Header graphic for print
Federal Regulations Advisor Insight and Commentary on U.S. Government Regulatory Affairs

Monday Morning Regulatory Review – 1/30/17: High Policy, Politics & Limitations; Withdrawals; and Request for Information not a Proposed Rule

Posted in Judicial Review & Remedies, Regulatory Process

dawn over the capitol aocThe first full week of the Trump Administration provided few surprises.  The White House continued to enunciate the high-level policy (or Policy) that its expects agencies to implement and the agencies have retreated to rereview rules that have not taken effect or were still pending review.  A least one hasty final rule met a temporary roadblock when a district court preliminarily enjoined implementation because the agency violated the Administrative Procedure Act (APA).

High Policy, Politics & Limitations:  The Trump Administration began announcement of its policy priorities last week, but the limitations of policy announcement were apparent.  A number of Executive Orders and memoranda make clear that they guide future regulatory efforts.  The White House has quickly learned, or been educated by the Department of Justice (DOJ) Office of Legal Counsel (OLC) (which reviews all Executive Orders for form and legality, not policy), that some boilerplate limitations exist no matter what Administration is issuing the directive, in particular:

(a) Nothing in this order shall be construed to impair or otherwise affect:

(i) the authority granted by law to an executive department or agency, or the head thereof; or

(ii) the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.

(b) This order shall be implemented consistent with applicable law and subject to the availability of appropriations.

(c) This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.

Note the limiting admission of paragraphs (a) and (b) that the Executive Order does not trump Congressional enactments or the appropriation of funds and reprogramming limitations.  Equally important is the longstanding disclaimer boilerplate of paragraph (c) that the Executive Order is not legally substantive and enforceable.

With that in mind, the President of the United States (POTUS) issued the Streamlining Permitting and Reducing Regulatory Burdens for Domestic Manufacturing memorandum that directs subordinates further in their development of regulations, “This memorandum directs executive departments and agencies (agencies) to support the expansion of manufacturing in the United States through expedited reviews of and approvals for proposals to construct or expand manufacturing facilities and through reductions in regulatory burdens affecting domestic manufacturing.”  The reduction is generalized and not specific to a regulation and it is the direction change that is significant.  Nearly everything else issued last week did not reach the regulatory detail.

►  Nothing in the policies announced should be surprising, nor should the mechanism for announcement.  The real key lies in the subordinate officials’ implementation of those policies through regulations, adjudications, and the application of discretion – the core of administrative law.  Those implementations and the procedural requirements for those implementations, such as the APA and Regulatory Flexibility Act (RFA), will take time and are the basis for any challenge, not the high policy direction.

Withdrawals:  In response to the White House Chief of Staff (COS)’s memorandum noted last week, agencies quickly withdrew nearly all documents from public inspection prior to publication by the Office of the Federal Register.  Agencies also began moving out effective dates.  The Environmental Protection Agency (EPA) efficiently extended the effective dates of 21 final rules en bloc to March 21, 2017, including the Renewable Fuel Standard Program: Standards for 2017 and Biomass-Based Diesel Volume for 2018, Formaldehyde Emission Standards for Composite Wood Products, and the Accidental Release Prevention Requirements: Risk Management Programs Under the Clean Air Act (CAA) final rules, as well as a number of State implementation plans.  Some extensions amount to a mere week, some almost the maximum 60 days, but EPA is being consistent in responding to the direction.

Slightly surprising, the Department of Transportation (DOT) Federal Aviation Administration (FAA) withdrew a prior airworthiness directive (AD) relating to certain Boeing airframes and submitted an AD for certain Rolls-Royce turbofan engines – usually maintenance orders imposed to implement a manufacturer’s service bulletin.  FAA appears to be applying the safety test contemplated by the COS Memorandum, but this is not to second-guess that highly technical decision, but rather merely note it.

Some rules have been filed and published, but generally rules by independent agencies, mandatory rules, or rules of no great consequence, controversy, or policy.  Agencies are, naturally, measuring their actions against what they know of the Administration’s policy positions or anticipated policy positions, and moving forward only those actions that are not inconsistent with those policies, or that are required by law as contemplated by the COS memo.

Similarly, the pending docket at the Office of Management and Budget (OMB) Office of Information and Regulatory Affairs (OIRA) has been reduced to almost nothing as agencies withdraw rules that are pending executive and interagency review in favor of review by new appointees.  Again, many of these rules will return to OMB.

►  Perhaps this is hyper-technical, but the general and even trade press confuse the withdrawal from publication or OMB as a substantive withdrawal of the regulation.  It may be that the regulation will never be published and take effect, but that decision has not been made – the withdrawal decision represents only a “hold steady” position pending further review by the Administration, particularly by new political leadership of the agencies.  In reality, many rules prepared by the past Administration will eventually go forward with modifications, some minor, some without any.

Request for Information not a Proposed Rule:  The United States District Court for the Eastern District of Texas, in Dialysis Patient Citizens v. Burwell, preliminarily enjoined the Department of Health and Human Services (HHS) Centers for Medicare and Medicaid Services (CMS) Medicare Program; Conditions for Coverage for End-Stage Renal Disease Facilities–Third-Party Payment interim final rule (IFR).  The IFR required dialysis providers to disclose to patients and insurers certain payments that they make to charities that provide insurance premium support.  HHS’s concern was to ensure that that health insurance coverage decisions were not inappropriately influenced by the financial interests of dialysis facilities rather than the health and financial interests of patients, i.e. avoiding “patient steering.”  The end-of-Administration IFR was both economically significant and major rule under the Congressional Review Act (CRA).

HHS, however, failed to comply with the APA on two distinct grounds, both worthy of note:  (1) HHS failed in justifying its good cause to bypass advance notice and an opportunity for public comment under the APA, and (2) a Request for Information (RFI) did not constitute notice that CMS intended to adopt a rule, i.e. a proposed rule.

First, the district court adopted the logic of the United States Court of Appeals for the District of Columbia Circuit regarding the “contrary to the public interest” good cause exception for advance notice and comment.  In short, quoting D.C. Circuit precedent, construing the exceptions narrowly, “contrary to the public interest” applies when “[t]he public interest prong of the good cause exception is met only in the rare circumstance when ordinary procedures – generally presumed to serve the public interest – would in fact harm that interest” which is limited to when “announcement of a proposed rule would enable the sort of . . . manipulation the rule sought to prevent.”

►  Once again, an agency has confused its value of its policy decision with the public interest in compliance with the APA notice and comment process.  Precedent needs to be statutized.

Quite curiously, DOJ appears to have argued that HHS’s Request for Information: Inappropriate Steering of Individuals Eligible for or Receiving Medicare and Medicaid Benefits to Individual Market Plans provided adequate notice and rendered any “technical departures from § 553(b)” harmless.  The argument, in sum, was that the APA requires only “either the terms or substance of the proposed rule or a description of the subjects and issues involved” and the RFI sufficed for the latter.  The court rejected this notion because the RFI “(1) did not give Plaintiffs notice that HHS was considering promulgating a rule; (2) was not specific to [End-Stage Renal Disease]; (3) disclosed no information regarding the provisions that made the Rule so damaging; and (4) was ‘[t]oo open-ended to allow for meaningful comment’ on key aspects of the Rule actually adopted.”

►  The court could have noted other distinctions.  While the RFI was published in the “proposed rules” section of the Federal Register, the proposed rules section is far more inclusive than just formal rulemaking proposals that can lead to a final rule – as the Office of the Federal Register (OFR) itself counsels, “The OFR publishes in the proposed rules any document that serves as the first public notice of a rulemaking proceeding and invites public input.”  This RFI text itself takes great pains to establish that the RFI is not part of a procurement (which RFIs often precede) and is only a “general solicitation of public comments” not subject to the Paperwork Reduction Act (PRA).  The RFI eschewed the concept that it represented a proposed rule.  Indeed, the RFI contains no magical incantation of present tense words of issuance, to paraphrase the OFR, to tie the proposed rule and the regulations (in the Code of Federal Regulations (CFR) units) that could be affected and bridges between the preamble discussion in the document and the regulatory changes that it proposes.  DOJ seems to be grasping far beyond the reach of this RFI to protect a hastily promulgated “midnight” rule – and joined HHS in failing badly.

Modern practice provides the text of proposed regulations and only rarely does one find a formal proposed rule reciting only a mere “description of the subjects and issues involved.”  Perhaps it is time for Congress to eliminate this archaic and dangerous option.