable and nonquantifiable, including social, 
        health, safety, environmental, economic, and 
        distributional effects, that are expected to result 
        from implementation of, or compliance with, a rule;
          (3) the term ``cost'' means the reasonably 
        identifiable significant adverse effects, quantifiable 
        and nonquantifiable, including social, health, safety, 
        environmental, economic, and distributional effects, 
        that are expected to result from implementation of, or 
        compliance with, a rule;
          (4) 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 isprepared 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 uncertainties, the 
significance and complexity of the decision, and the need to adequately 
inform the public;
          (5) the term ``Director'' means the Director of the 
        Office of Management and Budget, acting through the 
        Administrator of the Office of Information and 
        Regulatory Affairs;
          (6) the term ``flexible regulatory options'' means 
        regulatory options that permit flexibility to regulated 
        persons in achieving the objective of the statute as 
        addressed by the rule making, including regulatory 
        options that use market-based mechanisms, outcome 
        oriented performance-based standards, or other options 
        that promote flexibility;
          (7) the term ``major rule'' means a rule that--
                  (A) the agency proposing the rule or the 
                Director reasonably determines is likely to 
                have an annual effect on the economy of 
                $100,000,000 or more in reasonably quantifiable 
                costs; or
                  (B) is otherwise designated a major rule by 
                the Director on the ground that the rule is 
                likely to adversely affect, in a material way, 
                the economy, a sector of the economy, including 
                small business, productivity, competition, 
                jobs, the environment, public health or safety, 
                or State, local or tribal governments, or 
                communities;
          (8) the term ``reasonable alternative'' means a 
        reasonable regulatory option that would achieve the 
        objective of the statute as addressed by the rule 
        making and that the agency has authority to adopt under 
        the statute granting rule making authority, including 
        flexible regulatory options;
          (9) the term ``risk assessment'' means the 
        systematic, objective process of organizing hazard and 
        exposure information, based on a careful analysis of 
        the weight of the scientific evidence, to estimate the 
        potential for specific harm to an exposed population, 
        subpopulation, or natural resource including, to the 
        extent feasible, a characterization of the distribution 
        of risk as well as an analysis of uncertainties, 
        variabilities, conflicting information, and inferences 
        and assumptions;
          (10) the term ``rule'' has the same meaning as in 
        section 551(4), and shall not include--
                  (A) a rule exempt from notice and public 
                comment procedure under section 553;
                  (B) a rule that involves the internal revenue 
                laws of the United States, or the assessment or 
                collection of taxes, duties, or other debts, 
                revenue, or receipts;
                  (C) 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;
                  (D) 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;
                  (E) a rule relating to the operations, 
                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;
                  (F) a rule relating to the integrity of the 
                securities or commodities futures markets or to 
                the protection of investors in those markets;
                  (G) a rule issued by the Federal Election 
                Commission or a rule issued by the Federal 
                Communications Commission under sections 
                312(a)(7) and 315 of the Communications Act of 
                1934 (47 U.S.C. 312(a)(7) and 315); FY 19(H) a 
                rule required to be promulgated at least 
                annually pursuant to statute;
                  (I) a rule or agency action relating to the 
                public debt or fiscal policy of the United 
                States; or
                  (J) a rule or agency action that authorizes 
                the introduction into commerce, or recognizes 
                the marketable status of, a product; and
          (11) the term ``substitution risk'' means a 
        significant increased risk to health, safety, or the 
        environment reasonably likely to result from a 
        regulatory option.

Sec. 622. Applicability and effect

    (a) Except as provided in section 623(f), this subchapter 
shall apply to all proposed and final major rules.
    (b) Nothing in this subchapter shall be construed to alter 
or modify the substantive standards otherwise applicable to a 
rule making under other statutes or opportunity for judicial 
review made applicable under any other Federal statute.

Sec. 623. Regulatory analysis

    (a)(1) Before publishing a notice of a proposed rule making 
for any rule, each agency shall determine whether the rule is 
or is not a major rule covered by this subchapter.
    (2) The Director may designate any rule to be a major rule 
under section 621(7)(B), if the Director--
          (A) makes such designation no later than 30 days 
        after the close of the comment period for the rule; and
          (B) publishes such designation in the Federal 
        Register, together with a succinct statement of the 
        basis for the designation, within 30 days after such 
        designation.
    (b)(1)(A) When an agency publishes a notice of proposed 
rule making for a major rule, the agency shall prepare and 
place in the rule making file an initial regulatory analysis, 
and shall include a summary of such analysis consistent with 
subsection (e) in the notice of proposed rule making. (B)(i) 
When the Director has published a designation that a rule is a 
major rule after the publication of the notice of proposed rule 
making for the rule, the agency shall promptly prepare and 
place in the rule making file an initial regulatory analysis 
for the rule and shall publish in the Federal Register a 
summary of such analysis consistent with subsection (e).
    (ii) Following the issuance of an initial regulatory 
analysis under clause (i), the agency shall give interested 
persons an opportunity to comment under section 553 in the same 
manner as if the initial regulatory analysis had been issued 
with the notice of proposed rule making.
    (2) Each initial regulatory analysis shall contain--
          (A) a cost-benefit analysis of the proposed rule that 
        shall contain--
                  (i) 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 toreceive such benefits;
                  (ii) 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;
                  (iii) an evaluation of the relationship of 
                the benefits of the proposed rule to its costs, 
                including the determinations required under 
                subsection (d), taking into account the results 
                of any risk assessment;
                  (iv) an evaluation of the benefits and costs 
                of a reasonable number of reasonable 
                alternatives reflecting the range of regulatory 
                options that would achieve the objective of the 
                statute as addressed by the rule making, 
                including, where feasible, alternatives that--
                          (I) require no government action or 
                        utilize voluntary programs;
                          (II) provide flexibility for small 
                        entities under subchapter I and for 
                        State, local, or tribal government 
                        agencies delegated to administer a 
                        Federal program;
                          (III) employ flexible regulatory 
                        options; and
                          (IV) assure protection of sensitive 
                        subpopulations, or populations exposed 
                        to multiple and cumulative risks; and
                  (v) a description of the scientific or 
                economic evaluations or information upon which 
                the agency substantially relied in the cost-
                benefit analysis and risk assessment required 
                under this subchapter, and an explanation of 
                how the agency reached the determinations under 
                subsection (d);
          (B) if required, the risk assessment in accordance 
        with section 624; and
          (C) when scientific information on substitution risks 
        to health, safety, or the environment is reasonably 
        available to the agency, an identification and 
        evaluation of such risks.
    (c)(1) When the agency publishes a final major rule, the 
agency shall prepare and place in the rule making file a final 
regulatory analysis.
    (2) Each final regulatory analysis shall address each of 
the requirements for the initial regulatory analysis under 
subsection (b)(2), revised to reflect--
          (A) any material changes made to the proposed rule by 
        the agency after publication of the notice of proposed 
        rule making;
          (B) any material changes made to the cost-benefit 
        analysis or risk assessment; and
          (C) agency consideration of significant comments 
        received regarding the proposed rule and the initial 
        regulatory analysis, including regulatory review 
        communications under subchapter IV.
    (d)(1) The agency shall include in the statement of basis 
and purpose for a proposed or final major rule a reasonable 
determination, based upon the rule making record considered as 
a whole--
          (A) whether the rule is likely to provide benefits 
        that justify the costs of the rule;
          (B) whether the rule is likely to substantially 
        achieve the rule making objective in a more cost-
        effective manner, or with greater net benefits, than 
        the other reasonable alternatives considered by the 
        agency; and
          (C) whether the rule adopts a flexible regulatory 
        option.
    (2) If the agency head determines that the rule is not 
likely to provide benefits that justify the costs of the rule 
or is not likely to substantially achieve the rule making 
objective in a more cost-effective manner, or with greater net 
benefits, than the other reasonable alternatives considered by 
the agency, the agency head shall--
          (A) explain the reasons for selecting the rule 
        notwithstanding such determination, including 
        identifying any statutory provision that required the 
        agency to select such rule;
          (B) describe any reasonable alternative considered by 
        the agency that would be likely to provide benefits 
        that justify the costs of the rule and be likely to 
        substantially achieve the rule making objective in a 
        more cost-effective manner, or with greater net 
        benefits, than the alternative selected by the agency; 
        and
          (C) describe any flexible regulatory option 
        considered by the agency and explain why that option 
        was not adopted by the agency if that option was not 
        adopted.
    (e) Each agency shall include an executive summary of the 
regulatory analysis, including any risk assessment, in the 
regulatory analysis and in the statement of basis and purpose 
for the proposed and final major rule. Such executive summary 
shall include a succinct presentation of--
          (1) the benefits and costs expected to result from 
        the rule and any determinations required under 
        subsection (d);
          (2) if applicable, the risk addressed by the rule and 
        the results of any risk assessment;
          (3) the benefits and costs of reasonable alternatives 
        considered by the agency; and
          (4) the key assumptions and scientific or economic 
        information upon which the agency relied.
    (f)(1) A major rule may be adopted without prior compliance 
with this subchapter if--
          (A) the agency for good cause finds that conducting 
        the regulatory analysis under this subchapter before 
        the rule becomes effective is impracticable or contrary 
        to an important public interest; and
          (B) the agency publishes the rule in the Federal 
        Register with such finding and a succinct explanation 
        of the reasons for the finding.
    (2) If a major rule is adopted under paragraph (1), the 
agency shall comply with this subchapter as promptly as 
possible unless compliance would be unreasonable because the 
rule is, or soon will be, no longer in effect.
    (g) Each agency shall develop an effective process to 
permit elected officers of State, local, and tribal governments 
(or their designated employees with authority to act on their 
behalf) to provide meaningful and timely input in the 
development of regulatory proposals that contain significant 
Federal intergovernmental mandates. The process developed under 
this subsection shall be consistent with section 204 of the 
Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1534).

Sec. 624. Principles for risk assessments

    (a)(1)(A) Subject to paragraph (2), each agency shall 
design and conduct risk assessments in accordance with this 
subchapter for--
          (i) each proposed and final major rule the primary 
        purpose of which is to address health, safety, or 
        environmental risk; or
          (ii) any risk assessment that is not the basis of a 
        rule making that the Director reasonably determines is 
        anticipated to have a substantial impact on a 
        significant public policy or on the economy.
          (B)(i) Risk assessments conducted under this 
        subchapter shall be conducted in a manner that promotes 
        rational and informed risk management decisions and 
        informed public input into and understanding of the 
        process of making agency decisions.
          (ii) The scope and level of analysis of such a risk 
        assessment shall be commensurate with thesignificance 
and complexity of the decision and the need to adequately inform the 
public, consistent with any need for expedition, and designed for the 
nature of the risk being assessed.
    (2) If a risk assessment under this subchapter is otherwise 
required by this section, but the agency determines that--
          (A) a final rule subject to this subchapter is 
        substantially similar to the proposed rule with respect 
        to the risk being addressed;
          (B) a risk assessment for the proposed rule has been 
        carried out in a manner consistent with this 
        subchapter; and
          (C) a new risk assessment for the final rule is not 
        required in order to respond to comments received 
        during the period for comment on the proposed rule, the 
        agency may publish such determination along with the 
        final rule in lieu of preparing a new risk assessment 
        for the final rule.
    (b) Each agency shall consider in each risk assessment all 
relevant, reliable, and reasonably available scientific 
information and shall describe the basis for selecting such 
scientific information.
    (c)(1) When a risk assessment involves a choice of 
assumptions, the agency shall, with respect to significant 
assumptions--
          (A) identify the assumption and its scientific and 
        policy basis, including the extent to which the 
        assumption has been validated by, or conflicts with, 
        empirical data;
          (B) explain the basis for any choices among 
        assumptions and, where applicable, the basis for 
        combining multiple assumptions; and
          (C) describe reasonable alternative assumptions 
        that--
                  (i) would have had a significant effect on 
                the results of the risk assessment; and
                  (ii) were considered but not selected by the 
                agency for use in the risk assessment.
    (2) As relevant and reliable scientific information becomes 
reasonably available, each agency shall revise its significant 
assumptions to incorporate such information.
    (d) The agency shall notify the public of the agency's 
intent to conduct a risk assessment and, to the extent 
practicable, shall solicit relevant and reliable data from the 
public. The agency shall consider such data in conducting the 
risk assessment.
    (e) Each risk assessment under this subchapter shall 
include, as appropriate, each of the following:
          (1) A description of the hazard of concern.
          (2) A description of the populations or natural 
        resources that are the subject of the risk assessment.
          (3) An explanation of the exposure scenarios used in 
        the risk assessment, including an estimate of the 
        corresponding population or natural resource at risk 
        and the likelihood of such exposure scenarios.
          (4) A description of the nature and severity of the 
        harm that could reasonably occur as a result of 
        exposure to the hazard.
          (5) A description of the major uncertainties in each 
        component of the risk assessment and their influence on 
        the results of the assessment.
    (f) To the extent scientifically appropriate, each agency 
shall--
          (1) express the estimate of risk as 1 or more 
        reasonable ranges and, if feasible, probability 
        distributions that reflects variabilities, 
        uncertainties, and lack of data in the analysis;
          (2) provide the ranges and distributions of risks, 
        including central and high end estimates of the risks, 
        and their corresponding exposure scenarios for the 
        potentially exposed population and, as appropriate, for 
        more highly exposed or sensitive subpopulations; and
          (3) describe the qualitative factors influencing the 
        ranges, distributions, and likelihood of possible 
        risks.
    (g) When scientific information that permits relevant 
comparisons of risk is reasonably available, each agency shall 
use the information to place the nature and magnitude of a risk 
to health, safety, or the environment being analyzed in 
relationship to other reasonably comparable risks familiar to 
and routinely encountered by the general public. Such 
comparisons should consider relevant distinctions among risks, 
such as the voluntary or involuntary nature of risks, well 
understood or newly discovered risks, and reversible or 
irreversible risks.

Sec. 625. Peer review

    (a) Each agency shall provide for an independent peer 
review in accordance with this section of the cost-benefit 
analysis and risk assessment required by this subchapter.
    (b)(1) Peer review required under subsection (a) shall--
          (A) be conducted through panels, expert bodies, or 
        other formal or informal devices that are broadly 
        representative and involve participants--
                  (i) with expertise relevant to the sciences, 
                or analyses involved in the regulatory 
                decisions; and
                  (ii) who are independent of the agency;
          (B) be governed by agency standards and practices 
        governing conflicts of interest of nongovernmental 
        agency advisors;
          (C) provide for the timely completion of the peer 
        review including meeting agency deadlines;
          (D) contain a balanced presentation of all 
        considerations, including minority reports and an 
        agency response to all significant peer review 
        comments; and
          (E) provide adequate protections for confidential 
        business information and trade secrets, including 
        requiring panel members or participants to enter into 
        confidentiality agreements.
    (2) Each agency shall provide a written response to all 
significant peer review comments. All peer review comments and 
any responses shall be made--
          (A) available to the public; and
          (B) part of the rule making record for purposes of 
        judicial review of any final agency action.
    (3) If the head of an agency, with the concurrence of the 
Director, publishes a determination in the rule making file 
that a cost-benefit analysis or risk assessment, or any 
component thereof, has been previously subjected to adequate 
peer review, no further peer review shall be required under 
this section for such analysis, assessment, or component.
    (c) For each peer review conducted by an agency under this 
section, the agency head shall include in the rule making 
record a statement by a Federal officer or employee who is not 
an employee of the agency rule making office or program--
          (1) whether the peer review participants reflect the 
        independence and expertise required under subsection 
        (b)(1)(A); and
          (2) whether the agency has adequately responded to 
        the peer review comments as required under subsection 
        (b)(2).
    (d) The peer review required by this section shall not be 
subject to the Federal Advisory Committee Act (5 U.S.C. App.).

Sec. 626. Deadlines for rule making

    (a) All statutory deadlines that require an agency to 
propose or promulgate any major rule 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 this 
        subchapter are satisfied; or
          (2) the date occurring 6 months after the date of the 
        applicable deadline.
    (b) In any proceeding involving a deadline imposed by a 
court of the United States that requires an agency to propose 
or promulgate any major rule during the 2-year period beginning 
on the effective date of this section, the United States shall 
request, and the court may grant, an extension of such deadline 
until the earlier of--
          (1) the date on which the requirements of this 
        subchapter 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 major 
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 this 
        subchapter are satisfied; or
          (2) the date occurring 6 months after the date of the 
        applicable deadline.

Sec. 627. Judicial review

    (a) Compliance by an agency with the provisions of this 
subchapter shall be subject to judicial review only--
          (1) in connection with review of final agency action;
          (2) in accordance with this section; and
          (3) in accordance with the limitations on timing, 
        venue, and scope of review imposed by the statute 
        authorizing judicial review.
    (b) Any determination of an agency whether a rule is a 
major rule under section 621(7)(A) shall be set aside by a 
reviewing court only upon a showing that the determination is 
arbitrary or capricious.
    (c) Any designation by the Director that a rule is a major 
rule under section 621(7), or any failure to make such 
designation, shall not be subject to judicial review.
    (d) The cost-benefit analysis, cost-benefit determination 
under section 623(d), and any risk assessment required under 
this subchapter shall not be subject to judicial review 
separate from review of the final rule to which such analysis 
or assessment applies. The cost-benefit analysis, cost-benefit 
determination under section 623(d), and any risk assessment 
shall be part of the rule making record and shall be considered 
by a court to the extent relevant, only in determining whether 
the final rule is arbitrary, capricious, an abuse of 
discretion, or is unsupported by substantial evidence where 
that standard is otherwise provided by law.
    (e) If an agency fails to perform the cost-benefit 
analysis, cost-benefit determination, or risk assessment, or to 
provide for peer review, a court shall remand or invalidate the 
rule.

Sec. 628. Guidelines, interagency coordination, and research

    (a)(1) No later than 9 months after the date of enactment 
of this section, the Director, in consultation with the Council 
of Economic Advisors, the Director of the Office of Science and 
Technology Policy, and relevant agency heads, shall issue 
guidelines for cost-benefit analyses, risk assessments, and 
peer reviews as required by this subchapter. The Director shall 
oversee and periodically revise such guidelines as appropriate.
    (2) As soon as practicable and no later than 18 months 
after issuance of the guidelines required under paragraph (1), 
each agency subject to section 624 shall adopt detailed 
guidelines for risk assessments as required by this subchapter. 
Such guidelines shall be consistent with the guidelines issued 
under paragraph (1). Each agency shall periodically revise such 
agency guidelines as appropriate.
    (3) The guidelines under this subsection shall be developed 
following notice and public comment. The development and 
issuance of the guidelines shall not be subject to judicial 
review, except in accordance with section 706(1) of this title.
    (b) To promote the use of cost-benefit analysis and risk 
assessment in a consistent manner and to identify agency 
research and training needs, the Director, in consultation with 
the Council of Economic Advisors and the Director of the Office 
of Science and Technology Policy, shall--
          (1) oversee periodic evaluations of Federal agency 
        cost-benefit analysis and risk assessment;
          (2) provide advice and recommendations to the 
        President and Congress to improve agency use of cost-
        benefit analysis and risk assessment;
          (3) utilize appropriate interagency mechanisms to 
        improve the consistency and quality of cost-benefit 
        analysis and risk assessment among Federal agencies; 
        and
          (4) utilize appropriate mechanisms between Federal 
        and State agencies to improve cooperation in the 
        development and application of cost-benefit analysis 
        and risk assessment.
    (c)(1) The Director, in consultation with the head of each 
agency, the Council of Economic Advisors, and the Director of 
the Office of Science and Technology Policy, shall periodically 
evaluate and develop a strategy to meet agency needs for 
research and training in cost-benefit analysis and risk 
assessment, including research on modelling, the development of 
generic data, use of assumptions and the identification and 
quantification of uncertainty and variability.
    (2)(A) No later than 6 months after the date of enactment 
of this section, the Director, in consultation with the 
Director of the Office of Science and Technology Policy, shall 
enter a contract with an accredited scientific institution to 
conduct research to--
          (i) develop a common basis to assist risk 
        communication related to both carcinogens and 
        noncarcinogens; and
          (ii) develop methods to appropriately incorporate 
        risk assessments into related cost-benefit analyses.
    (B) No later than 24 months after the date of enactment of 
this section, the results of the research conducted under this 
paragraph shall be submitted to the Director and Congress.

Sec. 629. Risk based priorities study

    (a) No later than 1 year after the date of enactment of 
this section, the Director, in consultation with the Director 
of the Office of Science and Technology Policy, shall enter 
into a contract with an accredited scientific institution to 
conduct a study that provides--
          (1) a systematic comparison of the extent and 
        severity of significant risks to human health, safety, 
        or the environment (hereafter referred to as a 
        comparative risk analysis);
          (2) a study of methodologies for using comparative 
        risk analysis to compare dissimilar risks tohuman 
health, safety, or the environment, including development of a common 
basis to assist comparative risk analysis related to both carcinogens 
and noncarcinogens; and
          (3) recommendations on the use of comparative risk 
        analysis in setting priorities for the reduction of 
        risks to human health, safety, or the environment.
    (b) The Director shall ensure that the study required under 
subsection (a) is--
          (1) conducted through an open process providing peer 
        review consistent with section 625 and opportunities 
        for public comment and participation; and
          (2) no later than 3 years after the date of enactment 
        of this section, completed and submitted to Congress 
        and the President.
    (c) No later than 4 years after the date of enactment of 
this section, each relevant agency shall, as appropriate, use 
the results of the study required under subsection (a) to 
inform the agency in the preparation of the agency's annual 
budget and strategic plan and performance plan under section 
306 of this title and sections 1115, 1116, 1117, 1118, and 1119 
of title 31.
    (d) No later than 5 years after the date of enactment of 
this section, and periodically thereafter, the President shall 
submit a report to Congress recommending legislative changes to 
assist in setting priorities to more effectively and 
efficiently reduce risks to human health, safety, or the 
environment.

                    Subchapter III--Review of Rules

Sec. 631. Definitions

    For purposes of this subchapter--
          (1) the definitions under section 551 shall apply; 
        and
          (2) the term ``economically significant rule'' means 
        a rule that--
                  (A) is likely to have an annual effect on the 
                economy of $100,000,000 or more in reasonably 
                quantifiable costs; or
                  (B) is likely to adversely affect, in a 
                material way, the economy, a sector of the 
                economy, including small business, 
                productivity, competition, jobs, the 
                environment, public health or safety, or State, 
                local or tribal governments, or communities.

Sec. 632. Review of rules

    (a)(1) No later than 1 year after the date of enactment of 
this section (and no later than every 5th year following the 
year in which this section takes effect) each agency shall 
publish in the Federal Register a preliminary schedule for the 
review of economically significant rules previously promulgated 
by the agency. The preliminary schedule shall be subject to 
public comment for 60 days after the date of publication. 
Within 120 days after the close of the public comment period, 
each agency shall publish a final schedule in the Federal 
Register.
    (2) In selecting which economically significant rules it 
shall review, each agency shall consider the extent to which--
          (A) the rule could be revised to be substantially 
        more cost-effective or to substantially increase net 
        benefits, including through flexible regulatory 
        options;
          (B) the rule is important relative to other rules 
        being considered for review; and
          (C) the agency has discretion under the statute 
        authorizing the rule to modify or repeal the rule.
    (3) Each preliminary and final schedule shall include--
          (A) a brief description of each rule selected for 
        review;
          (B) a brief explanation of the reasons for the 
        selection of each such rule for review; and
          (C) a deadline for the review of each rule listed 
        thereon, and such deadlines shall occur no later than 5 
        years after the date of publication of the final 
        schedule.
    (4) No later than 6 months after the deadline for a rule as 
provided under paragraph (3)(C), the agency shall publish in 
the Federal Register the determination made with respect to the 
rule and an explanation of such determination.
    (5)(A) If an agency makes a determination to amend or 
repeal a rule, the agency shall complete final agency action 
with regard to such rule no later than 2 years after the 
deadline established for such rule under paragraph (3).
    (B) The Director may extend a deadline under this section 
for no more than 1 year if the Director--
          (i) for good cause finds that compliance with such 
        deadline is impracticable; and
          (ii) publishes in the Federal Register such finding 
        and a succinct explanation of the reasons for the 
        finding.
    (b) The agency shall include with the publication under 
subsection (a) the identification of any legislative mandate 
that requires the agency to impose rules that the agency 
determines are unnecessary, outdated or unduly burdensome.
    (c)(1) The Administrator shall work with interested 
entities, including small entities and State, local, and tribal 
governments, to pursue the objectives of this subchapter.
    (2) Consultation with representatives of State, local, and 
tribal governments shall be governed by the process established 
under section 204 of the Unfunded Mandates Reform Act of 1995 
(2 U.S.C. 1534).

                   Subchapter IV--Executive Oversight

Sec. 641. Definitions

    For purposes of this subchapter--
          (1) the definitions under sections 551 and 621 shall 
        apply; and
          (2) the term ``regulatory action'' means any one of 
        the following:
                  (A) Advance notice of proposed rule making.
                  (B) Notice of proposed rule making.
                  (C) Final rule making, including interim 
                final rule making.

Sec. 642. Presidential regulatory review

    (a) The President shall establish a process for the review 
and coordination of Federal agency regulatory actions. Such 
process shall be the responsibility of the Director.
    (b) For the purpose of carrying out subsection (a), the 
Director shall--
          (1) develop and oversee uniform regulatory policies 
        and procedures, including those by which each agency 
        shall comply with the requirements of this chapter;
          (2) develop policies and procedures for the review of 
        regulatory actions by the Director; and
          (3) develop and oversee an annual government-wide 
        regulatory planning process that shall include review 
        of planned significant regulatory actions and 
        publication of--
                  (A) a summary of and schedule for 
                promulgation of planned agency major rules;
                  (B) agency specific schedules for review of 
                existing rules under subchapter III and section 
                610;
                  (C) a summary of regulatory review actions 
                undertaken in the prior year;
                  (D) a list of major rules promulgated in the 
                prior year for which an agency could not make 
                the determinations that the benefits of a rule 
                justify the costs under section 623(d);
                  (E) identification of significant agency 
                noncompliance with this chapter in the prior 
                year; and
                  (F) recommendations for improving compliance 
                with this chapter and increasing the efficiency 
                and effectiveness of the regulatory process.
    (c)(1) The review established under subsection (a) shall be 
conducted as expeditiously as practicable and shall be limited 
to no more than 90 days.
    (2) A review may be extended longer than the 90-day period 
referred to under paragraph (1) by the Director or at the 
request of the rule making agency to the Director. Notice of 
such extension shall be published promptly in the Federal 
Register.

Sec. 643. Public disclosure of information

    (a) The Director, in carrying out the provisions of section 
642, shall establish procedures to provide public and agency 
access to information concerning review of regulatory actions 
under this subchapter, 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 a regulatory action, of--
                  (A) all written communications relating to 
                the substance of a regulatory action, including 
                drafts of all proposals and associated 
                analyses, between the Administrator or 
                employees of the Administrator and the 
                regulatory agency;
                  (B) all written communications relating to 
                the substance of a regulatory action between 
                the Administrator or employees of the 
                Administrator and any person not employed by 
                the executive branch of the Federal Government;
                  (C) a list identifying the dates, names of 
                individuals involved, and subject matter 
                discussed in substantive meetings and telephone 
                conversations relating to the substance of a 
                regulatory action between the Administrator or 
                employees of the Administrator 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 relating to 
                the substance of a regulatory action between 
                the Administrator or employees of the 
                Administrator and any person not employed by 
                the executive branch of the Federal Government;
                  (B) a list identifying the dates, names of 
                individuals involved, and subject matter 
                discussed in substantive meetings and telephone 
                conversations, relating to the substance of a 
                regulatory action between the Administrator or 
                employees of the Administrator 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 and the date of such action.
    (b) Before the publication of any proposed or final rule, 
the agency shall include in the rule making record--
          (1) a document identifying in a complete, clear, and 
        simple manner, the substantive changes between the 
        draft submitted to the Administrator for review and the 
        rule subsequently announced;
          (2) a document identifying and describing those 
        substantive changes in the rule that were made as a 
        result of the regulatory review and a statement if the 
        Administrator suggested or recommended no changes; and
          (3) all written communications relating to the 
        substance of a regulatory action between the 
        Administrator and the agency during the review of the 
        rule, including drafts of all proposals and associated 
        analyses.
          (c) In any meeting relating to the substance of a 
        regulatory action under review between the 
        Administrator or employees of the Administrator and any 
        person not employed by the executive branch of the 
        Federal Government, a representative of the agency 
        submitting the regulatory action shall be invited.

Sec. 644. Judicial review

    The exercise of the authority granted under this subchapter 
by the President, the Director, or the Administrator shall not 
be subject to judicial review in any manner.

                                
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