Executive Order 12866
Signed by President Clinton in September 1993, Executive Order 12866 replaces President Reagan's E.O. 12291 and 12498, outlining the regulatory principles and polices that have remained the cornerstone of White House administrative policy ever since. E.O. 12866 establishes the guiding principles agencies must follow when developing regulations, including encouraging the use of cost-benefit analysis, risk assessment, and performance-based regulatory standards. The executive order also establishes the regulatory planning process for each agency, delegating authority to the Office of Information and Regulatory Affairs (OIRA) to coordinate agency rulemaking efforts with the regulatory priorities of the President. E.O. 12866 also expands the roles of OIRA in rulemaking through a centralized review of regulations, whereby OIRA acts as gatekeeper for the promulgation of all significant rulemakings.
While making some improvements to the transparency and accountability of White House involvement in agency rulemaking, Clinton's E.O. 12866 continued to advocate the use of Reagan-era anti-regulatory tools such as cost-benefit analysis, risk assessment and cost-effectiveness to calculate public protections. Under the leadership of President George W. Bush's appointee John Graham, the Office of Information and Regulatory Affairs has even further expanded on the provisions of E.O. 12866 through various guidance documents and bulletins. OIRA's expanded role in agency rulemaking has also frequently led to weaker public protections that often serve the private sector far better than the general public. Read more about OIRA's meddling in agency rulemaking.
E.O. 12866 has three main components:
- Regulatory philosophy and principles
- Regulatory planning process
- Centralized review of agency rulemaking by OIRA
Regulatory Philosophy and Principles
E.O. 12866 requires that federal agencies promulgate regulation only in so far as the regulations are:
- "required by law,"
- "are necessary to interpret the law,"
- "or are made necessary by compelling public need, such as material failures of private markets to protect of improve the health and safety of the public, the environment, or the well-being of the American people."
In deciding if regulation is necessary, agencies must assess the costs and benefits of the regulation as well as the regulatory alternatives, "including the alternative of not regulating." "[U]nless statute requires another regulatory approach," agencies must also choose the regulatory alternative that maximizes net benefits. The regulatory principles of E.O. 12866 do not apply to regulations from independent agencies, such as the Consumer Product Safety Commission.
Other regulations that are exempt from these requirements include rules pertaining to a military or foreign affairs function or other regulations exempted by the administrator of OIRA.
For applicable agencies and regulations, the executive order mandates that agencies follow a host of guiding principles when developing regulatory priorities, including the following:
- Identify the problem the regulation is intended to address, including "the failures of private markets or public institutions that warrant new agency action;"
- Determine if the problem could be addressed through modifications to existing regulations or laws;
- Assess alternatives to regulation, such as economic incentives;
- Consider "the degree and nature of the risks posed by various substances or activities" within the jurisdiction of the rulemaking;
- Design regulations "in the most cost-effective manner;"
- Assess the costs and benefits. The benefits must justify the costs;
- Base decisions "on the best reasonably obtainable scientific, technical, economic, and other information;"
- Recommend performance-based rather than behavioral solutions, when possible;
- Consult with state, local and tribal governments and assess impacts of regulations on local governments;
- Avoid duplications and inconsistencies among federal agencies;
- Minimize burdens and consider cumulative cost of regulation;
- Write all regulations in plain language that can be easily understood by the general public.
Section 4 of 12866 outlines the regulatory planning process. The regulatory planning process includes three major steps:
The executive order also establishes a regulatory working group headed by the OIRA administrator for the identification and analysis of rulemaking issues, such as "the development of innovative regulatory techniques" or "the methods, efficacy, and utility of comparative risk assessment in regulatory decision-making." The OIRA administrator is also given authority to consult with outside groups on regulatory initiatives or existent regulations of concern to them.
Centralized Review of Regulations
E.O. 12866 expands the role of the Office of Information and Regulatory Affairs in the rulemaking process through the centralized review process. Though OIRA is given the authority ostensibly "to ensure that regulations are consistent with applicable law, the President's priorities, and the principles set forth in this Executive order, and that decisions made by one agency do not conflict with the policies or actions taken or planned by another agency," the role of OIRA in rulemaking is often far more pervasive and substantive than the executive order circumscribes.
E.O. 12866 grants OIRA the authority to review periodically existing significant regulations from federal agencies as well as to review new significant regulations under consideration by an agency. Significant regulatory action is defined as any regulatory action that "will likely result in a rule that may:
- "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;
- "Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency;
- "Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or
- "Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in this Executive order."
OIRA, not the agency, makes the final determination of which rules are considered to be significant. For all significant rulemakings, the agencies must provide OIRA with the text of regulation, a statement of need, and "an assessment of costs and benefits of the regulatory action."
Economically significant regulations must meet additional analytical requirements: Anticipated benefits and costs must be quantified to the extent possible; Agencies must provide cost-benefit analysis of reasonable alternatives and "an explanation of why the planned regulatory action is preferable to the identified potential alternatives."
OIRA has 90 days to complete the review, with the possibility of one 30 day extension. Agencies cannot publish the rule in the Federal Register until OIRA's review has been completed the review without a request for further consideration by the agency or the 90 days has expired without a response from OIRA. If OIRA does return the rule to the agency or requests changes of any kind, the agency must reconsider the rulemaking, addressing OIRA's concerns.
Public Participation and Transparency
In an improvement over its predecessors, E.O. 12866 does include some efforts to increase transparency and public participation in the rulemaking process. The executive order directs the agencies to "provide the public with meaningful participation in the regulatory process." The executive order also attempts to shed some light on OIRA's involvement in agency rulemaking, including requiring the following:
- Agencies are required to make public all assessments created for OIRA's reviews.
- The substantive changes between the draft submitted to OIRA for review and the action must be identified for the public "in a complete, clear, and simple manner."
- Changes made at the behest of OIRA must be explicitly identified for the public.
- OIRA is also required to keep a public log of any outside communications regarding a regulatory action under review. An agency representative is required to be present for such meetings and all written communications between OIRA and outside parties in regard to the rulemaking are to be forwarded to the issuing agency. OIRA must also keep these written communications as well as the status of all regulatory actions in the public law.
Unfortunately, as both GAO and OMB Watch investigations have discovered, these provisions for transparency are frequently ignored by agencies and OIRA. OIRA's documentation of outside communications is also largely inadequate. Though a log of meetings is available online, the log is only sporadically updated and often the rule in discussion is not properly identified.