Statutory interpretation in the era of OIRA.

• Author: Heinzerling, Lisa
• Position: Office of Information and Regulatory Affairs

In recent years, the Office of Information and Regulatory Affairs (OIRA) within the Office of Management and Budget (OMB) has asserted a remarkable degree of authority over administrative agencies' rulemaking processes. One of the ways in which OIRA has exercised power over agencies has been to foist upon them its own views about the requirements of the statutes under which they operate. The most notable trend in this area has been OIRA's insistence on converting technology-based environmental laws into cost-benefit laws. In OIRA's hands, for example, the Clean Water Act (1) ("the Act") is being transformed from a technology-based regime into a cost-benefit regime.

I will argue that this transformation is illegal. Given the plain language of the statute, it would be illegal even if the Environmental Protection Agency (EPA)--the agency charged with implementing the Act--had chosen this course. But EPA did not choose this course; OIRA did. OIRA's role in transforming EPA's understanding of the Act robs EPA's interpretation of any deference it might have been given under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc. (2) if EPA itself had chosen the interpretation.

I use the Clean Water Act, and in particular a rule governing cooling water towers for power plants, as my case study. But the analysis applies whenever OIRA foists upon an administrative agency an interpretation of a statute that the agency has Congressional authority to administer. When OIRA's interpretation, not the agency's, prevails, the agency's reluctant embrace of OIRA's views does not deserve the deference Chevron might otherwise afford.

Part I of this Article provides background on OIRA, the Clean Water Act, and EPA's rulemaking on cooling water towers. Part II discusses why EPA's interpretation of the Clean Water Act in the proceeding on cooling water towers was in error and why, given OIRA's deep involvement, EPA's interpretation does not deserve Chevron deference.

1. BACKGROUND

   1. The Office of Information and Regulatory Affairs

      OIRA is situated within the OMB. Created by the Paperwork Reduction Act of 1980, (3) OIRA has the authority to monitor and reduce the paperwork burden of the federal government and private entities. (4) OIRA also oversees the Unfunded Mandate Reform Act, which creates special procedural rules for Congress's consideration of legislation having certain specified effects on obligations of states and local governments; (5) the Information Quality Act, which aims at ensuring the reliability of information disseminated by the federal agencies; (6) and the Small Business Regulatory Enforcement Fairness Act, which requires agencies to consider the effects of their actions on the nation's small businesses. (7) Under the Regulatory Right-to-Know Act, OIRA is also required to publish an annual report on the costs and benefits of federal regulation. (8)

      Yet, in terms of influence, none of OIRA's statutory obligations has surpassed the authority given to it under two different Executive Orders. The first, Executive Order 12,291, (9) which was issued by President Reagan in 1981, required OIRA to oversee compliance with the Executive Order's new requirement that agency regulations costing $100 million or more be subject to a cost-benefit analysis. (10) The second, President Clinton's Executive Order 12,866, superseded Executive Order 12,291 in 1993. (11) Executive Order 12,866 is similar in many respects to the Order it displaced; it, too, requires cost-benefit analysis for major agency regulations and gives OIRA oversight authority regarding agencies' cost-benefit analyses. (12) Moreover, Executive Order 12,866, like Executive Order 12,291, specifically states that it does not displace any statutory requirements the agencies otherwise face. (13)

      In its memorandum concluding that Executive Order 12,291 did not unconstitutionally interfere with other agencies' prerogatives, the Department of Justice's Office of Legal Counsel emphasized that the Executive Order did not undo agencies' obligations under existing law, including congressional enactments:

      [I]t is clear that the President's exercise of supervisory powers must conform to legislation enacted by Congress. In issuing directives to govern the Executive Branch, the President may not, as a general proposition, require or permit agencies to transgress boundaries set by Congress.... ... This Office has often taken the position that the President may consult with those having statutory decision-making responsibilities, and may require them to consider statutorily relevant matters that he deems appropriate, as long as the President does not divest the officer of ultimate statutory authority.... ... The Order [E.O. 12,291] does not empower the Director [of OMB] ... to displace the relevant agencies in discharging their statutory functions or in assessing and weighing the costs and benefits of proposed actions.... [The Director's] power of consultation would not ... include authority to reject an agency's ultimate judgment, delegated to it by law, that potential benefits outweigh costs, that priorities under the statute compel a particular course of action, or that adequate information is available to justify regulation.... (14) Likewise, OIRA's first Administrator, James C. Miller III, testified before Congress that:

      President Reagan's Executive order imposes requirements on the agencies only "to the extent permitted by law" and only to the extent that its terms would not "conflict with deadlines imposed by statute or by judicial order." The limited application of [Executive Order 12,291] is a crucial point, one that insures [its] legality and the legality of actions pursuant to [it]. (15) From the beginning, therefore, it has been clear that, in reviewing the regulatory initiatives of its sister agencies, OIRA may not interfere with the agencies' compliance with statutory directives.

      In the past several years, OIRA has become increasingly involved in agency rulemaking proceedings. In September 2001, John Graham, OIRA's Administrator, sent a memorandum to the heads of all federal agencies, signaling his intent to use OIRA's oversight authority under Executive Order 12,866 in a variety of new ways. (16) Graham noted that he would disapprove regulations that did not jibe with the cost-benefit framework of Executive Order 12,866. (17) OIRA has made good on this promise. In a 2003 report, the Government Accountability Office (GAO) concluded that OIRA "can have a significant--if not determinative--effect on a broad array of federal regulations...." (18) According to GAO, between June 2001 and July 2002, "the primary effect of OIRA's suggestions was to delay or eliminate certain regulatory provisions that were included in the draft rules as submitted to OIRA" for six of the fourteen EPA rules specifically changed. (19) Moreover, GAO found that twenty-four of the twenty-five rules it examined in its report were weakened during the OIRA review process. (20) The unidirectional nature of OIRA's role in regulatory affairs led one scholar to call cost-benefit analysis in OIRA's hands a "one-way ratchet, able to stand still to be sure, but only capable of moving in one direction when it does function as a tool having some substantive effect, that of making regulation less stringent." (21) Indeed, when agencies have offered proposals that involve deregulation rather than increased regulation, OIRA has not required a cost-benefit analysis. (22)

   2. Technology-Based Regulation and Cost-Benefit Analysis

      The Clean Water Act, (23) passed in 1972 and amended in 1977, is the leading U.S. law protecting the nation's surface waters from pollution and other threats to their physical, biological, and chemical integrity. Several other federal statutes preceded the Clean Water Act; those statutes, in the words of the Senate Committee on Public Works, were "inadequate in every vital aspect." (24) The Clean Water Act departed from previous legislation in several important ways. For present purposes, the most important innovation was the transition from water-quality based standards to technology-based standards for controlling water pollution. (25)

      The Clean Water Act relies on technology-based regulation as the strategy of first resort for cleaning up the nation's waters. Technology-based regulation is regulation that attempts to protect the environment through the use of some version of the best available technology for controlling pollution. (26) The main advantage of technology-based regulation, compared to water-quality based regulation, is that one need not resolve all of the contentious scientific issues surrounding exactly what levels of pollution are bad for the waters before one proceeds to regulate. (27) To be sure, depending on the specific formulation of the "best available technology" requirement in place, the level of pollution reduction can be relevant to the technology-based inquiry. But under the Clean Water Act, the inquiry into the effluent reduction level achieved by various technologies has historically been very limited. In Weyerhaeuser Co. v. Costle, (28) for example, the D.C. Circuit held that the consideration of "effluent reduction benefits" called for by the Clean Water Act (29) did not require EPA to conduct a fine-grained cost-benefit analysis of technology requirements before imposing such requirements on the relevant industry. (30)

      Ever since Congress passed the Clean Water Act, industry groups regulated by the Act have tried to convert the Act's technology-based standards into cost-benefit standards. Early on, the Weyerhaeuser litigation sought to require cost-benefit analysis in setting technology-based standards for the pulp and paper industry. (31) Other cases involved--and rejected--similar arguments. (32) In the mid-1990s, Congress flirted with statutory amendments that would have required cost-benefit analysis of any rule costing more than...