Regulatory Transactions

Editor’s Note:  The same President, Richard Nixon, who established EPA was also responsible for establishing centralized Presidential review of environmental regulations.  Throughout EPA’s history, White House/OMB review of environmental regulations EPA regulations has been an appropriate exercise of the President’s Article 2 executive powers.

Lisa Heinzerling ¹

With President Obama’s nomination of of Gina McCarthy as the new Administrator of the Environmental Protection Agency (EPA), much attention has turned to her record as the EPA official in charge of air pollution programs, experience as the head of two states’ environmental agencies, and views on specific policies and priorities.  And with the President’s nomination of Sylvia Mathews Burwell to be the Director of the Office of Management and Budget (OMB), attention has likewise turned to her record and experience.  Few recognize, however, the tight relationship between the two nominations: the Obama administration’s approach to governing will make Ms. Burwell Ms. McCarthy’s boss.

Few environmental statutes in this country put the President (or his aides in the White House) in charge of environmental decisions; most give the job to the EPA or, more specifically, its Administrator.  Even fewer environmental statutes require rules to be evaluated according to cost-benefit analysis; most specify a different kind of decision-making framework for such rules.

Nevertheless, the Obama administration has continued and deepened a longstanding practice of White House control over EPA rules, with cost-benefit analysis as the guiding framework.  OMB is the central player in this structure: it reviews, under a cost-benefit rubric, all agency rules that it deems “major” under executive orders mandating this review.  EPA rules deemed major by OMB are not issued without OMB’s imprimatur.  Thus does the OMB director become the EPA Administrator’s boss.

This result would be bad enough, given the tension between it and the legal structures governing environmental policy.  But it turns out the OMB itself seems not to want to accept accountability for running U.S. environmental policy.  In a new law review article by Cass Sunstein, the former head of the OMB office that acts as the White House’s regulatory gatekeeper, Sunstein insists that he actually didn’t have very much power. ²  In fact, he says, decisions about rules most frequently turned on other players in the White House, Cabinet heads outside the agency proposing the rule, or even career staff in other agencies or in the OMB itself.  In Sunstein’s rendering, it appears that everyone is responsible for the shape and scope of environmental policy in this administration.  Which means no one is accountable.

In concrete terms, this leaves us unable to know whom to blame when the OMB delays the EPA’s list of “chemicals of concern” for almost three years, ³  holds the Occupational Safety and Health Administration’s rule on crystalline silica for over two years, ⁴  does not accept delivery of a notice of new data on EPA’s proposal to regulate coal ash impoundments, ⁵  or insists on extensive, substantive changes to the Food and Drug Administration’s new rules on food safety. ⁶  Perhaps it is the OMB itself, or another office in the White House, or the White House Chief of Staff, or the head of the Department of Agriculture, or a GS-12 at the Small Business Administration. ⁷   We just don’t know.

Part of the reason we don’t know is that the Obama administration does not follow its own rules on transparency in the process of OMB review.  Two years ago, President Obama issued an executive order reaffirming his embrace of a Clinton-era executive order governing OMB review. ⁸  The Clinton-era order requires transparency throughout the OMB process; at almost every step of the way, the order – which, again, President Obama reaffirmed in his own executive order on OMB review – requires disclosure of important decision points and documents:

• Ÿ if an agency plans a regulatory action that the OMB thinks is inconsistent with the President’s policies or priorities, the OMB must tell the agency so, in writing; ⁹

• Ÿ if a dispute arises between the OMB and the action agency over whether a particular rule should issue, and one of these parties requests resolution of the dispute by the President or Vice-President, the OMB must note – in a “publicly available log” – who requested elevation and when; ¹⁰

• Ÿ if the OMB returns a rule to an agency for further consideration, the Office of Information and Regulatory Affairs Administrator must provide a “written explanation” for this return; ¹¹

• Ÿ if a regulatory proposal changes between the time it goes to OMB and the time it emerges, the agency must identify those changes (“in a complete, clear, and simple manner”); ¹²

• Ÿ and if the OMB insists on changes to the regulatory proposal during its review, the agency must identify those changes for the public (“in plain, understandable language”). ¹³

The Obama administration follows almost none of these rules on transparency.  The OMB does not explain in writing to agencies that items on their regulatory agenda do not fit with the President’s agenda.  The OMB does not keep a publicly available log explaining when and by whom disputes between the OMB and the agencies were elevated.  Indeed, when the first elevation of an EPA rule occurred in President Obama’s first term, I drafted a brief memo for the EPA’s docket explaining that elevation had occurred and noting the outcome. The OMB told me in no uncertain terms that the memo must not be made public. Moreover, except in one instance – President Obama’s direction to then-EPA Administrator Lisa Jackson to withdraw the final rule setting a new air quality standard for ozone – the OMB has not returned rules to agencies with a written explanation about why they have not passed the OMB review. ¹⁴   Instead, the OMB simply hangs onto the rules indefinitely, and they wither quietly on the vine.  This is how it comes to pass that a list of chemicals of concern or a workplace rule on crystalline silica lingers at the OMB for years.

Some agencies do post “before” and “after” versions of rules that have gone to the OMB.  These redlined documents often feature hundreds of changes.  There is nothing here like the “complete, clear, and simple manner” of disclosure contemplated by the Executive Order.  There is also often no document that explains which changes were made at the OMB’s behest.  Where, as Sunstein explains, changes might come from the OMB, from another White House office, from another Cabinet head, or from a career staffer in a separate agency, the failure to follow the Executive Order’s rules on transparency means that no one is ultimately accountable for the changes that occur.  Who is responsible, for example, for the hundreds of technical changes made to the EPA’s scientific analyses of air quality rules? ¹⁵   We simply don’t know.

Here, too, the OMB is the stumbling block when it comes to transparency.  Agencies know full well that they are not to be too transparent.  The OMB reprimanded the EPA when the EPA accidentally posted interagency comments on its proposal to regulate coal ash impoundments. ¹⁶   But why shouldn’t the public know who is responsible for changing the rules?  In fact, without knowing the expertise and affiliation of the kibitzers, it is hard to evaluate their comments.

The problems go deeper still.  The OMB maintains a “Regulatory Review Dashboard” that contains a good deal of information about rules under review, how long they have been under review, and so on. ¹⁷   It is spiffy and informative, but woefully incomplete.  Some rules go to the OMB “informally” and do not appear on the Dashboard at that time.  Some rules go to the OMB and appear on the Dashboard only weeks after the agency has sent them. ¹⁸  Some items go to the OMB and never appear on the Dashboard. ¹⁹   Some rules are done, from the agency’s perspective, but the White House prevents their transmittal to the OMB. ²⁰   The truth is, the Dashboard purports to be, but is not, a full picture of the items under review at any given time.  Thus it misleads at the same time it informs.

What can be done?

First, Senators considering the nominations of Ms. McCarthy and Ms. Burwell should ask them about the relationship between the EPA and the OMB.  They should ask who will be in charge of the EPA’s regulatory program.  They should ask whether we will know who is in charge.  They should ask on what basis decisions about environmental policy will be made.

Second, the OMB should follow – and allow agencies to follow – the disclosure requirements of the Executive Order under which its review occurs.

Third, if the OMB decides not to allow a rule to issue, it should return the rule to the relevant agency with a written (and public) explanation as to why it is doing so.  It should stop holding onto rules indefinitely.  It is not plausible to suggest – as Professor Sunstein has ²¹  – that long periods of review simply mean that the OMB and the agencies are working hard on getting the rules right.  This may be true in some cases, but some of those rules are never going home to the agencies. The OMB should say so and explain why.

Fourth, the OMB should follow the deadlines set out in the Executive Order.  The Order quite clearly contemplates that the OMB has 90 days to review rules, 120 if the head of the OMB and the head of the relevant agency agree on an extension. ²²   But the OMB takes the position that if the head of the agency asks for an extension, review can continue indefinitely.  This is a strained reading of the Executive Order (as Sunstein himself seems to acknowledge). ²³  More important, the way the head of an agency often comes to “request” an extension is that she (or her staff) receives a call from the OMB, asking the agency head to ask the OMB for an extension.  Thus the OMB has unmoored itself completely from the deadlines set out in the Executive Order; review is over only when the OMB says it’s over.

Changes like these would be modest; they would simply bring the OMB into line with the Executive Orders it purports to be following.  More substantial changes – such as loosening the OMB’s grip on the agencies, ceasing the OMB’s meddling with agencies’ scientific findings, relaxing the cost-benefit stranglehold on regulatory policy – would also be welcome.  But to start, just following the rules laid out by the President himself would be nice.