Ossification's demise? An empirical analysis of EPA rulemaking from 2001-2005.

• Author: Johnson, Stephen M.

1. INTRODUCTION II. THE TREND AWAY FROM RULEMAKING A Challenges to Rulemaking B. Ossification C. Trend Toward Informal Procedures III. EMPIRICAL RESEARCH DESIGN IV. FINDINGS A. Ossification 1. Limited Applicability of Requirements 2. Timing of Review B. Judicial Review V. IMPLICATIONS OF THE FINDINGS A. Limitations B. Conclusion I. INTRODUCTION

   For more than a decade, academics and policymakers have suggested that agencies are increasingly avoiding notice and comment rulemaking because of the frequency of judicial challenges to rulemaking (1) and because procedures imposed by the courts, Congress, and the Executive Branch have "ossified" the rulemaking process. (2) To support the ossification claims, academics often cite studies from a decade ago that found the Occupational Safety and Health Administration (OSHA) and the Federal Trade Commission (FTC) generally took more than five years to promulgate roles (3) and most agencies took at least three years to finalize rules. (4) Regarding judicial challenges, commentators frequently reference an assertion by former United States Environmental Protection Agency (EPA) Administrator William Ruckleshaus that 80% of EPA's rules are challenged (5) and studies that have found agency rules are invalidated in 30%-50% of the cases in which they are challenged. (6)

   Many factors are blamed for the "ossification" of notice and comment rulemaking, including judicial interpretation of the rulemaking provisions of the Administrative Procedure Act (APA) (7); the procedural requirements imposed by the Regulatory Flexibility Act, (8) the Small Business Regulatory Enforcement Fairness Act (9) and similar laws, (10) and the review procedures imposed by the Executive Branch through Executive Order 12,866 (requiring Office of Management and Budget (OMB) review) (11); and a variety of executive orders addressing takings, (12) federalism, and children's health protection, among other topics. (13)

   In light of the "ossification" of rulemaking and the frequency of challenges to rules, academics have noted that agencies are reluctant to change existing rules or to issue rifles that will need to be changed, (14) and that agencies are relying more frequently on adjudication and informal tools, such as guidance documents, policy statements, and interpretive rules, to make policy and interpret laws. (15) When agencies rely on those informal tools, it becomes more difficult for the regulated community to find and comply with the law and reduces opportunities for the public to participate in the development of agencies' policies or to challenge those policies. (16)

   Since I have often cited articles that discuss the "ossification" of the rulemaking process and the frequency of challenges to rulemaking, (17) I decided to examine EPA's rulemaking from 2001 through 2005 to determine the extent to which specific legislative and Executive Branch procedures impacted the length of time it took the agency to finalize rules adopted through notice and comment rulemaking during that period. (18) I focused specifically on OMB review under Executive Order 12,866 (19) and agency compliance with the Regulatory Flexibility Act and Executive Order 13,045, (20) the executive order protecting children from environmental health and safety risks. I also examined EPA's rulemaking during that time period to determine how frequently those rules were challenged.

   I discovered that the rules finalized by EPA during that time period were finalized, on average, within 1.5 to 2 years after publication as proposed rules, (21) much faster than the 3 to 5 years cited in many articles as the post ossification standard. While OMB review impacts the content of EPA's rules and probably affects the amount of time the agency spends preparing rules for publication as proposed rules, (22) the OMB review process did not appear to impact the amount of time it took EPA to finalize rules after issuing them as proposed rules. For rules finalized between 2001 and 2005, EPA generally took about the same amount of time to finalize rules subject to OMB review as it took for the agency to finalize rules not subject to OMB review. (23) Surprisingly, when compared to other rules listed in the agency's semiannual regulatory agenda, it took less time for the agency to finalize the "economically significant" rules subject to the greatest amount of OMB review, than it took for the agency to finalize other rules not subject to OMB review. (24) It was also interesting to note that only a small number of EPA rules were subject to the OMB review requirements of Executive Order 12,866. Less than 4% of the rules finalized between 2001 and 2005 were "significant" rules triggering OMB review under the Order and less than 1% of the rules were "economically significant" rules triggering the most stringent form of OMB review under the Order. (25) In addition, almost none of the rules finalized by EPA triggered the requirements of the Regulatory Flexibility Act or Executive Order 13,045. (26)

   While the regulations were finalized more quickly than might be expected based on the ossification literature, the major regulations issued by the agency were challenged as frequently as expected. Of the "economically significant" rules issued by EPA, 75% were challenged at some point after they were promulgated. (27) In light of this finding, it is easy to see why a litigation-averse agency would strive to avoid notice and comment rulemaking whenever possible.

   The findings regarding ossification of EPA's rules are, however, more ambiguous. While my analysis suggests that OMB review and other procedural requirements may not significantly slow down EPA's rules after the agency issues proposed rules, my study did not examine whether those requirements increase the amount of time the agency spends preparing a rule before issuing it as a proposed rule. (28) My analysis also did not examine whether the OMB requirements and other procedural requirements encouraged EPA to avoid rulemaking, (29) or the manner in which OMB review and other procedures impacted the substantive content of the rules. (30) Those factors are probably much more significant than the impact of the procedures on the timing of promulgation.

   Part II of this Article outlines the debate regarding the trend of agencies away from rulemaking due to ossification of notice and comment rulemaking and the frequency of challenges to agencies' rules. Part III of the Article examines the procedure I used to determine the impact of OMB review and the requirements of the Regulatory Flexibility Act and Executive Order 13,045 on the timing of rules finalized by EPA between 2001 and 2005, and the frequency of challenges to those rules. Part IV outlines the findings of that analysis and Part V attempts to critique and draw conclusions from those findings.

2. THE TREND AWAY FROM RULEMAKING

   1. Challenges to Rulemaking

      For years, scholars, journalists, and government officials have asserted that more than 80% of the rules EPA issues every year are challenged in court. (31) As Professor Cary Coglianese has pointed out, these oft-repeated assertions are based primarily on anecdotes, rather than empirical study. (32) Statements by former EPA Administrator William Ruckleshaus are generally cited as the basis for the 80% figure. (33) Based on his own empirical study, Professor Coglianese maintains only 26% of EPA's rules or 35% of EPA's "significant" (34) rules are challenged each year. (35) While there is a substantial difference between Professor Coglianese's findings and the 80% figure, litigation-averse agencies may take little comfort in knowing they will have to defend one-quarter to one-third of all of their significant rules in court.

      When agencies' rules are challenged in court, most empirical studies have found courts invalidate the rules in 30%-40% of the cases. (36) For instance, in a recent article, Professors Thomas Miles and Cass Sunstein analyzed 183 recent federal appellate cases where panels reviewed EPA's legal interpretations and found that the judges only deferred to the agency 64% of the time. (37) Similarly, when Professor Jason Czarnezki reviewed ninety-three environmental law cases decided between 2003 and 2005, he found that courts affirmed EPA's decisions in 69% of the cases. (38)

   2. Ossification

      While the frequency of litigation and judicial invalidation of rules can discourage agency rulemaking, the "ossification" phenomenon is often cited as a major impediment to rulemaking. In a landmark article in 1992, Professor Thomas O. McGarity noted that the analytical requirements imposed on informal rulemaking over the preceding decade by courts, Congress, and the Executive Branch had transformed rulemaking into a rigid and burdensome process. (39) He asserted that the "ossification" (40) of rulemaking was widely regarded as one of the most serious problems facing regulatory agencies at the time. (41) Professor McGarity argued that due to ossification, it took OSHA and FTC more than five years to issue rules the agencies previously issued within six months to two years. (42) For more than a decade and a half since then, academics and policymakers have explored the ramifications of ossification and suggested reforms to "de-ossify" the rulemaking process. (43)

      Courts have played a role in the ossification of rulemaking by interpreting the procedural requirements of the APA expansively. (44) Congress has also played a major role by passing several laws imposing analytical and procedural requirements on agencies for rules they issue through notice and comment rulemaking. Most of the requirements of the laws focus on "significant" rules. (45) The Regulatory Flexibility Act, for instance, requires agencies to prepare a "regulatory flexibility analysis" for all "significant" rules. (46) The analysis must describe the impact of proposed and final significant rules on small businesses, and must identify...