CHAPTER 8 NOTICE, COMMENT AND DISCOVERY IN RULEMAKING: A COMPARISON BETWEEN THE ADMINISTRATIVE PROCEDURE ACT AND AN EXEMPTED AGENCY—THE SYNTHETIC FUELS CORPORATION
| Jurisdiction | United States |
(Nov 1981)
NOTICE, COMMENT AND DISCOVERY IN RULEMAKING: A COMPARISON BETWEEN THE ADMINISTRATIVE PROCEDURE ACT AND AN EXEMPTED AGENCY—THE SYNTHETIC FUELS CORPORATION
Department of Natural Resources State of Colorado
Denver, Colorado
TABLE OF CONTENTS
Page
INTRODUCTION
NOTICE AND COMMENT
I. Notice
A. Requirements Under the APA
B. Requirements Under the Act
II. Comment
A. Requirements Under the APA
B. Requirements Under the Act
III. Challenging Administrative Actions Under the APA and the Act
IV. "Good Cause" Notice Exceptions Under the APA
DISCOVERY IN RULEMAKING
I. Discovery Under the APA
II. Freedom of Information Act
A. General Requirements
B. Exemptions
C. Application of FOIA to the Corporation
D. Definitions of "Record", "Agency", and "Agency Record"
E. Attempts to Limit the Scope of the FOIA
III. Sunshine (Open Meetings)
CONCLUSION
FOOTNOTES 17
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INTRODUCTION
The process of enacting a law is public. Hearings are held and votes are taken in committee and on the floor of Congress. Records are kept. Ex parte communications are permitted—a citizen may talk to a member of Congress—and, on occasion, closed hearings are held. But those voting must periodically answer to their constituents.
Since the 1930's, Congress has tended to enact many laws with general guidelines, charging the bureaucracy with carrying out Congress' intent through a kind of second level of lawmaking. This lawmaking has been performed by a bureaucracy that is often removed from political accountability in the Executive branch. In fact, sometimes federal laws have been so politically sensitive that both the Legislative and Executive branches have welcomed the opportunity to remove themselves from accountability for carrying out these laws.
After World War II it became evident that this second tier of law-making, through bureaucratic rulemaking and decisionmaking, needed a process to make these activities less arbitrary and more open and accountable. Thus, the Administrative Procedure Act was approved.
Since the Act's passage, it has become apparent to Congress and the President that there is great dissatisfaction with government rules and regulations. Whether this criticism is justifiably laid at the feet of the bureaucracy, or at the feet of lawmakers who enact laws with objectives that are vague, complex, and difficult to achieve, is open to question. In any event, Congress has recently tried to evade these administrative procedures, established to regularize this second tier of lawmaking, by exempting agencies from their application.
This paper briefly discusses notice, comment and judicial review in rulemaking under the Administrative Procedure Act.1 (the "APA") It also discusses discovery in rulemaking, especially through use of the Freedom of Information Act2 and the Sunshine Act.3 For comparison, the paper also refers to the Synthetic Fuels Corporation Act4 (the "Act"), which exempts a federal entity from the APA.5 The Act is used for comparison because it is new; it affects the mineral industry and the western states; and it contains a number of provisions that grant discretion or impose requirements in areas that would fall within the APA.
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It may be helpful to have some background about the Act. In 1980, Congress passed the United States Synthetic Fuels Corporation Act,6 as part B of the Energy Security Act.7 The Act established the Synthetic Fuels Corporation (the "Corporation").8 The Corporation is to provide financial assistance to private industry in order to encourage commercial production of synthetic fuels and reduce United States dependence on foreign energy sources. The Corporation provides financial assistance in the form of loans, loan guarantees, price guarantees, purchase agreements, joint venture arrangements, and acquisition and lease back of synthetic fuel projects.9 The Corporation is also empowered to own synthetic fuel projects under certain conditions.10
Since the Corporation was to assist in development of a new industry in a relatively short time period,11 Congress decided not to handicap the Corporation with many of the restrictions of a federal agency.12 As with the proposed Energy Mobilization Board,13 the Corporation was intended to be a "fast track" program for energy development. However, because the program involved billions of dollars in federal funds, Congress could not allow the Corporation total freedom. This resulted in the Corporation becoming a hybrid federal agency, with a limited number of government restraints but the legal status of an entity independent of the United States government.14
Because of the pressures on Congress and the President to reduce government regulation and delay, organizations like the Corporation will probably become more common.15 However, the legislation creating the Corporation is only illustrative. The means by which Congress exempts agencies from laws applicable to rulemaking are diverse, complicated, and often not publicly announced. See, e.g., page 14, infra.
The Synthetic Fuels Corporation is designed to provide substantial federal financial assistance to industry. A number of other actions government may take, or be required to take, affect the same companies. However, the financial assistance program may be implemented outside of the Administrative Procedure Act, the Freedom of Information Act and the Sunshine Act. It is appropriate to ask whether these exceptions, and others like them, are justified. Should the entire second tier of lawmaking procedures be reviewed? Should every agency be subject to the same, existing set of rules? The scope of this paper is too general and brief to analyze these questions in any detail. But, by comparing the APA with the Act at various times throughout the paper, provocative and challenging questions are at least raised.
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NOTICE & COMMENT
I. Notice
A. Requirements Under the APA
The APA, in section 553,16 requires that general notice of proposed formal and informal rulemaking be published in the Federal Register* . Additionally, section 554 delineates the specific notice requirements in formal rulemaking.17 These sections of the APA apply to all agencies of the United States government except Congress and the courts.18
B. Requirements Under the Act
The Corporation is exempt from the rulemaking provisions of the APA.19 However, the Corporation is required to give notice in the Federal Register to solicit proposals for synthetic fuel projects.20 Each solicitation must state general evaluation criteria, as determined by the Board of Directors of the Corporation, and must include certain general criteria listed in the Act.21 These criteria could be considered the "rules" for the Corporation, at least as far as the public is concerned. However, the Board's evaluation criteria are not open to public comment or criticism, as in regular rulemaking proceedings.22 In some instances an action is left to the "judgment of the Board of Directors"23 and the Board has the broad discretion to adopt bylaws for the "proper functioning and management of the Corporation."24
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If one accepts the general premise that the purpose of rulemaking is to put the parties on notice as to what the "rules of the game" are, and to solicit comments before the rules become effective, persons dealing with the Corporation may assume they will be precluded from any such role. In practice, however, even though a full Board has not been appointed and the Corporation is not yet "operational," some proposed "rules" have been circulated for public comment.25 These rules have been widely commented on and criticized by some members of Congress, as well as industry and the public.
II. Comment
A. Requirements Under the APA
Both formal and informal rulemaking under the APA require opportunity for public comment.26 For informal rulemaking, the agency must consider the data before formulating a rule and must make a general statement of the rule's basis and purpose.27 In formal rulemaking, a "trial type" hearing must be held, and the administrative decision regarding the rule must be based on the record.28 The Supreme Court has stated that sections 556 and 557 of the APA, which describe formal rulemaking procedures, must only be applied where the agency statute, in addition to providing a hearing, prescribes explicitly that it be on the record.29 However, the Court has said that the words "on the record" are not talismanic; the crucial question is whether the proceedings involve just an "exercise in legislative rulemaking" or "adjudicatory hearings."30 The substantive rules, resulting from both formal and informal rulemaking, must be published at least 30 days before their effective date.31
Section 551(3) of the APA states that a party is a "person or agency named or admitted as a party, or properly seeking and entitled as of right to be admitted as a party, in an agency proceeding, and a person or agency admitted by an agency as a party for limited purposes." Since the statute defining informal rulemaking refers only to "interested persons," with no right to a formal hearing, it can be argued that there are no parties in informal rulemaking. Thus, the only time when one might be considered to be a party, with the right to be heard, is in formal rulemaking. The determination of who is to be considered a party is at the agency's discretion, although a description of who has such a right may be found in agency statutes or regulations.
Since federal agencies are generally cooperative in admitting as parties those persons who are directly affected by rulemaking, the problem generally becomes one of who has the right to intervene. Section 555(b) of the APA states that intervention can be denied if it interferes with the "orderly conduct of...
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