[Senate Report 106-110]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 219
_______________________________________________________________________

106th Congress                                                   Report
                                 SENATE
 1st Session                                                    106-110
_______________________________________________________________________




 
                  REGULATORY IMPROVEMENT ACT OF 1999

                               __________

                              R E P O R T

                                 of the

                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                          UNITED STATES SENATE

                             together with

                             MINORITY VIEWS

                              to accompany

                                 S. 746

 TO PROVIDE FOR ANALYSIS OF MAJOR RULES, TO PROMOTE THE PUBLIC'S RIGHT 
  TO KNOW THE COSTS AND BENEFITS OF MAJOR RULES, AND TO INCREASE THE 
                ACCOUNTABILITY AND QUALITY OF GOVERNMENT




                 July 20, 1999.--Ordered to be printed

                               __________

                    U.S. GOVERNMENT PRINTING OFFICE
                           WASHINGTON : 1999


                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                   FRED THOMPSON, Tennessee, Chairman
WILLIAM V. ROTH, Jr., Delaware       JOSEPH I. LIEBERMAN, Connecticut
TED STEVENS, Alaska                  CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine              DANIEL K. AKAKA, Hawaii
GEORGE VOINOVICH, Ohio               RICHARD J. DURBIN, Illinois
PETE V. DOMENICI, New Mexico         ROBERT G. TORRICELLI, New Jersey
THAD COCHRAN, Mississippi            MAX CLELAND, Georgia
ARLEN SPECTER, Pennsylvania          JOHN EDWARDS, North Carolina
JUDD GREGG, New Hampshire
             Hannah S. Sistare, Staff Director and Counsel
                      Paul R. Noe, Senior Counsel
      Joyce A. Rechtschaffen, Minority Staff Director and Counsel
                  Lawrence B. Novey, Minority Counsel
     Linda J. Gustitus, Minority Staff Director and Chief Counsel,
                Permanent Subcommittee on Investigations
          Carl Gold, Minority Congressional Fellow, Permanent
                     Subcommittee on Investigations
                 Darla D. Cassell, Administrative 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.................17
 IV. Administration views............................................19
  V. Section-by-section analysis.....................................19
 VI. Regulatory impact statement.....................................60
VII. CBO cost estimate...............................................61
VIII.Minority views..................................................66

 IX. Changes in existing law.........................................83

106th Congress                                                   Report
                                 SENATE
 1st Session                                                    106-110

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




                   REGULATORY IMPROVEMENT ACT OF 1999

                                _______
                                

                 July 20, 1999.--Ordered to be printed

                                _______


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

                              R E P O R T

                         [To accompany S. 746]

    The Committee on Governmental Affairs, to which was 
referred the bill (S. 746) 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 11-5 that the bill as amended do pass.

                         I. Purpose and Summary

    S. 746 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. 746 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. 746, 
Senator Levin stated:

          Those of us who believe in the benefits of regulation 
        to protect health and safety have a particular 
        responsibility to make sure that regulations are 
        sensible and cost effective. . . . I feel strongly that 
        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 better, more protective regulations because we will 
        be directing our resources in more cost-effective ways. 
        1
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    \1\ 145 Cong. Rec. S 3481-82 (daily ed. March 25, 1999).

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    In the same vein, Chairman Thompson stated:

          The Regulatory Improvement Act is an effort by many 
        of us who want to improve the quality of government to 
        find a common solution. . . . The supporters of this 
        bill represent a real diversity of political 
        viewpoints, but we share the same goals. We want an 
        effective government that protects public health, well-
        being and the environment. . . . in the most sensible 
        and efficient way possible.
          The Regulatory Improvement Act is based on a simple 
        premise: people have a right to know how and why 
        government agencies make their most important and 
        expensive regulatory decisions. This legislation also 
        will improve the quality of government decision 
        making--which will lead to a more effective Federal 
        government. And it will make government more 
        accountable to the people it serves. 2
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    \2\ Id. at S 3482.

    Senator Voinovich, an original co-sponsor of S. 746, 
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stated:

          The challenge facing public officials today is in 
        determining how best to protect the health of our 
        citizens and environment with limited resources. . . . 
        we need to do a better job of setting priorities and 
        spending our resources wisely. I believe that the 
        Regulatory Improvement Act will achieve these goals. 
        3
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    \3\ Id. at S 3485.

    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 (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) 
any risk assessment not related to a rule making that the OMB 
Director anticipates is likely to have an annual effect on the 
economy of $100 million or more.
    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 when the agency is conducting a risk assessment and 
allow the public to submit relevant and reliable information; 
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 highly exposed 
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 for major rules that are anticipated 
to have an annual effect on the economy of $500 million, and 
risk assessments required by the Act, would be subject to 
independent peer review, prior to issuance of a notice of 
proposed rulemaking, if feasible. Only one peer review would be 
required during a rule making.

                           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. 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 and Need for Legislation

    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, four comprehensive bills 
have been reported by the Committee, though none of these has 
been enacted into law. S. 746, the ``Regulatory Improvement Act 
of 1999,'' is the latest 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.

             B. THE NEED FOR REGULATORY REFORM LEGISLATION

    By any measure, federal agencies have long engaged in, and 
continue to engage in, an enormous volume of regulatory 
activity. In a 1997 report to Congress, OMB 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 In recent reports, GAO 
noted that the November 1998 edition of the Unified Agenda of 
Federal Regulations contained 4,560 entries describing planned 
or ongoing federal regulatory actions, 5 and that 
federal agencies issued more than 11,000 final rules between 
April 1996 and December 1998.6
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    \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.
    \5\ GAO, Regulatory Flexibility Act: Agencies' Interpretations of 
Review Requirements Vary, GAO/GGD-99-55, at 19, April 2, 1999.
    \6\ Statement for the Record of L. Nye Stevens, Director, Federal 
Management and Workforce Issues, General Government Division, GAO, 
before the Senate Governmental Affairs Committee, Federalism: 
Implementation of Executive Order 12612 in the Rulemaking Process, GAO/
T-GGD-99-93, May 5, 1999.
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    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.7 And American technology and 
expertise is in demand around the world. But more challenges 
lie ahead.
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    \7\ 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 recent reports, the annual cost of regulation 
of the environment, health, safety and the economy has been 
estimated on the order of several hundred billion dollars, with 
the cost of ``social regulations'' (i.e., environmental, 
health, and safety rules) making up approximately 75 percent of 
the total.8 These costs are often passed on 
indirectly to the American consumer and taxpayer through higher 
prices, diminished wages, increased taxes, or reduced 
government services.\9\ 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.
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    \8\ See Office of Management and Budget, Office of Information and 
Regulatory Affairs, Report to Congress on the Costs and Benefits of 
Federal Regulations at 17-19 (1998); see also, 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).
    \9\ 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).
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    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 then-
chief spokesperson on regulatory policy:

          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. \10\
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    \10\ 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 been accompanied by growing 
problems that must be solved: agencies may fail to balance the 
benefits and costs of regulations, fail to find flexible and 
cost-effective solutions, or fail 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.\11\ While Executive Order 
12866 sets out procedures intended to result in better rules 
and enhanced public confidence, compliance is not uniform or 
complete.\12\
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    \11\ 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).
    \12\ See, e.g., GAO, Regulatory Reform: Agencies Could Improve 
Development, Documentation, and Clarity of Regulatory Economic 
Analyses, RCED-142 (May 1998); GAO, Regulatory Reform: Changes Made to 
Agencies' Rules Are Not Always Clearly Documented, GAO/GGD-98-31 (Jan. 
1998); Hearing before the Senate Committee on Governmental Affairs, 
Subcommittee on Financial Management and Accountability, ``Oversight of 
Regulatory Review Activities of the Office of Information and 
Regulatory Affairs,'' S. Hrg. 104-825, 104th Cong., 2d Sess. (Sept. 25, 
1996).
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    S. 746 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 1997 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. \13\
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    \13\ 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 regulation.\14\ 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.\15\ 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.\16\
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    \14\ 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.
    \15\ Resources for the Future, Economic Analyses at EPA (Richard D. 
Morgenstern, ed. 1997).
    \16\ 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,\17\ the Harvard 
Center for Risk Analysis,\18\ the American Enterprise 
Institute,\19\ the Brookings Institution,\20\ the Clinton 
Administration,\21\ Justice Stephen Breyer,\22\ the Carnegie 
Commission,\23\ Resources for the Future,\24\ and other think 
tanks, commissions, and independent scholars throughout the 
country.\25\ The strong record on the need for regulatory 
reform and the tools to achieve it has contributed to this 
legislation.
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    \17\ 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).
    \18\ 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).
    \19\ 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).
    \20\ 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).
    \21\ 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, DC (Sept. 
1993).
    \22\ Stephen Breyer, Breaking the Vicious Circle: Toward Effective 
Risk Regulation, Harv. Univ. Press, Cambridge, MA (1993); Stephen 
Breyer, Regulation and its Reform (1982).
    \23\ Carnegie Commission on Science, Technology, and Government, 
Risk and the Environment: Improving Regulatory Decisionmaking, 
Washington, D.C. (June 1993).
    \24\ 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).
    \25\ 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 through 
                           the 105th congress

    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. 746.
    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.26 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 analyses which 
fail adequately to account for costs, the possibility of 
alternative regulatory solutions, or no regulation at 
all.27
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    \26\ 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).
    \27\ 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 28 and 97th 29 
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.
---------------------------------------------------------------------------
    \28\ 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).
    \29\ 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.30
---------------------------------------------------------------------------
    \30\ Many current members of the Governmental Affairs Committee 
voted for S. 291, including Senators Roth, Thompson, Stevens, Cochran, 
Lieberman, Levin and Akaka.
---------------------------------------------------------------------------
    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 significant 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. This led to 
the introduction in the 105th Congress of S. 981, the 
Regulatory Improvement Act, which is the predecessor to S. 746. 
Like S. 746, S. 981 was rooted in past Committee initiatives, 
particularly S. 291, but S. 746 was significantly streamlined 
and modified. The 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.31
---------------------------------------------------------------------------
    \31\ See GAO, Unfunded Mandates: Reform Act Has Little Effect on 
Agencies' Rulemaking Actions, GAO/GGD-98-30 (Feb. 1998); GAO, 
Regulatory Reform: Changes Made to Agencies' Rules 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).
---------------------------------------------------------------------------
    The Committee held two hearings on S. 981, in September 
1997 and February 1998. S. 981 was supported by diverse groups 
and individuals representing, among others, State and local 
governments, agricultural interests, scientists, policy 
institutes, small businesses, and educators. Supporters 
testified that S. 981 would foster better federal protection of 
public health and safety and the environment; would expedite 
the development and issuance of rules; and lead to more 
reasoned decisionmaking. Others, including representatives of 
environmental, public safety, and labor groups, opposed the 
bill as restrictive of agency authority, likely to cause delays 
in issuing rules, and leading to agencies placing cost 
justification above other factors in determining the regulatory 
approach to follow.
    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 Senator Levin and Chairman Thompson on February 4, 
1998, and adopted at a markup on March 10, 1998. Others were 
addressed by the Committee as amendments during the markup of 
S. 981. S. 981 was voted out of the Committee 8-4 on March 10, 
1998 32 but did not receive floor consideration.
---------------------------------------------------------------------------
    \32\ S. Rep. 105-188, 105th Cong., 2d Sess. (1998).
---------------------------------------------------------------------------

 D. CHANGES IN THE REGULATORY IMPROVEMENT ACT FROM THE 105TH CONGRESS 
                (S. 981) TO THE 106TH CONGRESS (S. 746)

    Following the Committee's reporting out of S. 981, Senator 
Levin and Chairman Thompson engaged in a series of discussions 
with the Administration. The starting point for these 
discussions was the letter from then-OMB Director Franklin 
Raines prior to the markup of S. 981 expressing the 
Administration's concerns with a number of provisions in the 
substitute to S. 981. On July 1, 1998, Senator Levin and 
Chairman Thompson responded to Director Raines, accepting many 
of the changes proposed by the Administration. By letter dated 
July 15, 1998, Acting OMB Director Jacob Lew informed Senators 
Levin and Thompson that ``if the bill emerges from the House 
and Senate as you now propose, with no changes, the President 
would find it acceptable and sign it.'' 33
---------------------------------------------------------------------------
    \33\ In his written statement submitted into the record of the 
Committee's April 21, 1999 hearing on S. 746, OMB Director Lew 
reiterated the Administration's commitment that, as proposed, the 
President would sign S. 746.
---------------------------------------------------------------------------
    As introduced, S. 746 was identical to S. 981 as reported 
with the changes accepted by Senator Levin and Chairman 
Thompson in their July 1 letter. The key changes from S. 981 as 
reported and S. 746 as introduced follow:
    1. Judicial review: S. 746 modifies S. 981 by adding 
language to clarify that the court shall consider the cost-
benefit analysis, cost-benefit determination, and risk 
assessment only in determining under the statute granting the 
rule making authority whether the final rule is arbitrary and 
capricious. S. 746 also gives a court discretion on whether to 
remand or invalidate a rule if the agency fails to perform the 
analysis, assessment or determination, or provide for peer 
review, and requires a court to order the agency to perform any 
or all of these actions if the court allows the rule to take 
effect without one or more of them having been performed.
    2. Relationship of Regulatory Improvement Act to other 
statutes: S. 746 adds two additional provisions to reiterate 
that S. 981 did not contain a ``supermandate'' that would 
override or alter substantive standards of authorizing 
statutes. The revisions confirm that S. 746 does not override 
the substantive standards under the statute authorizing the 
rule and that the agencies must consider the full range of 
regulatory options available under the authorizing statute. S. 
746 also confirms that agencies are still entitled to the 
deference accorded to them by reviewing courts under the 
Chevron doctrine.
    3. Review of Rules: S. 746 deletes S. 981's provisions for 
the review of existing rules.
    4. Risk Assessment: Like S. 981, S. 746 requires a risk 
assessment to be conducted for all major rules that have the 
primary purpose of addressing risks to health, safety, or the 
environment. S. 981 would also have applied to any risk 
assessment that is not the basis of a rulemaking if the OMB 
Director reasonably determined that the risk assessment might 
have a substantial impact on public policy or the economy. S. 
746 changes the bill with respect to risk assessments that are 
not the basis of a rulemaking by making its risk assessment 
requirements applicable if the Director anticipates that the 
risk assessment could have an annual effect on the economy of 
$100 million or more.
    5. Peer review: S. 746 clarifies that members of agency 
advisory boards required by statute, and persons who serve as 
contractors or grantees to the agency are not precluded from 
serving as peer reviewers solely because the bill requires peer 
reviewers to be independent of the agency. S. 746 also raises 
the threshold for requiring agencies to conduct peer review of 
cost-benefit analyses for rules that are anticipated to have a 
$500 million annual effect (as opposed to $100 million under S. 
981), and clarifies that an agency need conduct only one peer 
review of the cost- benefit analysis and the risk assessment.
    6. Net benefits: S. 746 clarifies that application of the 
net benefits analysis is to include consideration of 
nonquantifiable as well as quantifiable benefits.
    7. Substitution risk: S. 981 defined ``substitution risk'' 
as a significant risk to health, safety, or the environment 
reasonably likely to result from a regulatory option. S. 746 
clarifies that agencies are expected to consider ``reasonably 
identifiable'' risks, and that risks attributable to the effect 
of a regulatory option on the income of individuals are not to 
be considered.
    8. Exemptions: S. 981 as reported exempted from coverage 
``a rule or agency action that authorizes the introduction into 
commerce, or recognizes the marketable status of, a product.'' 
S. 746 amends this exemption to include removal of a product as 
well as introduction into commerce, and it limits the exemption 
only to rules promulgated under the Federal Food, Drug and 
Cosmetic Act.

                  E. COMMITTEE CONSIDERATION OF S. 746

    As with its predecessor bill, S. 981, many individuals and 
organizations representing a wide range of segments of American 
society have strongly supported S. 746. These include 
representatives of many State and local governments, including 
officials responsible for environmental protection and safety; 
small business owners; the National Academy of Sciences; many 
educational organizations; the GAO; John Graham, Director of 
the Harvard Center for Risk Analysis; the United States Chamber 
of Commerce; former Federal regulators; and many other 
scholars, officials, and experts on the regulatory process.
    Testifying in favor of the bill, John Graham, Director of 
the Harvard Center for Risk Analysis,cited a study that found 
that:

          [R]eallocation of lifesaving resources to cost-
        effective programs could save 60,000 more lives per 
        year than we are currently saving, at no increased cost 
        to taxpayers or the private sector! In short, a smarter 
        regulatory system can provide the public with more 
        protection against hazards at less cost than we are 
        achieving today.34
---------------------------------------------------------------------------
    \34\ Testimony of John D. Graham before the Senate Governmental 
Affairs Committee, April 21, 1999.

    Witnesses testifying in favor of the bill included State 
and local government officials whose ability to protect their 
constituents' health, safety, and environmental surroundings is 
affected on a daily basis by federal regulations. These 
witnesses acknowledged the benefits of federal regulation, but 
testified that they believe that S. 746 will promote better 
prioritization and coordination between the state and local 
governments with the federal government, resulting in better 
use of limited resources. Robert E. Roberts is the Executive 
Director of the Environmental Council of States, which is 
comprised of the state and territorial officials who are 
responsible for environmental safety in their respective 
---------------------------------------------------------------------------
jurisdictions. Mr. Roberts told the Committee that:

          We support the consideration of cost benefit 
        analysis, because to do otherwise is to risk 
        misapplication of limited resources. We support risk 
        analysis because to do otherwise may be to attack the 
        wrong programs. Expanding the participation of state 
        and local government officials in the development of 
        national environmental requirements can only strengthen 
        the final products.35

    \35\ Testimony of Robert E. Roberts before the Senate Governmental 
Affairs Committee, April 21, 1999.

    Similarly, in a letter filed concurrent with the hearing on 
S. 746, the leaders of the ``Big 7'' organizations 
36 which represent the nation's state, county, and 
municipal government organizations, stated that:
---------------------------------------------------------------------------
    \36\ The National Governor's Association, the National Conference 
of State Legislatures, the Council of State Governments, the National 
Association of Counties, the National League of Cities, the U.S. 
Conference of Mayors, and the International City/County Management 
Association.

          The proposed bipartisan legislation would greatly 
        assist state and local governments in assessing the 
        costs and benefits of major regulations. This bill 
        would lead to improved quality of federal regulatory 
        programs and rules, increase federal government 
        accountability, and encourage open communication among 
        federal agencies, state and local governments, the 
        public and Congress regarding federal regulatory 
        priorities.37
---------------------------------------------------------------------------
    \37\ Letter from Governor Thomas R. Carper of Delaware et al., to 
Chairman Thompson and Senator Levin (April 21, 1999).

    Scott Holman, testifying on behalf of the U.S. Chamber of 
Commerce, is owner and President of a small business, a 
manufacturer of custom steel castings for the automotive 
tooling, machine tool, steel mill, and construction industries. 
---------------------------------------------------------------------------
Mr. Holman testified that:

          Information is power. This has never been as true as 
        it is in today's ``information age.'' S. 746 is about 
        ensuring a healthy exchange of information on 
        governmental decisions between the People and their 
        government. One of the founding principles of our 
        Nation was the ability of People to question their 
        government. The Regulatory Improvement Act of 1999 
        provides power to the American people through greater 
        information.38
---------------------------------------------------------------------------
    \38\ Testimony of Scott Holman before the Senate Governmental 
Affairs Committee, April 21, 1999.

    Ronald A. Cass, Dean of the Boston University School of 
---------------------------------------------------------------------------
Law, told the Committee that:

          S. 746 generally should make agency rulemaking 
        correspond more closely to public interest. The changes 
        S. 746 would effect primarily ask that agencies attend 
        to considerations that should be relevant to regulatory 
        rulemaking, that agencies assess critically information 
        pertinent to their rulemaking decisions, and that 
        agencies allow these assessments to be open to the sort 
        of comparative evaluation common in other venues for 
        similar analysis.39

    \39\ Testimony of Dean Ronald A. Cass before the Senate 
Governmental Affairs Committee, April 21, 1999.

    Dean Cass further refuted concerns raised by some that S. 
746 would drive agencies to always select the least costly 
regulatory approach and promote a ``one size fits all'' 
regulatory approach. He stated that ``S. 746 does not make 
formal cost-benefit analysis the sole input to agency decision-
making, and the bill properly cautions attention to 
nonquantifiable as well as quantifiable variables'' 
40 and that ``the risk assessment principles in S. 
746 . . . do not handcuff regulatory agencies but merely 
promote better informed decision-making. . . . the requirement 
of thoughtful risk assessments, including explanations of the 
agency's analysis of scientific evidence, is designed to 
improve the information relied on by the agency and the 
communication of agency decisions to the interested 
public.41
---------------------------------------------------------------------------
    \40\ Id.
    \41\ Id.
---------------------------------------------------------------------------
    Some expressed concern that the bill would alter the 
current mode of judicial review of regulations by enabling 
courts to review the validity of a cost-benefit analysis or 
risk assessment without regard to whether the rule itself is 
supportable by the facts and law. Dean Cass rebutted such 
concerns, noting that:

          The judicial review provision in S. 746 seems well-
        tailored, neither insulating considerations that make 
        regulatory analysis sound or unsound from review nor 
        allowing judicial review to become a strategic tool of 
        interests opposed to agency action.42
---------------------------------------------------------------------------
    \42\ Id. See also Testimony of Warren Belmar, Chair, Section of 
Administrative Law and Regulatory Practice, American Bar Association, 
before the Senate Governmental Affairs Committee, S. Hrg. 105-468 (Feb. 
24, 1998) (expressing ABA support for the judicial review provision of 
the Regulatory Improvement Act); Testimony of Ernest Gellhorn, 
Professor of Law, George Mason University School of Law, before the 
Senate Governmental Affairs Committee, S. Hrg. 105-335 (Sept. 12, 1997) 
(supporting the judicial review provision of the Regulatory Improvement 
Act).

    Dr. Lester M. Crawford, a former federal regulator, also 
testified in support of S. 746, including the cost-benefit 
analysis, risk assessment, and peer review requirements. In 
regard to peer review, Dr. Crawford testified that it has been 
used effectively by the FDA, among other agencies, and stated 
that ``peer review can and does broaden the expertise available 
to the government and it makes the process more open and 
democratic.'' 43
---------------------------------------------------------------------------
    \43\ Testimony of Dr. Lester M. Crawford, Director, Georgetown 
University Center for Food and Nutrition Policy before the Senate 
Governmental Affairs Committee, April 21, 1999.
---------------------------------------------------------------------------
    Dr. Milton Russell, former Assistant Administrator of the 
EPA, told the Committee:

          In contrast to previous proposals, which I did not 
        support, I believe that [the Regulatory Improvement 
        Act] 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 the 
        environment.44
---------------------------------------------------------------------------
    \44\ Testimony of Dr. Milton Russell, Senior Fellow, Joint 
Institute for Energy and Environment, Professor Emeritus of Economics 
at the University of Tennessee, before the Senate Governmental Affairs 
Committee, S. Hrg. 105-468 (Feb. 24, 1998).

    L. Nye Stevens, Director, Federal Management and Workforce 
Issues of the General Government Division of GAO, who testified 
in the 105th Congress in favor of S. 981, submitted a statement 
for the record expressing similar support for S. 746. Mr. 
Stevens cited a 1998 GAO report 45 in which GAO 
found that cost-benefit analyses prepared under Executive Order 
12866 did not incorporate the ``best practices'' elements 
recommended by OMB, lacking sufficient, if any, discussion of 
alternative regulatory approaches or explanation of 
assumptions, limitations, and uncertainties in cost-benefit 
analyses. Analyses also lacked executive summaries that could 
help Congress, decisionmakers, or the public quickly identify 
key information addressed in the agency analyses. Mr. Stevens 
told the Committee that:
---------------------------------------------------------------------------
    \45\ Regulatory Reform: Agencies Could Improve Development, 
Documentation, and Clarity of Regulatory Economic Analyses, GAO/RCED-
98-142 (May 26, 1998).

          S. 746 addresses many of these areas of concern . . . 
        Enactment of the analytical, transparency, and 
        executive summary requirements in S. 746 would extend 
        and underscore Congress' previous statutory 
        requirements that agencies identify how regulatory 
        decisions are made. We believe that Congress and the 
        public have a right to know what alternatives the 
        agencies considered and what assumptions they made in 
        deciding to regulate. . . . Passage of S. 746 would 
        provide a statutory foundation for such principles as 
        openness, accountability, and sound science in 
        rulemaking.46
---------------------------------------------------------------------------
    \46\ Statement for the Record of L. Nye Stevens before the Senate 
Committee on Governmental Affairs, April 21, 1999.

    In his testimony on S. 981, the predecessor bill to S. 746, 
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 [the Regulatory 
        Improvement Act]. 47
---------------------------------------------------------------------------
    \47\ Testimony of Dr. Bruce Alberts, President, National Academy of 
Sciences, before the Senate Committee on Governmental Affairs, February 
24, 1998.

    Others, including representatives of environmental, public 
safety, and labor groups, opposed the bill. Despite changes 
made to the Regulatory Improvement Act following the reporting 
out of S. 981 last year, witnesses expressed concern about 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. One 
witness stated that ``the take home message of S. 746 to 
agencies is to optimize the economic benefits of regulation 
relative to costs.'' 48 Some witnesses also 
testified that S. 746 would require counterproductive analysis 
and would ``result in extensive delays in the time it takes for 
regulatory decisions to be made'' 49 to the already 
lengthy process of proposing and issuing rules.50 
They also argued against the peer review requirements of the 
bill, claiming that, among other things, they will give an 
undue advantage to industry representatives in shaping health 
and safety rules.51
---------------------------------------------------------------------------
    \48\ Testimony of David C. Vladeck, Director, Public Citizen 
Litigation Group before the Senate Governmental Affairs Committee, 
April 21, 1999.
    \49\  Testimony of Patricia G. Kenworthy for the National 
Environmental Trust before the Senate Governmental Affairs Committee, 
April 21, 1999.
    \50\ Id.
    \51\ See Testimony of Franklin E. Mirer, Director of Health and 
Safety, United Auto Workers, before the Senate Governmental Affairs 
Committee, April 21, 1999.
---------------------------------------------------------------------------
    After careful consideration of all views, 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 April 21, 1999, the Governmental Affairs Committee held 
a hearing on S. 746. This hearing built on the Committee's 
extensive hearing record and legislative history on regulatory 
reform from the 104th and 105th Congresses. Testifying at this 
hearing were: Gregory S. Lashutka, Mayor of Columbus, Ohio, for 
the National League of Cities; Robert E. Roberts, Executive 
Director, Environmental Council of States; Scott Holman, 
Chairman, Regulatory Affairs Committee of the U.S. Chamber of 
Commerce; Ronald A. Cass, Dean of Boston University School of 
Law; Dr. Lester Crawford, Director, Georgetown University 
Center for Food and Nutrition Policy; Patricia G. Kenworthy, 
Vice President for Government Affairs, National Environmental 
Trust; John D. Graham, Director, Harvard Center for Risk 
Analysis; David C. Vladeck, Director, Public Citizen Litigation 
Group; and Dr. Franklin E. Mirer, Director of Health and 
Safety, International Union, United Automobile, Aerospace, and 
Agricultural Workers of America. Jacob J. Lew, the Director of 
OMB, and L. Nye Stevens, Director of Federal Management and 
Workforce Issues, GAO, submitted statements for the record.

                   B. AMENDMENTS AND COMMITTEE ACTION

    On May 20, 1999, the Committee on Governmental Affairs 
marked up and favorably reported S. 746 by a vote of 11 to 5. 
Voting in the affirmative were Senators Roth, Stevens, Collins, 
Voinovich, Domenici, Cochran, Specter, Gregg, Levin, Cleland, 
and Thompson. Voting in the negative were Senators Lieberman, 
Akaka, Durbin, Torricelli, and Edwards.
    A number of amendments were offered, debated and voted 
upon. The following amendment was adopted: Senator Durbin 
offered an amendment, which was amended by Senator Levin's 
second degree amendment, to require OMB to submit to Congress 
in 2002 an accounting statement and report containing an 
estimate of the total annual incremental benefits and costs of 
complying with the provisions of subchapter II added by this 
Act for each agency.
    The following amendments were defeated:
    (1) Senator Lieberman offered an amendment to require that 
the cost-benefit determination required by the bill not be 
judicially reviewable and to require that an agency's failure 
to conduct a particular requirement for cost-benefit analysis 
or risk assessment will not authorize a court to remand the 
rule unless the agency ``entirely'' fails to perform the 
analysis. The amendment was defeated 6-10. Voting in the 
affirmative were Senators Lieberman, Akaka (by proxy), Durbin, 
Torricelli (by proxy), Cleland (by proxy), and Edwards. Voting 
in the negative were Senators Roth (by proxy), Stevens (by 
proxy), Collins, Voinovich, Domenici (by proxy), Cochran (by 
proxy), Specter (by proxy), Gregg (by proxy), Levin, and 
Thompson.
    (2) Senator Lieberman offered an amendment to require that 
public hearings in which scientific experts may be cross-
examined would satisfy the bill's requirements for independent 
peer review of cost-benefit analyses and risk assessments. The 
amendment was defeated 6-10. Voting in the affirmative were 
Senators Lieberman, Akaka (by proxy), Durbin, Torricelli (by 
proxy), Cleland (by proxy), and Edwards. Voting in the negative 
were Senators Roth (by proxy), Stevens (by proxy), Collins, 
Voinovich, Domenici (by proxy), Cochran (by proxy), Specter (by 
proxy), Gregg (by proxy), Levin, and Thompson.
    (3) Senator Durbin offered an amendment to exempt from the 
bill's cost-benefit and risk assessment requirements any rule 
or agency action to reduce the use of tobacco products by 
minors or protect the public from the health risks associated 
with tobacco products. The amendment was defeated 6-10. Voting 
in the affirmative were Senators Specter (by proxy), Lieberman, 
Akaka (by proxy), Durbin, Torricelli (by proxy), and Cleland 
(by proxy). Voting in the negative were Senators Roth (by 
proxy), Stevens (by proxy), Collins (by proxy), Voinovich, 
Domenici (by proxy), Cochran (by proxy), Gregg (by proxy), 
Levin, Edwards, and Thompson.
    (4) Senator Lieberman, with Senator Akaka, offered an 
amendment to exempt any rules from the cost-benefit analysis 
and risk assessment requirements if the agency is not required 
to base the rule on the outcome of a risk assessment. The 
amendment was defeated 7-9. Voting in the affirmative were 
Senators Specter (by proxy), Lieberman, Akaka (by proxy), 
Durbin, Torricelli (by proxy), Cleland, and Edwards. Voting in 
the negative were Senators Roth (by proxy), Stevens (by proxy), 
Collins, Voinovich, Domenici (by proxy), Cochran (by proxy), 
Gregg, Levin, and Thompson.
    (5) Senator Lieberman offered an amendment to require that 
the bill's risk assessment requirements would not apply to any 
programs for collecting and disseminating information. The 
amendment was defeated 7-9. Voting in the affirmative were 
Senators Specter (by proxy) Lieberman, Akaka (by proxy), 
Durbin, Torricelli, Cleland, and Edwards. Voting in the 
negative were Senators Roth (by proxy), Stevens (by proxy), 
Collins, Voinovich, Domenici (by proxy), Cochran (by proxy), 
Gregg, Levin, and Thompson.
    (6) Senator Cleland offered an amendment to exclude from a 
peer review panel any person who has, or is employed by an 
entity which has, a significant direct financial interest in 
the outcome of a rulemaking. Chairman Thompson noted that S. 
746 specifically requires peer reviewers to be subject to 
current conflict of interest standards, and the amendment was 
defeated 6-9. Voting in the affirmative were Senators 
Lieberman, Akaka (by proxy), Durbin, Torricelli, Cleland, and 
Edwards. Voting in the negative were Senators Roth (by proxy), 
Stevens (by proxy), Collins, Voinovich, Domenici (by proxy), 
Cochran (by proxy), Gregg, Levin, and Thompson.
    (7) Senator Torricelli offered an amendment to exempt from 
the bill's cost-benefit analysis and risk assessment 
requirements any rules relating to the protection of children's 
health, food safety, worker and workplace safety, environmental 
protection, firefighter safety, or civil rights. The amendment 
was defeated 6-10. Voting in the affirmative were Senators 
Specter (by proxy), Lieberman, Akaka (by proxy), Durbin (by 
proxy), Torricelli, and Cleland (by proxy). Voting inthe 
negative were Senators Roth (by proxy), Stevens (by proxy), Collins, 
Voinovich, Domenici (by proxy), Cochran (by proxy), Gregg (by proxy), 
Levin, Edwards, and Thompson.

                        IV. Administration Views

    OMB Director Jacob Lew submitted a statement to the 
Committee dated April 21, 1999, expressing the Administration's 
views on S. 746. Director Lew noted that the Administration had 
offered suggestions concerning S. 981, that those concerns had 
been taken seriously by the sponsors, and that S. 746 includes 
changes suggested by the Administration. Director Lew stated 
that the Administration's view remains the same as in the July 
15, 1998 letter to Senator Levin and Chairman Thompson and 
reiterated that ``if S. 746 emerges from the Senate and House 
as you now propose, the President would sign it.''

                     V. Section-By-Section Analysis


                         SECTION 1. SHORT TITLE

    The name of this legislation is the ``Regulatory 
Improvement Act of 1999''.

                          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.52 These findings are as 
follows:
---------------------------------------------------------------------------
    \52\ 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.53
---------------------------------------------------------------------------
    \53\ 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 risk assessment and cost-benefit 
analysis, to make the regulatory process more transparent, more 
efficient and effective, and more accountable to the public.

                     SECTION 3. REGULATORY ANALYSIS

    Section 3(a) substantially amends chapter 6 of title 5, 
United States Code. Section 3(a) creates two 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 executive oversight of the rule making 
process.
    Section 3(b) 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(c) provides the technical and conforming 
amendments necessary to reorganize chapter 6 into subchapters, 
including, for example, moving the Regulatory Flexibility Act 
to subchapter I of chapter 6.
    In amending title 5, United States Code, the Committee-
passed bill applies the definition of ``agency'' under section 
551 to subchapters II and III of the bill--the regulatory 
analysis and executive oversight requirements. This definition 
includes the independent regulatory agencies within the scope 
of this legislation. Thus, the requirements to identify major 
rules and to performcost-benefit analyses and risk assessments 
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.\54\ 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.
---------------------------------------------------------------------------
    \54\ 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). In General

    Section 3(a) creates new subchapters II and III 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 subchapter III.
    (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 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 for 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 a reasonably 
thorough effort at identifying and analyzing all significant 
benefits that flow from a regulatory action. At the same time, 
the Committee cautions agencies against speculative attribution 
of distant outcomes to a regulatory action.
    The definition of benefits is not limited to favorable 
effects 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. \55\ Accordingly, agencies should 
be more sophisticated in cost estimation than only summing up 
compliance costs.
---------------------------------------------------------------------------
    \55\ 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. \56\
---------------------------------------------------------------------------
    \56\ 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 
would have required states to change their State Implementation Plans 
(``SIPs'') to satisfy the tighter standards. These SIP revisions would 
impose costs that are attributable to the EPA rule and such costs would 
be included in a cost-benefit analysis under this legislation.
---------------------------------------------------------------------------
    (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 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 essential 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 an 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 been achieved through market-based 
mechanisms. 57 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. 58
---------------------------------------------------------------------------
    \57\ 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.
    \58\ 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.
---------------------------------------------------------------------------
    ``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 longstanding 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 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. 59 The Committee encourages 
the Director and the agencies to be sensitive to these 
concerns.
---------------------------------------------------------------------------
    \59\ 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).
---------------------------------------------------------------------------
    (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 risk assessment. Specifically, the risk assessment should 
be scientifically ``objective'' 60 and ``based on a 
careful analysis of the weight of the scientific evidence.'' 
61 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.
---------------------------------------------------------------------------
    \60\ 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).
    \61\ 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.
---------------------------------------------------------------------------
    The Committee recognizes that risk assessment is a flexible 
process by which complextechnical 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 approve or prescribe 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 analytical 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 tohunting, 
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'' a rule that 
authorizes or bars the introduction into or removal from 
commerce, or recognizes or cancels recognition of the 
marketable status, of a product under the Federal Food, Drug 
and Cosmetic Act.
    (11) The term ``substitution risk'' means a reasonably 
identifiable significant risk to health, safety, or the 
environment expected to result from a regulatory option and 
does not include risks attributable to the effect of an option 
on the income of individuals. A regulatory option designed to 
decrease certain risks may sometimes actually increase other 
risks.62 A substitution risk is an unintended 
adverse consequence. The provisions of S. 746 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).
---------------------------------------------------------------------------
    \62\ See John D. Graham & Jonathan Baert Wiener, Risk vs. Risk: 
Tradeoffs in Protecting Health and the Environment, Harv. Univ. Press 
(1995).
---------------------------------------------------------------------------
    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; 63 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 
``expected to result,'' the Committee means that the 
substitution risk should not be implausible. The Committee does 
not intend that attenuated arguments that changes in lifestyle 
that could result from changes in income of individuals 
potentially attributable to a regulatory option should be 
considered a substitution risk under this legislation.
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    \63\ See Occupational Safety and Health Act 29, U.S.C. Sec. 651.
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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; (2) the range of regulatory options that an agency 
has the authority to adopt under the statute authorizing the 
agency to promulgate the rule, or deference otherwise accorded 
to the agency in construing such statute; or (3) any 
opportunity for judicial review made applicable under other 
statutes.
    This so-called ``savings clause'' clarifies a few important 
points: First, this legislation is not intended to override 
existing statutory standards. 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. 746 does not contain a so-called 
``supermandate.'' S. 746 also does not alter the range of 
regulatory options that an agency can consider or the deference 
otherwise accorded to the agency in construing the statute 
authorizing the rule.
    Finally, subsection 622(b) clarifies that S. 746 does not 
alter or diminish any 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 any other Federal statutes.

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.64
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    \64\ 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); The Greening of Industry: A Risk-Management 
Approach, Harv. Univ. Press (John D. Graham & Jennifer Hartwell, eds. 
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-benefitanalysis 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 proposed and final 
rules 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.65
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    \65\ 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 requirements 
of the Act. 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 incremental costs and 
benefits 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 and risk assessments.
            C. Content of the cost-benefit analysis
    Subsection 623(b) requires the agency to place an initial 
regulatory analysis 66 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.67
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    \66\ A regulatory analysis under this legislation encompasses a 
cost-benefit analysis, cost-benefit determinations, any risk 
assessment, and, if applicable, a substitution risk analysis.
    \67\ 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 incremental 
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 incremental 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.68 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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    \68\ 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 are 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 (d) require 
the agency to analyze and estimate the incremental 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--can be 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 material that 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), (A)(iv), and (d) 
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 briefdescription 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 more cost-effective 
manner. In the past, agencies have sometimes adopted rules without 
seriously considering alternatives that could more effectively achieve 
the statutory 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 
incremental benefits and costs of a reasonable number of 
reasonable alternatives reflecting the range of the agency's 
discretion, including, where feasible,69 
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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    \69\ 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.
---------------------------------------------------------------------------
    Alternatives 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,70 market, judicial, state, or 
local regulatory mechanisms that could adequately resolve the 
problem identified by the agency for action.
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    \70\ 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)(A)(iii) 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)(A)(iii) 
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 flexible regulatory 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) and (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 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 where it is not possible; 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 objective 
``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 quantitative exercise that 
focuses only on costs. 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.71
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    \71\ 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 may be 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 (iv) 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) & (iv) 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). Such determinations need not be made 
primarily on a numerical or mathematical basis. The Committee 
has made clear that net benefits analysis under subsection 
623(d) is not limited to quantifiable effects. This is 
consistent with the definitions of ``benefit'' and ``cost.''
    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.
    Quantifiable costs and benefits 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.72 
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.
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    \72\ See M. Granger Morgan & Max Herrion, Uncertainty: A Guide to 
Dealing with Uncertainty in Quantitative Risk and Policy Analysis, 
Cambridge Univ. Press (1990).
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    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 where 
appropriate. For example, benefits that consist of reducing or 
controlling adverse effects on health or the environment could 
be described in the first instance by estimating, using the 
risk assessment procedures of this legislation, the degree to 
which the rule would reduce the risk that such effects would 
occur.
    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 cost-benefit 
determination 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. 73 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 
expected risk reduced and the key conclusions 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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    \73\ 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 for good cause 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 
merely 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 the OMB Director 
determines that compliance would be clearly unreasonable. This 
is a very narrow exception to avoid clearly unreasonable 
situations where a costly analysis would be required for a rule 
that would not be in effect when the analysis was completed.
    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 therefore 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 withimplementing 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 on assumptions 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 not the basis of a rule making 
that the OMB Director reasonably anticipates are likely to have 
an annual effect on the economy of $100 million or more in 
reasonably quantifiable costs and that the Director determines 
shall be subject to the requirements of Section 624.
    The Committee recognizes that risk assessments are not 
necessary for rules that do not have the primary purpose to 
address health, safety or environmental risk. At the Committee 
hearing on S. 746, the concern was raised that S. 746 would 
require a risk assessment for Toxic Release Inventory (``TRI'') 
reporting rules issued under the Emergency Planning and 
Community Right to Know Act. This law requires that covered 
entities report, not control, the levels of certain chemicals 
emitted from a facility. The primary purpose of such rules is 
not to address risks but to disclose information. At the 
Committee hearing and markup, Senators Levin and Thompson agree 
that S. 746 does not mandate a risk assessment for TRI 
rules.74
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    \74\ Hearing before the Senate Committee on Governmental Affairs, 
``S. 746, the Regulatory Improvement Act of 1999,'' April 21, 1999.
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    The Committee also 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. 746 if the risk assessment is 
likely to have a $100 million effect 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. 
75 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 relatively 
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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    \75\ 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 
relevant, reliable 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 relevant and reliable. And third, if the 
data are relevant and reliable, the agency should consider and 
analyze all those data 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. 76
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    \76\ 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 
agency will use a careful analysis of the weight of the 
evidence to evaluate the information it has. 77 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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    \77\ 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. 78 It 
requires the agency to revise its assumptions to incorporate 
all 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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    \78\ 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 an agency provide notice to 
the public of a risk assessment, and the agency must 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. 79
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    \79\ 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 risk 
        assessment. 80

    \80\ 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. 81
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    \81\ 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 more than one distribution 
        may be needed to demonstrate fundamental uncertainties 
        or to provide specialized information for relevant 
        subpopulations, as described in subsection (f)(2).
          (2) The central 82 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.83 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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    \82\ 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.
    \83\ 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.84
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    \84\ 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 the risk and whether the agency is focusing its 
efforts on the right problems.85 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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    \85\ 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:
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          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.

Sec. 625. Peer review

    This section specifies that agency heads must develop a 
systematic program for independent peer review of all risk 
assessments covered by S. 746 and of cost-benefit analyses 
conducted for major rules costing $500 million or 
more.86 Central to the peer review program should be 
review 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 87 of the 
agency.88
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    \86\ 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); Shelia Jasanoff, The Fifth Branch: Science Advisors as 
Policymakers, Harv. Univ. Press (1990). 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).
    \87\ 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. 746.
    \88\ 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. 746 are intended to allow agencies to use peer 
review procedures that are commensurate with the significance and 
complexity of the subject matter.
    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 89 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. 746 will seek 
guidance from OMB, OSTP and agencies with expertise in the 
field.
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    \89\ 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. 746 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.
    Subsection (b)(3) provides that where the agency head and 
the OMB Director both determine that a cost-benefit analysis, 
risk assessment, or any component thereof, previously has been 
subjected to adequate peer review, they can exempt them from 
the peer review requirements.
    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).
    Subsection (d) provides that the formality of the peer 
review shall be commensurate with the significance and 
complexity of the subject matter.
    Subsection (e) 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.90 
Moreover, the Committee believes that the FACA exemption will 
reduce the potential rigidity, time, and expense of peer 
reviews.
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    \90\ 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.'' EPA, Science Policy 
Council Handbook, at p. 10.
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    Subsection (f) makes clear that statutorily created agency 
advisory boards may be considered ``independent of the agency'' 
under subsection 625(b)(1)(A)(ii). Subsection (g) clarifies 
that the status of a person as a contractor or grantee of the 
agency shall not by itself exclude such person from serving as 
a peer reviewer for such agency because of the requirement 
under subsection 625(b)(1)(A)(ii).
    Finally, Subsection (h) makes clear that Section 625 does 
not mandate more than one peer review of the cost-benefit 
analysis or the risk assessment during a rule making. To the 
extent feasible, peer reviews under Section 625 shall occur 
prior to the notice of proposed rule making.

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.91
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    \91\ 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 . . . any 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 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, unless the court found that such failure to perform 
the analysis or assessment, to make the determination, or to 
provide for peer review, was not prejudicial.
    By contrast, if the agency incorrectly determines that a 
rule is ``major,'' the impact on the rule itself 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 dates 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 for a rule shall not be subject to judicial 
review separate from review of the 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 under 
the statute granting rule making authority whether the final 
rule is arbitrary, capricious, an abuse of discretion, or 
unsupported by substantial evidence.92
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    \92\ 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).
    The phrase ``under the statute granting the rule making authority'' 
clarifies that a rule should not be set aside where the action alleged 
to be arbitrary, capricious, or an abuse of discretion involves a 
matter that cannot be relevant to promulgating the rule under the 
authorizing statute.
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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 ``may, giving due regard to 
prejudicial error, remand or invalidate the rule.'' The 
adequacy of compliance with the specific requirements of the 
subchapter shall not otherwise be grounds for remanding or 
invalidating a rule under the subchapter. If the court allows 
the rule to take effect, the court shall order the agency to 
promptly perform such analysis, determination, or assessment or 
to provide for peer review. If an agency fails to perform the 
cost-benefit analysis, cost-benefit determination, risk 
assessment, or peer review, the court may, with due regard to 
the principle of prejudicial error, invalidate or remand the 
rule. In this respect, S. 746 expands the role of a reviewing 
court by directing that a rule may 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. 746 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, unless the 
statute granting the rule making authority imposes such a 
requirement. 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. 746 is intended to operate.
    Scenario (1): S. 746 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. 746 when it failed to consider a 
legitimate substitution risk?
    No. Failure to comply with a specific procedural 
requirement of S. 746 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. 746. Such an argument is available today, and 
would continue to be available after S. 746 is enacted. 
93
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    \93\ In addition, of course, the failure to consider a substitution 
risk could be a ground for invalidating the rule if the statute 
granting the rule making authority requires that substitution risks be 
considered. See, e.g., the Safe Drinking Water Act of 1996, 
Sec. 1412(b)(3)(C)(i), 42 U.S.C. Sec. 300g-1(b)(3)(C)(i).
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    Scenario (2): S. 746 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. 746 when it failed to 
consider such information?
    No. As indicated in Scenario (1), failure to comply with 
the procedural requirements of S. 746 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. 746 is intended to preclude a court from reaching 
the same result in the future. To the contrary, S. 746 
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. 746 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. 746?
    Yes. The bill explicitly states that the failure to make 
the determination allows 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. 746 
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. 
746 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 is arbitrary or capricious. This is true under 
current law and would continue to be true once S. 746 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 could remand or invalidate the rule. In this respect, S. 
746 changes the role of a reviewing court by providing 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. 746--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 
remand or invalidation of the rule is allowed--a court would 
not remand or invalidate a rule solely on the ground that the 
agency had not complied with a specific procedure of S. 746.

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 
adopt 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 andmaintain 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.94 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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    \94\ 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,95 as well as in testimony before the 
Governmental Affairs Committee.96 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.97 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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    \95\ 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).
    \96\ See, e.g., Testimony of John D. Graham, Director, Harvard 
Center for Risk Analysis, before the Senate Committee on Governmental 
Affairs, September 12, 1997.
    \97\ 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 ordi nary 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).
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    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.98
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    \98\ 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).
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    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, sub section (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.99
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    \99\ 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).
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    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. 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; 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 cost-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 public disclosure. 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 III has four sections: Section 631, definitions; 
Section 632, presidential regulatory review; Section 633, 
public disclosure of information; and Section 634, judicial 
review.
    Section 631 provides several definitions for Subchapter 
III. First, it applies the same definitions in Section 551 of 
current law and Section 621 of the bill to the provisions in 
Subchapter III. 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.
    Subsection 632(a) makes clear that Subchapter III applies 
to all proposed and final major rules, including interim direct 
and interim final rules, and to all other rules designated by 
the President, acting through the Director, for review.
    Subsection 632(b) requires the President 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 632(c) 
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 chapter 6; 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 632(c)(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 section 610 of title 5, United 
        States Code, and under other authorities.
          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) of this Act.
          An identification of significant agency noncompliance 
        with Chapter 6 of title 5, United States Code, in the 
        prior year.
          Recommendations for improving compliance with this 
        chapter and increasing the efficiency and effectiveness 
        of the regulatory process.

    Section 632(d)(1) states that the OMB review of regulatory 
actions should be conducted as expeditiously as practicable and 
should be limited to no more than 90 calendar days. Under 
subsection (d)(2), the review may be extended by either the 
Administrator of OIRA or at the request of the rulemaking 
agency to the Administrator, and such extension must be 
published promptly in the Federal Register.
    Section 633 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. 
12866.100
---------------------------------------------------------------------------
    \100\ See GAO, Regulatory Reform: Changes Made to Agencies' Rules 
Are Not Always Clearly Documented, GAO/GGD-98-31 (Jan. 1998); Hearing 
before the Senate Committee on Governmental Affairs, Subcommittee on 
Financial Management and Accountability, ``Oversight of Regulatory 
Review Activities of the Office of Information and Regulatory 
Affairs,'' 104th Cong., 2d Sess. (Sept. 25, 1996).
---------------------------------------------------------------------------
    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 633 would codify 
those disclosure procedures developed and agreed to over time. 
Generically, Subsection 633(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 correspondence 
        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 correspondence 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; and (3) a list identifying the 
        dates, names of individuals involved, and subject 
        matter discussed in significant 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.

          Disclosure to the regulatory agency, on a timely 
        basis of--(1) all written correspondence 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 (2) a list identifying the 
        dates, names of individuals involved, and subject 
        matter discussed in significant 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.

    Subsection 633(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 correspondence 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 633(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 634 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). Presidential authority

    Section 3(b) 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(c). Technical and conforming amendments

    Section 3(c) 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. It also creates two new subchapters: 
Subchapter II--Regulatory Analysis--and Subchapter III--
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 the Regulatory 
Improvement Act 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. report to congress

    Section 5 requires that by February 5, 2002, the President, 
acting through the Director of the Office of Management and 
Budget, shall prepare and submit to Congress an accounting 
statement and report containing an estimate of the total annual 
incremental benefits and costs of complying with the provisions 
of subchapter II of the Regulatory Improvement Act for each 
agency.

                       section 6. 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. 746 will have a significant regulatory 
impact.

                         VII. CBO Cost Estimate

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, July 9, 1999.
Hon. Fred Thompson,
Chairman, Committee on Governmental Affairs,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 746, the Regulatory 
Improvement Act of 1999.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is John R. 
Righter.
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).

S. 746--Regulatory Improvement Act of 1999

    Summary--CBO estimates that implementing S. 746 would, on 
average, cost about $6 million a year, assuming appropriation 
of the necessary amounts. 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 (UMRA) and would impose no costs 
on the budgets of state, local, or tribal governments.
    S. 746 would amend chapter 6 of title 5, U.S. Code, to 
require federal agencies to complete specific studies, 
including cost-benefit analyses and risk assessments, as part 
of the regulatory analysis performed before certain major rules 
are issued. The bill would define a major rule as a regulatory 
action expected to result in an annual impact on the economy of 
$100 million or more in costs, or a rule designated as major by 
the Office of Management and Budget (OMB). The bill will exempt 
many rules from the new requirements, however, and would 
primarily apply to those agencies that issue major rules 
governing health, safety, and the environment. In cases where 
an agency issues a rule that is expected to have an annual 
impact on the economy of $500 million or more in costs, the 
legislation would require that the agency submit the rule for 
peer review. For major rules covered by S. 746, agency 
compliance with the bill's regulatory analysis provisions would 
be subject to limited judicial review.
    CBO expects that implementing S. 746 would have a small 
impact on the federal government's cost to perform regulatory 
analyses because the bill would: (1) codify much of existing 
practice, (2) generally not apply to so-called minor rules, (3) 
exempt most major rules from its review, and (4) allow agencies 
to opt out of its requirements in certain situations. Based on 
our review of the number and type of major rules issued in 
fiscal years 1997 and 1998 and on past costs of regulatory 
analyses, CBO estimates that, subject to appropriation of the 
necessary amounts, implementing S. 746 would increase the 
government's costs to perform regulatory analyses by around $5 
million annually. Such costs would result from the additional 
documentation and analyses required by S. 746 and from 
requiring that independent agencies perform cost-benefit 
analyses for certain major rules.
    In addition, the bill would require the Office of 
Information and Regulatory Affairs (OIRA) within OMB to write 
regulations, periodically evaluate training needs at agencies 
that perform regulatory analyses, contract for a pair of 
studies, submit an accounting statement to the Congress that 
contains an estimate of agencies' incremental costs in 
complying with the bill's regulatory analysis provisions, and 
review applicable major rules issued by independent agencies. 
The legislation also would direct agencies that regulate 
health, safety, and the environment to devise detailed 
guidelines for performing risk-assessment analyses. CBO 
estimates that implementing these administrative requirements 
would cost federal agencies an average of less than $1 million 
a year over the 2000-2004 period.
    Under some circumstances, S. 746 could result in additional 
costs to federal agencies beyond those in this estimate. OMB 
could require that agencies perform risk assessments according 
to the bill's detailed procedures for agency actions, other 
than major rules, that it anticipates could have an annual 
effect on the economy of $100 million or more in costs. CBO 
assumes however, that the bill's procedures for conducting risk 
assessments would be applied only in the case of major rules. 
If OMB required agencies to apply the bill's risk assessment 
procedures to other agency actions that include an assessment 
of risk, the additional costs would likely be significant. The 
estimate also does include costs that might be incurred as the 
result of additional judicial review because CBO has no basis 
for predicting how many regulatory actions might be challenged 
under this bill.
    Estimated cost to the Federal Government--CBO estimates 
implementing S. 746 would increase the costs of regulatory 
analysis at agencies that issue major rules government health, 
safety, and the environment, as well as increase federal 
reporting and administrative costs. In total, implementing the 
bill would require appropriations of about $6 million a year 
over the next five years.

Regulatory Analysis

    Much of the regulatory analysis and review that would be 
required by S. 746 is already required by Executive Order 12866 
(``Regulatory Planning and Review'') and the accompanying best 
practices for performing economic analyses of significant 
regulatory actions (``Economic Analysis of Federal Regulations 
Under Executive Order 12866''), as well as title II of UMRA.
    In addition, the bill would exempt many federal regulatory 
actions from its requirements, including rules that apply to 
regulate: (1) military or foreign affairs, (2) federal agency 
management or personnel, (3) public property, loans, grants, 
benefits, or contracts, (4) governmental receipts, (5) certain 
commerce activities, including wages and prices, mergers and 
acquisitions, and accounting practices, (6) securities trading, 
(7) monetary and federal fiscal policy, (8) banking, and (9) 
the removal or introduction of products under the Federal Food, 
Drug, and Cosmetic Act.
    In addition, the bill would exempt certain regulations of 
the Federal Election Commission and the Federal Communications 
Commission (FCC) and any rule that an agency must issue at 
least annually. Based on a review of the summaries provided by 
the General Accounting Office (GAO) of approximately 115 major 
rules issued by agencies during fiscal years 1997 and 1998 
(GAO's list, which is required by Public Law 104-121, does not 
include all major rules issued over the two years), CBO 
estimates that at least two-thirds of majors rules would be 
exempt from the bill's requirements.
    In addition to the specified exemptions, agencies 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 OMB determines that such compliance 
would be unreasonable.
    CBO expects that enacting S. 746 would have a small impact 
on the cost to perform regulatory analyses 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, and the 
Departments of Health and Human Services, Energy, 
Transportation, and Agriculture, as well as certain independent 
agencies that are excluded from the requirements of Executive 
Order 12866.
    Based on our review of the type and number of major rules 
issued during fiscal years 1997 and 1998, we expect the bill's 
provisions would apply to about 20 rules a year, although the 
volume of regulatory activity can fluctuate depending on the 
demands on regulatory agencies. On average, we expect that the 
EPA would issue about one-third of the major rules covered by 
S. 746.
    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 $14,000 to $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.) Based on our 
review of the number and type of rules that would likely be 
affected by the provisions of S. 7246, the bill's requirements 
for conducting regulatory analyses, and our analysis of the 
costs of RIAs, CBO estimates that implementing S. 746 would, on 
average, increase regulatory analysis costs for agencies that 
issue rules governing health, safety, and the environment by 
around $5 million a year. That estimated increase would cover 
the costs for health, safety, and environmental agencies to 
conduct additional analyses, including assessments of 
comparative risks and analysis of substitution risks, as well 
as to provide additional documentation of the agencies' 
assumptions, models, findings, public comments, and 
conclusions. On average, we estimate that the provisions of S. 
746 would add a few hundred thousand dollars to the cost of 
such rules, although the amount per rule could vary greatly.
    Independent agencies, which currently are not required to 
prepare a cost-benefit analyses for major rules, would also 
need to begin preparing such analyses for a handful of rules 
each year. This requirement would predominantly affect the FCC, 
although it also would occasionally affect rules issued by the 
Nuclear Regulatory Commission (NRC). While implementing the 
cost-benefit analysis provisions of S. 746 would increase 
regulatory costs at both agencies, particularly the FCC, both 
the FCC and NRC are authorized to collect fees to offset the 
cost of their regulatory programs. Thus, CBO estimates that 
implementing S. 746 would result in no significant net 
budgetary effect for independent agencies.
    Finally, S. 746 would require that agencies submit for peer 
review any cost-benefit analysis or risk assessment developed 
for a rule that is covered by the bill's provisions and is 
reasonably expected to have an annual impact on the economy of 
$500 million or more in costs. The bill would require that the 
peer review panel represent all points of view and that 
agencies respond in writing to all significant comments from 
peer review. With theconcurrence of OMB, an agency could 
certify that a cost-benefit analysis or risk assessment has received 
adequate peer review outside of the bill's procedures. Based on our 
review of GAO's summaries of major rules for fiscal years 1997 and 
1998, the bill's requirement for peer review would appear to have 
applied to only four of those rules--all issued by EPA, which already 
submits its rules for formal peer review. Although the provisions 
would, at times, apply to rules issued by other agencies, most or all 
of which do not currently submit their rules for peer review, CBO 
expects that implementing this provision would result in only a 
negligible increase in the annual cost for agencies to issue major 
rules.

Reporting, Oversight, and Implementation

    S. 746 would impose several reporting and oversight 
requirements, which would be performed 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) develop a strategy to meet agency needs for 
        research and training in performing regulatory-impact 
        analyses;
          (3) contract with accredited scientific institutions 
        to study the use of risk assessments and comparative-
        risk analysis in performing regulatory analyses;
          (4) prepare and submit to the Congress by February 5, 
        2002, an estimate of the total annual incremental costs 
        and administrative benefits for each agency of 
        complying with the bill's provisions; and
          (5) review the regulatory analyses of certain major 
        rules issued by independent agencies.

    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. In 
addition, the bill would require agencies that issue health, 
safety, and environmental regulations to adopt within 18 months 
detailed guidelines for performing risk assessments as part of 
their regulatory impact analyses. In total, CBO estimates that 
the bill's reporting, oversight, and implementation 
requirements would cost agencies an average of less than $1 
million a year over the 2000-2004 period. Such costs would be 
about $1 million for each of the next three years, but would 
fall below $500,000 in subsequent years.
    Pay-as-you-go considerations--None.
    Intergovernmental and private-sector impact--S. 746 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would impose no costs on the budgets of 
state, local, or tribal governments.
    Estimate prepared by--John R. Righter.
    Estimate approved by--Paul N. Van de Water, Assistant 
Director for Budget Analysis.

                          VIII. Minority Views

    We understand that the goal of our colleagues in crafting 
S. 746 is to improve the regulatory process. We appreciate the 
efforts that the sponsors of this bill have made, including a 
number of changes in response to some of the concerns that we 
and others expressed about this legislation in the last 
Congress. The sponsors and we share the goal of protecting the 
health and safety and environment of Americans through 
effective and efficient regulation, but how to accomplish this 
goal is where there are differences.
    S. 746 would require Federal agencies issuing major rules 
to take a number of new, complex, and time-consuming analytic 
and procedural steps and would authorize more judicial review. 
We oppose this bill because of our concerns that the 
consequences of this kind of omnibus regulatory reform 
legislation will be to threaten the ability of our health and 
safety, environmental, and consumer protection agencies to act 
in a timely and decisive manner to protect us, our children, 
and the natural resources we all cherish.
    As elected representatives, we have an obligation to the 
people we serve to protect them from harm, and that includes 
protecting people from breathing polluted air, drinking 
poisonous water, eating contaminated food, working under 
hazardous conditions, exposing children to unsafe toys, and 
becoming victims of consumer fraud. Americans depend on 
regulatory agencies to prevent harm before it occurs. As we 
have evaluated and heard testimony on S. 746 and predecessor 
legislation in recent years, the risks to these protections of 
trying to achieve regulatory reform through one-size-fits-all 
requirements has become increasingly evident.
    Witnesses testified that the highly prescriptive 
requirements for risk assessment, cost-benefit analysis, net 
benefit determinations, and peer review could further delay 
what is already a slow process of establishing needed public 
protections.\1\ For example, the bill would require agencies to 
conduct time-consuming risk assessments even where Congress has 
decided that regulatory standards should be based on available 
technology rather than on estimates of risk. We also heard 
concerns that new avenues for judicial review may create 
significant new opportunities for opponents of public 
protections to challenge them in court. The provisions on peer 
review and on OMB review of agency regulations would make the 
regulatory process less fair and transparent than it is now. 
And perhaps most troubling, witnesses explained that the 
emphasis on cost-benefit analysis and net benefits, coupled 
with new opportunities for judicial review, could lead agency 
officials to choose regulatory alternatives that are less 
protective of the public. We believe that the combined effect 
of these new hurdles will actually make it more difficult for 
the environmental, health, safety, and consumer agencies to 
establish the protections Americans want.
---------------------------------------------------------------------------
    \1\ Our laws provide a host of procedural protections to make 
certain that all individuals have an opportunity to participate in the 
rule making process and then to challenge decisions that they believe 
are wrong in federal court. Guaranteeing that all citizens have these 
procedural due process rights with respect to rule making 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 
hepatitis A victim, and Nancy Donley, whose child died from eating an 
E. Coli contaminated hamburger, spoke eloquently to the Committee on 
this point. (This testimony was presented at hearing on S. 981 in the 
105th Congress, which was a predecessor bill to S. 746.) 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 he current standard setting process at OSHA 
to protect workers from chemical exposure is stalled and failing to 
protect workers.
---------------------------------------------------------------------------
    These are not just abstract concerns. The Committee has 
heard about a number of specific examples where S. 746 would 
adversely affect programs to establish protective regulation--
illustrating how this bill would be the wrong kind of 
regulatory reform. Some of these examples will be discussed 
below. We have also heard a wide array of environmental 
organizations, public health groups, and other public interest 
organizations and labor unions express very serious concerns 
about the harmful consequences of this legislation.
    We offered a number of amendments at Committee markup to 
try to fix some of the problems that we identified. 
Unfortunately, except for an amendment requiring a report on 
the cost of the legislation to agencies, none of the amendments 
was adopted. When this legislation comes before the entire 
Senate, we will try again to fix the problems that have been 
identified by offering a number of amendments.
    Furthermore, in considering across-the-board regulatory 
reform legislation such as S. 746, which would impose new 
analytic and procedural requirements on regulatory agencies 
across-the-board, we must also recognize that there will surely 
be unforeseen consequences. As far as we know, neither the 
proponents of this legislation nor anyone else has produced a 
law-by-law analysis showing how this bill would affect 
individual programs--whether involving the environment, worker 
safety and health, highway and aviation safety, food safety, 
protection of nursing home residents, nuclear safety, civil 
rights including rights of individuals with a disability, and 
all the other areas where we rely on regulation to protect the 
public. We are therefore concerned about the unforeseen 
consequences--the problems that we may not learn about until 
some months or years after the legislation has passed, when the 
resulting harm to our efforts to establish essential regulatory 
protections will become manifest.
    For these reasons we oppose S. 746.

              there is a better way to improve regulations

    We would all agree on the importance of adopting and 
enforcing health and safety and consumer protections in an 
equitable, efficient, and fact-based way, that is as open to as 
much public understanding and participation as possible. Such 
improvements might be called ``regulatory reform.'' But we have 
concluded that the better way to enact such regulatory reform 
is targeted and in the framework of specific regulatory 
statutes, not in an across-the-board omnibus bill such as S. 
746.
    Statute-by-statute reform does not create problems of over-
inclusiveness, as does omnibus legislation like S. 746. And it 
works. The 1996 Safe Drinking Water Act Amendments is an 
outstanding example of regulatory reform legislation that was 
very targeted and dealt with the problems unique to drinking 
water quality. The Congress carefully considered how risk 
assessment and cost-benefit analysis could make the statute 
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 Environmental Protection Agency's 
authority to use cost-benefit analysis based on differences in 
these systems. We are concerned that such refinement and 
targeting will be missed in this type of broad government-wide 
proposal.
    In another example of specifically tailored regulatory 
reform legislation from the 104th Congress, we also passed and 
the President signed the 1996 Food Quality Protection Act. In 
the enactment of this legislation, like the Safe Drinking Water 
Act Amendments, negotiations led to bipartisan agreements for 
tailored provisions to increase future cost-effectiveness, 
while giving EPA flexibility to address high-priority risks. 
The Accountable Pipeline Safety and Partnership Act of 1996 is 
yet another example of legislation that included narrowly 
targeted regulatory reform provisions. Such refinement and 
targeting is impossible in across-the-board regulatory reform 
legislation like S. 746, and serious unintended consequences 
may result.
    Although the statute-by-statute approach may be more time-
consuming and difficult in the short-run than an omnibus bill, 
the result is well worth it. 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 was not working, but the bill passed the Senate 
unanimously with the support of virtually every interested 
group. The Food Quality Protection Act also passed the Senate 
by a wide margin. 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.
    By contrast, there is no consensus with respect to S. 746. 
As we noted, the bill is opposed by a wide array of 
environmental, public-health, and other public-interest and 
labor organizations. The testimony of one Committee witness, 
Patricia Kenworthy on behalf of the National Environmental 
Trust, indicates just how far from consensus we are. Ms. 
Kenworthy testified: ``it is our belief that this legislation 
will result in extensive delays in the time it takes for 
regulatory decisions to be made and will thus undermine federal 
agencies' ability to protect public health, worker safety and 
the environment.'' In a similar vein, Dr. Frank Mirer of the 
UAW testified: ``Now our members are asking why legislation is 
being considered to make it even more difficult to get new 
protections against hazards that put their lives, limbs and 
health in danger.''
    In addition to the statute-by-statute approach, in recent 
years Congress passed and President Clinton signed a number of 
more targeted regulatory reform bills to address some of the 
concerns raised by the business community and state and local 
governments about the regulatory process. The Unfunded Mandates 
Reform Act of 1995 includes provisions for cost-benefit 
analysis of major rules. The Paperwork Reduction Act, which was 
designed, in part, to assure that Federal regulations requiring 
the collection of information will minimize the burden on 
respondents and maximize the usefulness to agencies, was 
reauthorized in 1995, including specific requirements for 
paperwork reduction. The Small Business Regulatory Enforcement 
Fairness Act (SBREFA), passed in 1996, combines several new 
laws intended to ease regulatory burdens on small businesses. 
Under this legislation, agencies must write regulations so that 
those affected can more easily understand them and know how to 
comply, and 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. 
SBREFA also provides for enhanced judicial review for 
regulations affecting small businesses and provides for 
Congressional review of agency rulemaking whereby Congress 
acknowledges and assumes more responsibility for the rules that 
agencies issue. Finally, in 1996, 1997, and 1998, Congress 
passed regulatory accounting measures requiring OMB to submit a 
report on the costs and benefits of regulations.
    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 add new 
judicial hurdles for agencies to overcome. The Administration 
has also undertaken to improve programs at every regulatory 
agency as part of the National Partnership for Reinventing 
Government. EPA, for example, has reported that it established 
stronger partnerships, especially with States; provided for 
greater public access to environmental information; gave more 
attention to compliance assistance to help businesses and 
communities meet their environmental responsibilities; used 
more flexible, tailored approaches to solving environmental 
problems; and substantially reduced regulatory paperwork.
    Proponents of S. 746 have referred to assertions in GAO 
reports that some of these new requirements are not being 
implemented as effectively as they could be. We do not know 
whether GAO is correct in these conclusions--and we will not 
know until this Committee takes the appropriate next step, 
which is to conduct oversight hearings to determine how these 
laws are working, where the gaps, if any, may be, and whether 
more needs to be done. Let us try to make the laws work that we 
just passed in the last several years, rather than throwing up 
our hands and imposing yet another set of overlapping 
requirements on our environmental and public health and safety 
agencies.

                     SPECIFIC CONCERNS WITH S. 746

    In addition to our general concerns about the unforeseen 
consequences arising from omnibus, across-the-board regulatory 
reform legislation, we also have particular concerns about 
specific provisions of S. 746.

1. Judicial review

    Throughout the years of debate on regulatory reform, many 
have expressed their opposition to creating new grounds for 
litigation. We fully support the thorough judicial review that 
the Administrative Procedure Act (APA) provides for all rules. 
Under the APA, an agency's decision will be set aside if it is 
arbitrary, capricious, an abuse of discretion, or otherwise not 
in accordance with law. Courts 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 relevant risk assessment or cost-benefit analysis that is 
prepared must be sufficient to withstand this APA test.
            a. Judicial review of the bill's cost-benefit tests create 
                    new opportunities and arguments for regulated 
                    interests to overturn safeguards in court, and 
                    create incentives for agencies to choose less 
                    protective options.
    S. 746 imposes new, more burdensome hurdles that the agency 
must overcome, beyond what is required under present law. We 
are particularly concerned that the judicial review allowed by 
S. 746 could create new opportunities and arguments for 
overturning regulations and could result in agencies' selecting 
rules that are less protective of the public than those the 
agencies would have selected without the bill. S. 746 would do 
this, first, by mandating that agencies must justify their 
decisions using the specific cost-benefit terminology set forth 
in the bill, and then by placing those agency justifications 
before the reviewing courts--thereby providing new substantive 
arguments that regulated interests could use in challenging the 
agency's decision as arbitrary and capricious. In particular, 
S. 746 would first require the agency to publish a 
determination of: (1) whether the agency's rule is likely to 
provide ``benefits that justify the costs,'' (2) whether the 
rule is likely to achieve its objectives in ``a more cost-
effective manner'' or with ``greater net benefits'' than 
alternatives, and (3) whether the rule ``adopts a flexible 
regulatory option.'' If any answer is no, the agency head must: 
(4) explain why. The bill then requires that each of these 
determinations and explanations by the agency must go into the 
record for judicial review. By requiring the agency to make 
determinations about whether these demanding new tests are 
satisfied, and then by making the agency's determinations 
subject to judicial review, S. 746 raises our concern about 
unintended consequences: a competent lawyer representing 
opponents of the regulation will frequently be able to find 
some basis for arguing that the agency's conclusions about 
whether the ``benefits justify the costs,'' and whether the 
selected rule is ``more cost-effective'' or achieves ``greater 
net benefits'' was arbitrary and capricious. We fear that 
courts may allow these complex cost-benefit determinations, as 
well as the bill's cost-benefit terminology, to be injected 
into the argument about whether the rule is arbitrary and 
capricious, thereby encouraging new substantive arguments for 
challenging an agency's rule.
    For example, suppose EPA were setting a standard for 
reducing pollution from hazardous industrial waste, and must 
choose between a less-stringent standard and a more-stringent 
standard. Typically, all of the costs, but only some of the 
benefits, would be quantifiable. Let's say, in our example, 
that the most significant benefit--avoiding reproductive 
problems causing birth defects in children--cannot be fully 
quantified, so that the more stringent standard has lower net 
quantifiable benefits than the less stringent standard. The law 
now generally instructs EPA to develop hazardous-waste 
standards ``as may be necessary to protect human health and the 
environment.'' Therefore, under current law, if EPA selected 
the more stringent alternative, the debate before a reviewing 
court would focus on whether it was arbitrary or capricious for 
the agency to decide that the standard yielding greater 
reduction in reproductive problems and birth defects is 
``necessary to protect human health and the environment.''
    If S. 746 were enacted, however, EPA would be required to 
state the agency's determination whether benefits of the more 
stringent standard justify'' costs, and whether the standard is 
``more cost-effective'' or has ``greater net benefits'' than 
the alternative, and the agency would also have to explain any 
decision to adopt a rule that did not pass these tests. Then 
the bill instructs that all of these determinations and 
explanations by the agency shall be part of the rule making 
record for the court to consider in deciding whether the rule 
is arbitrary and capricious. S. 746 might thereby direct the 
court's attention away from whether the agency's decision 
satisfies the standards of applicable environmental law, and 
towards evaluating the agency's determinations and explanations 
mandated by the economics-based requirements of the bill. Thus, 
a court case that under today's law would focus on the mandate 
to adopt standards ``as necessary to protect human health and 
the environment'' could be transformed into a debate on whether 
it was reasonable for the agency to conclude that ``greater net 
benefits'' are achieved when the nonquantifiable health and 
social values are balanced against the economic costs of the 
selected regulatory standard.
    We do not believe that the law should grant regulated 
entities new opportunities to challenge an EPA decision as 
being arbitrary and capricious, by finding fault with the 
agency's determination that the chosen standard is ``more cost-
effective'' or would achieve ``greater netbenefits'' than 
alternatives, or by arguing that it was unreasonable for the agency to 
select a standard that does not pass these new tests. In essence, the 
court would be second-guessing whether the agency, for example, was 
``correct'' in the quantifiable and nonquantifiable value it assigned 
to avoiding birth defects in children and whether the agency properly 
balanced that value against economic costs to ascertain the ``net 
benefits'' or the ``cost-effectiveness'' of the rule. Current 
environmental law does not require the agency to determine whether 
those tests are satisfied, and we see no reason to provide litigants 
with new opportunities and arguments for overturning good rules. We 
oppose giving courts the ability to be the arbiters of fundamental 
value decisions such as the value of avoiding birth defects in 
children, or the value of preserving a child's IQ, or the value of 
seeing a clear Grand Canyon. But this is what could occur under S. 746.
    We also oppose creating incentives for agencies to avoid 
judicial challenge by adopting less protection for these 
values. Again, this is what could occur under S. 746, and is 
another concern raised by the judicial review provisions of S. 
746--another unintended consequence. 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 and less protection of the environment.\2\ As Dr. Mirer 
testified on behalf of the UAW, the bill would, in the OSHA 
context, ``shift the balance in standard setting decisions from 
worker protection to industry costs.''
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    \2\ 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 in hearings last Congress on a predecessor bill to 
S. 746, 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?'' Testimony of Karen 
Florini, Senior Attorney, Environmental Defense Fund, before the Senate 
Committee on Governmental Affairs on February 24, 1998, in Hearing on 
S. 981, 105th Cong., 2nd Sess., S. Hrg. 105-486, at page 131.
---------------------------------------------------------------------------
            b. Courts might overturn rules if the agency has not 
                    performed the required analyses to the letter of 
                    the statute.
    We are also concerned that this bill may authorize the 
courts to overturn a rule if the agency fails to perform some 
particular requirement in the bill regarding cost-benefit 
analysis and risk assessment. This problem is most evident when 
the language of S. 746 is compared to provisions considered by 
the Committee in prior Congresses. Judicial review language in 
the Glenn/Chafee proposal from the 104th Congress, and proposed 
by the Administration in a letter on March 6, 1998 from former 
Director of OMB Franklin Raines to the Chairman of this 
Committee, allowed for judicial remand only if the agency 
``entirely fails to perform'' the required cost-benefit 
analysis or risk assessment. Earlier Glenn-Chafee language, 
introduced in S. 1001 from the 104th Congress, and incorporated 
into S. 291 as reported in that Congress by this Committee, 
provided for remand only if the required analysis was ``wholly 
omitted.''
    S. 746 dropped the phrases ``entirely fails to perform'' 
and ``wholly omitted'' used in these earlier proposals and 
instead authorizes judicial remand if the agency ``fails to 
perform'' a cost-benefit analysis or risk assessment. Both the 
terms ``cost-benefit analysis'' and ``risk assessment'' are 
defined in the bill in considerable detail, and an opponent of 
an agency's regulation could therefore argue that the agency 
failed to perform the ``cost-benefit analysis'' or ``risk 
assessment'' based on a failure to perform any one of the 
numerous requirements in the bill. One of the Committee 
witnesses, David Vladeck, a lawyer with extensive experience 
arguing cases in front of courts of appeals, testified that: 
``courts are likely to measure whether an agency has 
`performed' these analyses against the yardsticks established 
in the statute. If the agency has not followed the statute to 
the letter, a court might well rule that it has not `performed' 
the required analysis and set aside the rule on that basis 
alone.''
    Senator Lieberman offered an amendment at markup to make 
clear that the bill would not give rise to these new bases for 
overturning an agency's rule. The amendment would have made 
changes in the judicial review provision of the bill like the 
Glenn/Chafee judicial review language recommended by the 
Administration in the March 6, 1998, letter from former OMB 
Director Raines to the Chairman of this Committee. 
Unfortunately, the amendment was rejected. The sponsors contend 
that their intent is to have limited judicial review.\3\ We 
therefore remain troubled by their rejection of an amendment 
that would express their intent clearly in the text of the 
bill.
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    \3\ ``The [cost-benefit] analysis and [risk] assessment are 
included in the rulemaking record, but there is no judicial review of 
the content of those items or the procedural steps followed or not 
followed by the agency in developing the analysis or assessment. Only 
the total failure to actually do the cost-benefit analysis or risk 
assessment would allow the court to remand the rule to the agency.'' 
Statement of Senator Levin upon introducing S. 746, Congressional 
Record, page S3482, March 25, 1999 (emphasis added).
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2. Peer review

    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 burdensome new processes for peer review without any 
benefits and without appropriate safeguards of fairness and due 
process. The reaction to this legislation of many scientists we 
have heard from has been strongly negative.\4\
---------------------------------------------------------------------------
    \4\ For example, in a letter to the sponsors of S. 981 in the 105th 
Congress, a group of scientists, including representatives from across 
the country, concluded that the legislation, ``particularly the 
provisions governing participation on peer review panels, takes a 
peculiar and even damaging approach to science.'' Letter to Senators 
Levin and Thompson, signed by 74 scientists, physicians, and public 
health professionals, dated March 3, 1998. Most of the problems in S. 
981 identified by these scientists remain in S. 746, including: (1) 
that the peer review requirements are redundant and wasteful, since the 
science and the risk assessments underlying major regulations are 
already being vetted routinely by intra-agency review panels and 
independent scientific bodies; (2) that the agency's own experts are 
excluded from participating on peer review panels, yet employees of the 
regulated industry may participate, as long as the federal agency's 
procedures permit it; (3) that a requirement in predecessor bills that 
the membership of panels be ``balanced'' has been dropped from the 
legislation; and (4) that panel deliberations could take place ``behind 
closed doors'' and review is made exempt from the Federal Advisory 
Committee Act, which guarantees public scrutiny and participation in 
established advisory committees. The letter also criticized S. 981 
because university researchers might be disqualified from participating 
on panels because of research grants received in that university, but 
S. 746 has been fixed to make clear that grantees are not disqualified.
---------------------------------------------------------------------------
            a. For proposed Occupational Safety and Health standards 
                    (and other rules thoroughly vetted though public 
                    hearing processes), the peer review required by S. 
                    746 would superimpose yet another time-consuming, 
                    burdensome, and completely unnecessary process.
    S. 746 would impose new requirements for ``peer review'' 
applicable to all risk assessments required by the bill and to 
cost-benefit analyses of those major rules having a large ($500 
million) annual effect on the economy. We are concerned, first, 
about the interaction of this peer review requirement with 
other established approaches that may not currently be called 
peer review, but that serve to provide a similar type of 
review--another example where unintended consequences emerge 
when we start looking at how this bill would apply to 
individual agencies and programs. The purpose of peer review in 
S. 746 is to create an opportunity for individual experts from 
relevant scientific and technical disciplines to provide their 
expert advice to the agency. However, such an opportunity is 
already built into the hearing process that the Labor 
Department must follow in adopting or amending OSHA standards.
    We heard testimony about the OSHA procedures from Dr. 
Franklin E. Mirer, Director of the Health and Safety Department 
of the UAW. Under current law and procedure, proposed OSHA 
standards must be presented in a public hearing if any affected 
party requests a hearing. The agency must present evidence 
supporting the proposed standard including the health risks, 
control measures, cost analyses and other details. Scientific 
experts, unions, employers, and individual employees also are 
allowed to testify. Any participant in the rule making 
proceeding may ask questions of the others, and OSHA staff may 
ask questions as well. This OSHA process, which is mandated by 
statute and agency regulation, fulfills the same function as 
``peer review,'' and the OSHA procedures are better in some 
ways than those in S. 746, because the hearing follows public 
notice and is open and on the record. To require the agency to 
conduct an additional round of peer review to meet the 
specifics of the bill would further delay a rule making process 
that already takes a very long time. Dr. Mirer testified that 
``the extra peer review step mandated by the legislation takes 
extra time and extra OSHA and stakeholder resources, which 
could be better spent addressing additional hazards.''
    Senator Lieberman offered an amendment at markup to 
establish that the OSHA hearing procedure and similar 
procedures under other laws would be recognized under the bill 
as satisfying the peer review requirements. We were 
disappointed that the amendment was not accepted.
            b. Peer review under S. 746 lacks necessary protections of 
                    due process, fairness, and transparency.
    In arguing against Senator Lieberman's amendment at markup, 
proponents of S. 746 argued that the OSHA hearing comes too 
late in the process because, for peer review to have its 
desired effect, it must occur before the proposed rule is 
published when agency staff positions remain amenable to 
influence. But this argument actually shows how the OSHA 
hearing procedure is preferable. Unlike the hearing, peer 
review as required by S. 746 is actually contrary to the 
principles of due process and public participation established 
under the Administrative Procedure Act. The OSHA hearing occurs 
only after public notice, is open to the public, and is fully 
on the public record. Under the APA, it is at this stage, after 
public notice, that interested parties are to submit their 
comments and evidence to the agency, and the agency is then 
legally obligated to consider these comments and evidence in 
deciding whether and how to modify the original proposal. All 
interested parties--both the regulated industry and the people 
to be protected by the regulation--receive the notice at the 
same time and have the same opportunity to submit their views 
and information.
    By contrast, S. 746 calls for peer review before the public 
is even notified of the agency's proposed rule, and authorizes 
the peer review to occur without public announcement and 
including representatives of the regulated industry. Although 
we are convinced that the sponsors of S. 746 advocate this kind 
of peer review in a good-faith effort to improve regulations, 
we are concerned that the peer review requirements in the bill 
would actually foster suspicion that some interested parties 
may get unfair access and influence in the rule making; and we 
believe it is understandable that Dr. Mirer, on behalf of the 
UAW, testified that: ``Quite frankly, this extra step is just 
one more foothold for interests who simply want no change and 
whose only goal is to stop any new regulation.''
    Furthermore, the requirement in the bill that the peer 
review panel be independent of the agency could also diminish 
the quality of the panel. 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.Former OMB Director Raines pointed out in his March 6, 
1998 letter to the Chairman of this Committee, 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.
    Supporters of S. 746 have asserted that decisions about 
conflicts of interest are best left to agencies. But agencies 
cannot always be relied upon to avoid conflicts of interest 
undermining the integrity of peer review. For example, Senator 
Lieberman described to the Committee his experience in a Senate 
investigation relating to pesticides where there were 
allegations that people on the peer review panels, including 
some experts from the academic world, were nonetheless also 
doing work for the regulated industries.\5\ Furthermore, the 
Majority Report gives no assurance that all agencies have any 
conflict-of-interest rules, but offers merely the 
``expectation'' that agencies new to peer review will seek 
guidance from their more experienced sister-agencies.
---------------------------------------------------------------------------
    \5\ Hearing on S 981, 105th Cong., 1st Sess., S. Hrg. 105-335, 
Sept. 12, 1977, at page 18.
---------------------------------------------------------------------------
    Senator Cleland offered an amendment at markup designed to 
address some of these concerns by excluding participation in 
peer review by individuals with a direct and substantial 
conflict of interest. We were disappointed and puzzled that the 
sponsors did not accept this amendment.\6\ Furthermore, the 
bill provides no safeguards to counteract the potentially 
corrosive effects of conflicts of interest in the peer review 
panel. The bill does not require that conflicts be disclosed or 
that panel meetings be announced and opened to the public or 
that the membership of panels be balanced.\7\
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    \6\ The sponsor's argument in response to Senator Cleland's 
amendment was puzzling. They quoted from EPA's Peer Review Handbook, 
which states that sometimes experts with a ``stake in the outcome--and 
therefore a potential conflict'' may be used for peer review because 
they may be the most knowledgeable and up-to-date. However, Senator 
Cleland's amendment did not exclude those with a ``potential 
conflict,'' such as EPA may use in peer review; his amendment would 
exclude those with a ``direct'' and ``significant'' conflict of 
interest. This limitation in the proposed amendment is similar to the 
limitation in this EPA Handbook, which states that in some cases ``the 
conflict may be so direct and substantial as to rule out a particular 
expert.'' EPA Peer Review Handbook, prepared by the EPA Science Policy 
Council, page 48 (January 1998).
    \7\ The Glenn/Chafee regulatory reform proposal from the 104th 
Congress and S. 981 as introduced in the 105th Congress required that 
peer review panels be ``balanced.'' However, this requirement was 
dropped from S. 981 as reported by this Committee in the 105th Congress 
and, now, from S. 746. Instead, S. 746 requires that the peer review 
must ``contain a balanced presentation of all considerations,'' but 
does not require that the membership on the panel be balanced.
---------------------------------------------------------------------------
    In fact, S. 746 would actually make some peer review less 
transparent and balanced than it is under present law. Peer 
review carried out by formal and established advisory 
committees such as the EPA Science Advisory Board is now 
subject the Federal Advisory Committee Act (FACA), which 
requires that panel membership be balanced and that meetings be 
announced and open to the public. However, if S. 746 were 
enacted, even peer review conducted by established advisory 
committees would become exempt from these existing guarantees 
of fairness and openness.

3. Risk assessments; over-broad and time-consuming analytic 
        requirements generally

    S. 746 would require the agency to conduct a risk 
assessment for each proposed and final major rule ``the primary 
purpose of which is to address health, safety, or environmental 
risk.'' In addition, the Director of OMB would have authority 
to impose the prescriptive requirements of the bill on any 
agency risk assessment anticipated to have an annual effect on 
the economy of $100 million, even if the risk assessment is not 
part of a rulemaking.
    In the all-too-common situation where adequate scientific 
data are not available, the requirements of S. 746 are 
ambiguous. It is unclear whether the risk assessment provisions 
direct the agency to base its decision on whatever data are 
available or to collect additional data. This uncertainty 
presents the agency and its scientists with a Hobson's choice. 
If they rely on available data, they put the rule in jeopardy 
of judicial challenge by regulated interests who will argue 
that the agency failed to collect sufficient data to perform a 
risk assessment meeting the minimum requirements of S. 746. 
However, the only way to limit this risk of judicial remand is 
to delay the rule while additional data are collected, even if 
the new data are not essential to making any critical 
regulatory or policy decision. These serious consequences are 
described in a recent report from the Congressional Research 
Service (CRS), which concludes: ``Such uncertainty [in S. 746, 
as ordered to be reported,] is likely to lead to legal 
challenge.'' \8\
---------------------------------------------------------------------------
    \8\ The CRS report states:

        ``Some proposals attempt to ensure scientific objectivity 
      by mandating it. For example, S. 746, as ordered to be 
      reported, would require scientists to consider `all 
      relevant' and `all reliable' scientific data and to perform 
      an `objective' assessment `based on the weight of the 
      scientific evidence.' However, the effect of these 
      legislated mandates on agency behavior is unpredictable due 
      to the variety of circumstances surrounding risk 
      assessments and the legal consequences of EPA actions. For 
      example, the validity of the `weight-of-the-[scientific]-
      evidence' approach in practice depends on the quality and 
      comprehensiveness (or representativeness) of the data. 
      Therefore, a legal requirement to rely on the approach may 
      be interpreted by scientists as a directive either to base 
      decisions on available data even if data are inadequate and 
      misleading, or to collect additional data to meet minimum 
      data requirements, even if the aspect of the risk 
      assessment for which data are unavailable is unimportant to 
      the risk analysis as a whole or to significant regulatory 
      or policy decisions. Such uncertainly is likely to lead to 
      legal challenges.''

CRS Issue Brief, ``The Role of Risk Analysis and Risk Management in 
Environmental Protection'' (Order Code IB94036, updated June 9, 1999), 
at page CRS-3.
---------------------------------------------------------------------------
            a. The risk assessment provisions of S. 746 would impose 
                    burdensome requirements even where those 
                    requirements cannot enhance the rule
    In those circumstances where Congress has already mandated 
that the regulatory agency must base its standard on best 
available performance practices rather than on an assessment of 
risk, it makes no sense to require the agency to conduct an 
expensive, complex, and time-consuming risk assessment before 
the standards can be proposed and adopted. This is a 
particularly good demonstration of why one-size-fits-all 
regulatory reform may unduly delay critical public protections, 
and why it is better to craft targeted reforms appropriate in 
the framework of particular regulatory statutes.
    In its comments on S. 981 in the last Congress, the 
Administration proposed to exclude from the coverage of the 
risk-assessment requirements those major rules that are not 
premised on the outcome of a risk assessment. (These comments 
were presented in the March 6, 1998 letter from former OMB 
Director Franklin Raines to the Chairman of this Committee.) 
The examples offered in the letter are the technology-based 
standards that EPA is required to adopt for toxic air 
pollutants and water pollutants.
    Let us consider first the example of air toxics regulation. 
When amending the Clean Air Act in 1990, Congress recognized 
that toxic air pollution was not being adequately controlled. 
Literally thousands of pollution sources were releasing 
chemicals into the air that were known or suspected causes of 
cancer, birth defects, or other serious health problems. Many 
of these sources were without controls (despite the 
availability of cost-effective technology to control the 
pollution), partly because it took too long for the agency to 
research and analyze the nature and extent of the risks. 
Instead, Congress decided there was already enough evidence of 
risk to justify regulating a list of particularly harmful 
chemicals and instructed EPA to set standards for sources of 
those chemicals based on existing technologies, to reflect the 
``maximum achievable control technology'' (MACT).\9\ A second 
phase of controls, based on risk, are to be established, only 
if necessary, eight years after the MACT standards are 
required. Congress made a similar decision in the Clean Water 
Act, which requires EPA to set technology-based standards for 
water pollutants.
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    \9\ In preparing the MACT standards, the agency is to consider 
costs, non-air quality health and environmental impacts, and energy 
requirements. See Section 112(d)(2) of the Clean Air Act, 42 U.S.C. 
Sec. 7412(d)(2).
---------------------------------------------------------------------------
    We worry that if S. 746 applied to the air toxics or water 
pollutant programs, EPA could be required to delay issuing 
technology-based standards until the agency conducted risk 
assessments on the potential for harm posed by each pollutant B 
despite Congress's intent to the contrary. We believe that 
Congress should not pass omnibus reform legislation that would 
effectively overturn earlier decisions enacted by Congress to 
require agencies to develop standards without further 
consideration of the risk posed by each pollutant. At markup, 
Senators Lieberman and Akaka proposed an amendment to exempt an 
agency from the risk-assessment requirements insofar as 
Congress has not authorized the agency to take risk into 
account in developing a regulation. Again, we were disappointed 
that this amendment was not adopted.
    In arguing against the amendment, a sponsor of S. 746 
proposed that risk assessments should be required, even if not 
useful to the agency preparing the regulations, because the 
assessments will provide useful information to Congress and the 
public. However, in situations where Congress decided that the 
agency should issue standards to reduce toxic emissions without 
evaluating the potential for harm posed by those toxic 
emissions, we would oppose holding those public-health 
standards hostage while the agency prepares risk assessments 
that are irrelevant to the agency's decision and would result 
in considerable delay. We believe it is inappropriate for this 
Committee, on the record before us, to use this legislation to 
effect wholesale changes in the approach enacted by prior 
Congresses for regulating air toxics or water pollutants. The 
current air toxics provisions, for example, were adopted after 
many years of debate. Yet this Committee has not held a single 
hearing on whether EPA's technology-based standards are 
working. If, on this record, Members of the Committee believe 
that further evaluation of the potential for harm posed by 
toxic emissions would be valuable not to the agency developing 
the rules, but to Congress for legislative purposes or to the 
public, then let us consider commissioning the necessary 
research in some way that does not delay the issuance of the 
essential public-health regulations.
    Another example of the harm that could result from over-
broad requirements in S. 746 involves right-to-know laws. At 
the hearing on S. 746, Senators Durbin and Lieberman asked 
whether the listing of toxic chemicals under the Emergency 
Planning and Community Right-to-Know law should be delayed 
while complex risk assessments and cost-benefit analyses are 
conducted. The purpose of this law is to provide information 
about toxic chemicals and releases to local communities and to 
encourage voluntary actions by companies to reduce releases of 
these chemicals, and the law has been successful.
    The sponsors of S. 746 responded (as noted in the Majority 
Report) that right-to-know regulations are not covered by the 
risk assessment requirements. This seems a highly debatable 
point, so Senator Lieberman proposed an amendment at markup to 
clarify that the risk assessment requirements would not cover 
community right-to-know or similar programs that address risks 
to health, safety, and the environment by requiring the 
collection, reporting, and dissemination of information. This 
amendment would have exempted the community right-to-know law, 
OSHA's worker right-to-know requirements, and other 
environmental and consumer protection programs that require 
reporting, disclosure, and dissemination of information about 
health and safety risks and precautions. For example, a number 
of programs require labeling of commercial products to provide 
consumers accurate information about risks and precautions they 
can take.
    Unfortunately, this amendment was not adopted. The debate 
on the right-to-know law again points to the fundamental 
problems with across-the-board regulatory reform; we simply do 
not, and cannot, now know the unintended consequences if S. 746 
were enacted.
            b. Application of S. 746 to ``stand-alone'' risk 
                    assessments could be used to delay scientific 
                    research and analysis important to protecting 
                    public health and the environment and could 
                    engender legal challenge to future regulations 
                    based on that analysis.
    The risk assessment requirements of S. 746 apply not only 
to a rule, but also to a ``stand-alone'' risk assessment, 
provided the OMB Director ``reasonably anticipates'' that the 
risk assessment ``is likely to have an annual effect on the 
economy of $100,000,000 or more in reasonably quantifiable 
costs.'' We fear this provision could be used to significantly 
delay important scientific research and analysis needed to 
protect human health and the environment.\10\
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    \10\ The Majority Report adds to our concern by stating that the 
Director might apply the legislation where a risk assessment ``may 
establish the basis for significant regulatory action at the Federal, 
state, or international level.'' If this requires our Federal 
regulatory agencies and research institutes to demonstrate that their 
risk assessments are not likely to be the basis for regulatory actions 
aggregating $100 million in annual effect at some future date anywhere 
in the world, the legislation could be made applicable to many ``stand-
alone'' risk assessments each year.
---------------------------------------------------------------------------
    Moreover, S. 746 imposes no deadline for the OMB Director 
to determine whether a ``stand-alone'' risk assessment is 
subject to the bill. A Director might assert that he has the 
authority to require a Federal regulatory agency or research 
institute to comply with the bill's specifications and 
procedures even after a risk assessment is well underway or is 
even completed. Finally, if regulations are eventually 
promulgated based on an earlier risk assessment that the OMB 
Director determined was subject to the bill, opponents of the 
regulations could attempt to use the judicial review provisions 
of S. 746 in seeking to have the regulations overturned. These 
provisions of S. 746 are a prescription for disruption and 
delay of research, analysis, and regulatory actions by our 
public health, safety, and environmental agencies.
    Additional concerns about the risk assessment provisions 
were expressed in the March 6, 1998 letter from former OMB 
Director Franklin Raines, which criticized these provisions for 
being too specifically tailored to analysis of cancer risks, 
and thus ill-suited to evaluation of other kinds of risks such 
as environmental and natural resource protection, worker 
safety, or airworthiness. No changes were made in S. 746 to 
respond to these concerns.
            c. S. 746 does not just provide ``information''; it will 
                    also move agencies towards less protective 
                    decisions and will delay critical rules.
    In response to some of our concerns about risk assessments 
and other analytic requirements of the bill, proponents contend 
that the required analyses are simply designed to provide 
``information.'' However, this response is not reassuring, for 
several reasons. First, the combination of mandated judicial 
review and the new complex regulatory requirements will move 
agencies towards making decisions that are less protective of 
public health, the environment, wildlife, and consumers. This 
is a substantive outcome about how protective our laws will be, 
not simply a requirement to provide information. Furthermore, 
other Congresses determined in the context of specific laws, in 
areas such as clean air, clean water, and wildlife protection, 
that some of the analysis required in this bill should not be 
done. Congress determined, in some instances, that the agencies 
already had enough information on which to proceed, or that 
delay was too risky to public health and the environment, or 
that the delay resulting from requiring the analyses (such as 
risk assessment) had actually proved counter-productive to 
Congress's goals, or that the analyses were fundamentally 
incompatible with the basic guarantees provided by this nation 
(among other reasons). Senator Torricelli highlighted this last 
concern at markup by demonstrating the fundamental 
inappropriateness of applying cost-benefit analysis to civil 
rights protections. Thus, to impose the analytical requirements 
of this legislation can both affect the substantive outcome of 
a rulemaking and impose undue delay, in some instances in 
direct contradiction of decisions made by prior Congresses.
    Proponents of S. 746 also respond to our concerns about 
delay by referring to testimony of one witness, Dr. Lester 
Crawford, expressing his opinion that the bill would have sped 
up, rather than delayed, issuance of food-safety regulations 
including the U.S. Department of Agriculture's 1996 meat and 
Poultry Hazard Analysis Critical Control Point (HACCP) rule. He 
observed that agencies' proposed regulatory actions were often 
held up during review within the executive departments or at 
OMB by arguments over such matters as cost-benefit analysis, 
risk assessment, and judicial review; and he expressed his 
opinion that requiring these matters to be addressed early 
would actually accelerate the development of useful 
regulations. However, we believe it is far more likely that the 
highly prescriptive requirements for regulatory analysis in S. 
746, enforceable by judicial review, will create even more 
grist for controversy during administrative review and will 
encourage and empower cautious reviewers to return even well-
analyzed regulatory proposals to the agency for yet more 
complete analysis. Our view is shared by a number of public 
health experts and consumer representatives who have been 
active participants in rule making to assure food safety. For 
example, on June 9, 1998, in response to similar comments by 
Dr. Crawford regarding S. 981 (a predecessor bill in the 105th 
Congress), the American Public Health Association (APHA) wrote 
to each Senator: ``Food safety regulations are a prime example 
of regulations that could be substantially delayed under S. 
981.'' \11\
---------------------------------------------------------------------------
    \11\ Likewise, on May 19, 1999, the APHA, the Consumer Federation 
of America, the Consumers Union, and the United Food and Commercial 
Workers, among others, sent a letter to all Senators in opposition to 
S. 746, stating: ``The bill's mandates would also delay the agencies' 
[FDA and USDA] already slow regulatory process.'' Furthermore, in a 
June 24, 1998 letter to all Senators, Nancy Donley, President of 
S.T.O.P.--Safe Tables Our Priority, wrote: ``S.T.O.P. was and is 
actively involved in USDA rulemaking and implementation for meat and 
poultry regulations. . . . [U]nder S. 981's prescription, common sense 
and practical science would not have been enough. The 2\1/2\ year meat 
and poultry HACCP rulemaking process would have been further delayed.''
---------------------------------------------------------------------------

 4. Transparency and accountability in OMB review of agency regulations

    Vice President Quayle's Council on Competitiveness in the 
1980's was accused of bottling up regulations from agencies 
such as EPA and of providing an off-the-record mechanism by 
which outside interests could impose pressure on agencies 
without public scrutiny. This Committee was in the forefront of 
opposing these abuses.
    President Clinton, upon taking office in 1993, sought to 
end these abuses by issuing Executive Order 12866. This 
executive order guaranteed that regulations could not be 
bottled up by OMB indefinitely, and it established a number of 
procedural guarantees to avoid off-the-record pressure on the 
agencies.
    Some supporters of S. 746 have said that it only codifies 
this executive order. However, the bill actually differs from 
the executive order in a number of important ways. Perhaps most 
significantly, the implementation of the executive order's 
requirements is not subject to judicial review, the executive 
order does not require risk assessment, and it does not require 
peer review.
    Furthermore, specifically in the area of regulatory-review 
procedures, S. 746 includes some of the guarantees established 
in E.O. 12866, but omits or cuts back on several of the most 
important ones:

          The executive order provides that OMB may only review 
        a regulation for 90 days, subject to a single 30-day 
        extension. S. 981 as introduced in the last Congress 
        contained the same provisions. However, the language 
        was modified in the version of S. 981 reported by this 
        Committee and in S. 746 so that OMB may unilaterally 
        extend the review period indefinitely.
          The executive order requires OMB to provide a written 
        explanation for all regulations that OMB returns to the 
        agency. (In fact, this requirement has been in place 
        since it was established in a 1986 memorandum by former 
        OIRA Administrator Wendy Gramm.) A similar requirement 
        was included in S. 981 as introduced and reported by 
        this Committee last Congress--yet it has now been 
        dropped from S. 746.
          Under the executive order, OMB must log and disclose 
        to the agency all ``substantive'' oral communications, 
        such as meetings and telephone conversations, relating 
        to the regulation under review. (Indeed, OMB has been 
        committed to disclosing to the agency ``all oral 
        communications'' since the 1986 memorandum by former 
        OIRA Administrator Gramm.) A requirement to log and 
        disclose all ``substantive'' oral communications was 
        included in S. 981 as introduced and reported by this 
        Committee last Congress. However, in S. 746 the logging 
        requirement has now been weakened, so that OMB may 
        decline to log a substantive communication if OMB deems 
        it to be not ``significant.''
          The logging requirement in S. 746 applies only to 
        communications with OMB's Office of Information and 
        Regulatory Analysis. If OMB assigned regulatory review 
        responsibilities to any other office, the requirements 
        to log correspondence and communications could be 
        circumvented.
          Under the executive order, if OMB decides to declare 
        that an agency's proposed regulatory action is a major 
        rule subject to regulatory review, it must do so at an 
        early stage, when the disruption to the agency's 
        rulemaking process will be relatively limited. 
        Specifically, if an agency decides that its proposed 
        regulatory action is not a major rule, that decision 
        will stand unless overruled by OMB within 10 days after 
        receiving the agency's list of planned regulatory 
        actions. By contrast, S. 746 would allow OMB to declare 
        that a proposed action is a major rule as late as 30 
        days after the end of the comment period for the rule--
        giving OMB the power to force the agency to go back and 
        prepare a cost-benefit analysis and risk assessment at 
        that stage, when disruption to the agency's rulemaking 
        process will be far greater.

    We are concerned that these provisions would allow a future 
Administration to depart from the procedures in E.O. 12866 and 
to restore the abuses of Vice President Quayle's Council on 
Competitiveness. Specifically, an Administration could bottle 
up rules in endless review, could return rules to the agency 
without explanation, and could use regulatory review as a back-
channel conduit for opponents of regulations to communicate 
their views off the record.
    Senators Lieberman and Edwards advocated amendments at the 
markup to rectify some of these problems in the bill. The 
sponsors did express a willingness to consider these concerns 
further, but we were disappointed that the amendments were not 
accepted.
    One final point--we are concerned that the bill and the 
Majority Report may skew the cost-benefit analysis by including 
costs that are speculative and often inflated. For example, the 
Majority Report states that agencies should include both 
compliance costs and ``opportunity costs'' of the regulation. 
This concept of ``opportunity costs'' could lead to very 
speculative cost estimates, including, for example, forecasts 
of how a business project not even in existence might have 
worked out had the government regulations not been issued. 
Projections of opportunity costs could also require time-
consuming and extensive information-gathering and analyses of 
financial and business data collected from companies by the 
government, which some might view as intrusive. Difficult 
confidentiality issues and claims might also arise in the 
context of collecting and analyzing information on opportunity 
costs, resulting in potentially more litigation. Moreover, the 
Majority Report fails to acknowledge many of the uncertainties 
associated with estimating compliance costs. For example, 
industries often adopt advanced or innovative control measures 
that significantly bring down costs, but are not anticipated at 
the time of the rulemaking.\12\
---------------------------------------------------------------------------
    \12\ 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 seven they had spent less.

           *       *       *       *       *       *       *

---------------------------------------------------------------------------
    In conclusion, we do not question that the sponsors of S. 
746 seek to improve the regulatory process through this bill. 
But we disagree that this result has been achieved. We are 
concerned that the consequences of this legislation will be to 
threaten the ability of our health and safety, environmental, 
and consumer protection agencies to act in a timely and 
decisive manner, and we therefore oppose this bill.

                                   Joseph Lieberman.
                                   Daniel K. Akaka.
                                   Dick Durbin.
                                   Robert Torricelli.
                                   John Edwards.

                      IX. 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. 746 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--Executive Oversight

631. Definitions.
632. Presidential regulatory review.
633. Public disclosure of information.
634. Judicial review.

            Subchapter I--Analysis of Regulatory Flexibility

Sec. 601. Definitions

    For purposes of this chapter--

           *       *       *       *       *       *       *


                  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 is prepared in 
        accordance with the requirements of this subchapter at 
        the level of detail appropriate and practicable for 
        reasoned decisionmaking on the matter involved, taking 
        into consideration 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);
                  (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 
                or bars the introduction into or removal from 
                commerce, or recognizes or cancels recognition 
                of the marketable status, of a product under 
                the Federal Food, Drug and Cosmetic Act (21 
                U.S.C. 301 et seq.); and
          (11) the term ``substitution risk''--
                  (A) means a reasonably identifiable 
                significant increased risk to health, safety, 
                or the environment expected to result from a 
                regulatory option; and
                  (B) shall not include risks attributable to 
                the effect of an option on the income of 
                individuals.

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--
          (1) the substantive standards applicable to a rule 
        making under other statutes;
          (2) (A) the range of regulatory options that an 
        agency has the authority to adopt under the statute 
        authorizing the agency to promulgate the rule; or
          (B) the deference otherwise accorded to the agency in 
        construing such statute; or
          (3) any opportunity for judicial review made 
        applicable under other statutes.

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 to receive 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)(A)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--
          (i) whether the rule is likely to provide benefits 
        that justify the costs of the rule;
          (ii) 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
          (iii) whether the rule adopts a flexible regulatory 
        option.
    (B) Consistent with section 621 (2) and (3), net benefits 
analysis shall not be construed to be limited to quantifiable 
effects.
    (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 the Director determines that compliance would 
beclearly unreasonable.
    (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).
    (h) Not later than February 5, 2002, the Director of the 
Office of Management and Budget shall prepare and submit to 
Congress an accounting statement and report containing an 
estimate of the total annual incremental administrative 
benefits and incremental costs of complying with the provisions 
of this subchapter for each agency.

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--
                  (I) reasonably anticipates is likely to have 
                an annual effect on the economy of $100,000,000 
                or more in reasonably quantifiable costs; and
                  (II) determines shall be subject to the 
                requirements of this section.
    (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 the significance 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) Significant assumptions used in a risk assessment shall 
incorporate all reasonably available, relevant and reliable 
scientific information.
    (d) The agency shall inform the public when the agency is 
conducting a risk assessment subject to this section 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--
          (1) a cost-benefit analysis of a major rule that the 
        agency or Director reasonably anticipates is likely to 
        have an annual effect on the economy of $500,000,000 in 
        reasonably quantifiable costs; and
          (2) a 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 formality of the peer review conducted under this 
section shall be commensurate with the significance and 
complexity of the subject matter.
    (e) The peer review required by this section shall not be 
subject to the Federal Advisory Committee Act (5 U.S.C. App.).
    (f) A member of an agency advisory board (or comparable 
organization) established by statute shall be considered 
independent of the agency for purposes of subsection 
(b)(1)(A)(ii).
    (g) The status of a person as a contractor or grantee of 
the agency conducting the peer review shall not, in and of 
itself, exclude such person from serving as a peer reviewer for 
such agency because of the requirement of subsection 
(b)(1)(A)(ii).
    (h) Nothing in this section shall require more than one 
peer review of a cost-benefit analysis or a risk assessment 
during a rule making. A peer review required by this section 
shall occur to the extent feasible before the notice of 
proposed rule making.

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 180 days 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 180 days 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 180 days 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 under 
the statute granting the rule making authority 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 may, giving due regard to 
prejudicial error, remand or invalidate the rule. The adequacy 
of compliance with the specific requirements of this subchapter 
shall not otherwise be grounds for remanding or invalidating a 
rule under this subchapter. If the court allows the rule to 
take effect, the court shall order the agency to promptly 
perform such analysis, determination, or assessment or provide 
for such peer review.

Sec. 628. Guidelines, interagency coordination, and research

    (a)(1) Not later than 270 days 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).
    (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 modeling, the development of 
generic data, use of assumptions and the identification and 
quantification of uncertainty and variability.
    (2)(A) Not later than 180 days 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) Not later than 2 years 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) Not 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 to human 
        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) not later than 3 years after the date of 
        enactment of this section, completed and submitted to 
        Congress and the President.
    (c) Not 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) Not 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--Executive Oversight

Sec. 631. 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. 632. Presidential regulatory review

    (a) This subchapter shall apply to all proposed and final 
major rules and to any other rules designated by the President 
for review.
    (b) 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.
    (c) For the purpose of carrying out subsection (b), 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, including under 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.
    (d)(1) The review established under subsection (b) 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. 633. Public disclosure of information

    (a) The Director, in carrying out the provisions of section 
632, 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, not later than 
        publication of a regulatory action, of ``
                  (A) all written correspondence 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 correspondence 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 list identifying the dates, names of 
                individuals involved, and subject matter 
                discussed in significant 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
          (3) disclosure to the regulatory agency, on a timely 
        basis, of--
                  (A) all written correspondence 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
                  (B) a list identifying the dates, names of 
                individuals involved, and subject matter 
                discussed in significant 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.
    (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 published;
          (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 correspondence 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. 634. 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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