The term “economically significant” has a distinct meaning in the regulatory process and is the source of much angst for agencies and regulated industries. “Economically significant” is not a legal term, however, but a management term – one of several thresholds for triggering review of a proposed or final rule by the Office of Management and Budget (OMB) Office of Information and Regulatory Affairs (OIRA) and other interested agencies. How that trigger works, its content and context, are often misunderstood, so a little disinfecting light may be helpful.
Significant Action: Executive Order 12866 defines “significant regulatory action” as any regulatory action that is likely to result in a rule that may:
(1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities;
(2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency;
(3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or
(4) Raise novel legal or policy issues arising out of legal mandates, the President’s priorities, or the principles set forth in this Executive order.
The second and fourth categories are somewhat nebulous and often subject to negotiation. The first category is somewhat less nebulous to the extent that the economics are more data driven than the other factors, while the third factor is both precise and encompasses a broad swath of process that is due.
Economically Significant: The $100 million threshold of the Executive Order depends is coupled with a disjunctive “adversely” affect, and therefore is not the sole basis for triggering an economic review. Moreover, the $100 million threshold has steadily declined in value due to the effect of inflation because the threshold is not adjusted the way many other thresholds and caps are adjusted for inflation. Accordingly caution must be applied to the trigger – it may or may not be what it appears.
Law, Opportunity, and Negotiation: As the Executive Order (and nearly all other Executive Orders) avers, this threshold does not create any judicially enforceable rights, but it does create an opportunity for those affected by a rule to negotiate. A regulatory action under consideration by an agency and included within an agency’s Unified Agenda may suggest whether the trigger will be pulled – giving advance suggestion of the agency’s and OMB’s thinking. That suggestion may lead the cautious to suggest their views to the agency and to OMB, and a persuasive presentation may ultimately alter the regulatory process for that regulatory action.
The “economic” threshold may have primacy in this Executive Order, but that is not as clear or precise as numbers may suggest – economists will differ in quality, quantity, and judgment – providing an opportunity for further analysis. Moreover, the budgetary impact is not limited to the denominated enumeration of the third trigger – the Budget of the United States may adversely affect in a material way the economy.
Policy and law triggers under Executive Order 12866 provide far broader capacity to negotiate the scope of the Executive Branch regulatory process for a specific regulatory action. While the policy issues of interest to the White House may be public politics, the novel legal issues presented and interagency interests and interagency conflicts are less apparent and more the stuff of well-heeled practitioners.
Even the timing is subject to negotiation, as OMB may seek to speed up or slow down the submission of regulatory actions – and the submission of a regulatory action by an agency to the joint OMB and General Services Administration Regulatory Information Service Center (RISC) RISC and OIRA Consolidated Information System (ROCIS) does not necessarily mean that OMB will accept and review the regulatory action. Some regulatory actions may be delayed or (by negotiation) withdrawn.
Snapshot: Of the 135 regulatory actions pending OMB review on August 9, 2013, according to OMB’s Reginfo.gov website, 22 are designated as “economically significant.” The remainder (113) are policy or legal significant regulatory actions. The snapshot illustrates the diversity of subjects and also the compound nature of the thresholds:
Department of Agriculture (DOA):
- Energy Efficiency Program Loans (final rule submitted July 13, 2013)
Department of Defense (DOD):
- Voluntary Education Programs (proposed rule submitted Aug. 8, 2013)
Department of Education (ED):
- Race to the Top – Early Learning Challenge (final rule submitted Aug. 3, 2013)
Department of Energy (DOE):
- Energy Efficiency Standards for Metal Halide Lamp Fixtures (proposed rule submitted Feb. 17, 2012)
- Energy Conservation Standards for Commercial Refrigeration Equipment (proposed rule submitted Feb. 17, 2012)
- Energy Conservation Standards for Residential Furnace Fans (proposed rule submitted June 27, 2013)
- Energy Efficiency Standards for Certain Commercial and Industrial Electric Motors (proposed rule submitted July 17, 2013)
- Energy Conservation Standards for Walk-In Coolers and Walk-In Freezers (proposed rule submitted Sept. 23, 2011)
- Energy Efficiency Standards for Manufactured Housing (proposed rule submitted Dec. 21, 2011)
Department of Health and Human Services (HHS):
- Emergency Preparedness Requirements for Medicare and Medicaid Participating Providers and Suppliers (proposed rule submitted July 2, 2011) (Centers for Medicare and Medicaid Services (CMS)
- Unique Device Identification (final rule submitted June 11, 2013) (Food and Drug Administration (FDA))
- Over-the-Counter (OTC) Drug Review – Topical Antimicrobial Drug Products (proposed rule submitted June 15, 2013) (FDA)
- Revision of Postmarketing Reporting Requirements Discontinuance or Interruption in Supply of Certain Products (Drug Shortages) (proposed rule submitted June 18, 2013) (FDA)
- Current Good Manufacturing Practice and Hazard Analysis and Risk-Benefit Preventive Controls for Food for Animals (proposed rule submitted (Dec. 5, 2011) (FDA)
Department of Labor (DOL):
- Occupational Exposure to Crystalline Silica (proposed rule submitted Feb. 14, 2011) (Occupational Safety and Health Administration (OSHA))
- Electric Power Transmission and Distribution; Electrical Protective Equipment (final rule submitted June 27, 2012) (OSHA)
- Application of the Fair Labor Standards Act to Domestic Service (final rule submitted Jan. 15, 2013 (Wage and Hour Division)
Department of Transportation (DOT):
- Commercial Driver’s License Drug and Alcohol Clearinghouse (proposed rule submitted Mar. 26, 2013) (Federal Motor Carrier Safety Administration (FMCSA))
- Electronic Logging Devices and Hours of Service Supporting Documents (proposed rule submitted Aug. 9, 2013) (FMCSA)
- Require Installation of Seat Belts on Motorcoaches (final rule submitted Feb. 2, 2013) (National Highway Traffic Safety Administration (NHTSA)
Environmental Protection Agency (EPA):
- Standards of Performance for New Residential Wood Heaters, New Residential Hydronic Heaters and Forced-Air Furnaces, and New Residential Masonry Heaters (proposed rule submitted July 26, 2013)
- Criteria and Standards for Cooling Water Intake Structures (final rule submitted July 30, 2013).