Formal vs. Informal Agency Rulemaking | Administrative Law

This comprehensive section traces the evolution of judicial review standards for agency actions. It begins with APA Section 706, which establishes standards including arbitrary and capricious review (examining rational connection between agency action and its explanation), in excess of statutory jurisdiction, and short of statutory right. The section explains that unlike arbitrary review, courts are not called upon to oversee agency reasoning in highly specialized technical tasks. Chief Justice Marshall's principle from Marbury v. Madison—that it is the province of the judicial branch to say what the law is—underlies this framework. Pre-Chevron cases like NLRB v. Hearst Publications established that where agencies must initially determine specific applications of broad statutory terms, courts limit their review to whether the agency's determination has warrant in the record and a reasonable basis in law. The 1984 Chevron v. NRDC case then established the landmark two-step framework: Step One asks if Congress has spoken clearly; Step Two asks if the agency's reading of ambiguous language is reasonable. The court found the EPA's bubble rule interpretation reasonable because it struck a balance between clean air and economic growth, establishing that agency interpretations are not instantly carved in stone.

The APA makes most final agency action judicially reviewable, with limitations including actions made unreviewable by statute or committed to agency discretion. The arbitrary and capricious standard is the default requirement requiring agencies to examine relevant data and articulate satisfactory explanations for decisions. Factors affecting review strength include agency credibility, political context, and whether agencies are changing policy. The leading case State Farm v. NLRB established that agency rules are arbitrary if they rely on unintended factors, fail to consider important aspects, offer explanations counter to evidence, or make implausible choices. Courts vary in applying this standard—some are more rigorous while others are lenient. The Chevron Doctrine (overturned in 2024) previously required courts to defer to agency interpretations of ambiguous statutes, but the Supreme Court ruled this defied the APA's command that courts decide all relevant questions of law.

The 1983 State Farm case established that administrative agencies cannot issue arbitrary and capricious rules. Agencies must examine relevant data and articulate a satisfactory explanation for their actions, including a rational connection between facts found and choices made. When agencies change their course by rescinding rules, they must supply reasoned analysis. Justice Rehnquist's 'elections have consequences' doctrine holds that changes in administration provide reasonable basis for agencies to reappraise program costs and benefits. Courts grant military significant discretion in policy matters, which may influence how policy changes are evaluated.

In Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co. (1983), the U.S. Supreme Court established the 'hard look review' standard, requiring courts to rigorously scrutinize agency decisions under the Administrative Procedure Act's arbitrary and capricious standard. The Court unanimously held that an agency action is arbitrary and capricious if it fails to examine relevant data, entirely ignores important aspects of the problem, fails to consider important alternatives, or offers explanations contradicting the evidence. The Court specifically criticized the Department of Transportation for rescinding a passive restraint safety rule without adequately justifying why it didn't consider the obvious alternative of requiring only airbags, demonstrating that agencies must provide satisfactory explanations connecting facts to their choices.

Administrative agency decisions fall into three categories: (1) Factual determinations - courts apply a close to jury standard; (2) Questions of law - courts interpret statutory terms and determine the scope of agency power; (3) Policy decisions - courts defer to agencies as long as they haven't acted arbitrarily or capriciously. The Supreme Court has loosened the arbitrary and capricious standard in recent years, potentially giving agencies more deference in policy decisions. The Loper Bright decision (2024) left open the question of whether Congress could amend the Administrative Procedure Act to restore the pre-Chevron system where courts defer to all reasonable interpretations of statutory language.

The Office of Information and Regulatory Affairs (OIRA), established during the Bush administration, is a White House agency that reviews federal regulations to assess their economic justification, having altered approximately 84% of EPA rule submissions; the review process involves extensive stakeholder meetings, with industry representatives and lobbyists participating in approximately 1,764 meetings compared to only 116 for public interest groups, raising concerns about regulatory bias toward business interests over public welfare.

The Office of Information and Regulatory Affairs (OIRA) within the Office of Management and Budget reviews agency regulations at two stages: proposed rule and final rule. Starting with Reagan, OIRA gained authority to ensure regulations meet executive branch standards, including proper cost-benefit analysis and alignment with presidential priorities. The public comment process allows anyone to submit feedback, but most comments come from interest groups rather than individual citizens due to technical complexity. Business-oriented comments tend to be more sophisticated and influential. Career civil servants respond to comments and justify decisions in final rule preambles before OMB review.

OIRA (Office of Information and Regulatory Affairs) serves multiple functions in regulatory review: providing a dispassionate analytical second opinion on agency actions, coordinating across agencies to provide external input on regulation impacts and alternatives, and ensuring presidential accountability. OIRA consists of approximately 50 career professionals who work closely with White House policy officials. Historically, OIRA has enforced EO 12866 requirements regarding benefit-cost analysis, though there are concerns about whether it can effectively enforce requirements when presidential priorities conflict. The effectiveness of benefit-cost analysis depends on agencies believing the president and White House leadership value it, making OIRA's position critical. Without presidential support, regulatory review becomes mere box-checking rather than genuine decision-informing.

President Trump's February 18, 2021 Executive Order directing independent regulatory agencies to submit all proposed and final significant regulatory actions to the Office of Information and Regulatory Affairs (OIRA) within the Executive Office of the President represents a significant expansion of presidential oversight over independent agencies. This order amends Executive Order 12866 (Clinton era) to bring independent agencies under OIRA review, which previously only applied to executive branch agencies. The implications include increased presidential accountability for agency rulemaking, potential changes in how independent agencies operate, and ongoing constitutional questions about agency independence versus executive control, particularly regarding removal powers and the separation of powers doctrine.

Under Section 553 of the APA, interpretive rules, general statements of policy, and rules of agency organization are exempt from notice and comment requirements. Courts use inconsistent standards to determine what constitutes an interpretive rule - some ask if rules create new rights and duties, others use four-part legal effect tests, and others distinguish between interpretive versus substantive changes. If statements are deemed non-binding, courts typically won't impose notice and comment requirements. Strategic recommendation: if proposed rules matter significantly, don't try to circumvent notice and comment by deeming rules interpretive - this gives opponents additional angles of attack in court and makes reversal by future administrations harder. Guidance documents are easier to withdraw than rules and should be systematically identified and withdrawn by incoming conservative administrations.

Congress provided another rulemaking track called negotiated rulemaking, where agencies invite interested parties to work together with agency representatives to devise new rules. This approach is suitable when there are limited identifiable interests impacted by the rule and the agency can convene a representative committee. Negotiated rulemaking increases rule acceptability and shortens finalization time. The process requires publishing notice in the Federal Register with committee details, agenda, and timetable, followed by a 30-day public comment period on the negotiation process. If the committee reaches agreement, the proposed rule proceeds through the usual notice and comment process, though agencies are not bound to adopt the negotiated proposal.

Administrative agency rulemaking involves agencies creating regulations within their congressionally-granted authority, following procedures outlined in the Administrative Procedure Act (particularly Section 553), which distinguishes between formal rulemaking (rare and cumbersome) and informal rulemaking; courts may apply the 'hard look doctrine' to review the substantive reasonableness of regulations, while also examining whether agencies properly followed procedural requirements, and agencies may attempt to circumvent these requirements by classifying actions as guidance memos or interpretive rules rather than formal regulations.

Negotiated rule making emerged when EPA conducted 20 experiments with mediated processes for creating regulations. The process uses stakeholder assessments with neutral assistance to identify participants, then facilitates agreement on regulatory approaches. The Federal Advisory Committee Act formalizes participant selection. Legislation later made negotiated rule making permanent as an option alongside normal rule-making procedures.

A negotiated rulemaking model where stakeholders discuss and reach compromise could make more sense and enable agencies to accomplish more with limited resources. This would help narrow legal issues and focus on practical concerns rather than ideological standpoints. While this wouldn't work for every risk management rule, it might help reduce litigation and get stakeholders focused on what really matters in the workplace and to companies, moving away from purely ideological positions.

The major questions doctrine holds that when agencies interpret statutes, courts should defer to agency interpretations only if Congress would reasonably have intended to grant such authority. Courts examine whether the issue is so significant that Congress likely intended to keep it for itself rather than delegate to an agency. This doctrine considers whether the agency possesses relevant expertise and whether the interpretation affects major policy questions.

The major questions doctrine holds that when an administrative agency seeks to exercise power of vast economic and political significance, the Court looks for a clear congressional statement granting such authority. The absence of such a statement is reason to doubt Congress empowered the agency to settle such major questions rather than retaining authority for itself. This applies primarily to statutory interpretation rather than constitutional interpretation.

The major questions doctrine is a legal principle that applies when administrative agencies assert authority over matters of extraordinary economic and political significance. Under this doctrine, courts are more likely to require clear congressional authorization before allowing agencies to exercise such broad powers. The Court stated that when the history and breadth of an agency's asserted authority and the economic and political significance of that assertion provide reason to hesitate, the agency must point to clear congressional authorization. This doctrine limits agency power in cases of major national importance.

Under current Supreme Court cases, notably Chevron v. NRDC (1984), courts lean over backwards to permit agencies to get their way on statutory interpretation. However, the 2022 West Virginia v. EPA case established the Major Question Doctrine, requiring clear statutory statements for courts to conclude Congress intended to delegate regulatory authority on major questions. The upcoming Loper Bright Enterprises v. Rondo case may reverse or modify Chevron itself. Any rule must fall within statutory authority granted by Congress, requiring familiarity with relevant statutory language. This creates significant opportunities for conservative policy victories but also risks if rules exceed delegated authority.

The major questions doctrine is a textual tool of statutory construction requiring clear congressional authorization for agencies to exercise transformative power over major economic and political questions. It operates alongside the clear statement canon and is grounded in separation of powers principles. Courts examine whether Congress would have clearly spoken to delegate such authority, using common sense presumptions about legislative intent. The doctrine applies when agency action has sweeping consequences based on costs, number of people affected, or the type of authority claimed. This framework prevents agencies from claiming unprecedented power through interpretations of long-dormant statutes without clear congressional authorization.