The White House has released a memo instructing agencies on how to implement President George W. Bush's recent changes to the regulatory process. OMB Watch had anticipated the release of such a memo due to the need for clarification of certain controversial provisions within Bush's executive order. However, the memo offers little new information and further confounds issues in some areas.

On April 25, the White House Office of Management and Budget (OMB) and OMB's Office of Information and Regulatory Affairs (OIRA) jointly released a "compliance assistance" memo regarding implementation of Executive Order 13422 (amending E.O. 12866) and OMB's Final Bulletin for Agency Good Guidance Practices. OMB addressed its statement to agency heads. OIRA addressed its statement to agency Regulatory Policy Officers, and the memo was signed by Susan Dudley — her first communiqué as OIRA administrator.

The memo serves to clarify several points of the amended E.O. and the Bulletin. Those documents provide for OIRA review of "significant guidance documents." Under the E.O., "each agency shall provide OIRA, at such times and in the manner specified by the Administrator of OIRA, with advance notification of any significant guidance documents." However, the way in which agencies would transmit guidance documents to OIRA was unclear, as was the timetable for OIRA review.

According to the April 25 memo, after an agency transmits a request to promulgate guidance, OIRA will notify the agency within ten days whether additional consultation is necessary. The agency's transmittal should include, among other things, a description of the agency's intent and how the guidance will address the issue. It should also include, where applicable, a summary of public comments on the guidance.

If the administrator of OIRA deems additional consultation necessary, OIRA will ensure the guidance is consistent with the president's regulatory philosophy. OIRA will also maintain regular contact with the agency in question as well as other agencies. The memo states, "OIRA will complete its consultative process within 30 days or, at that time, advise the agency when consultation will be complete."

The Bulletin requires special consideration for "economically significant" guidance documents — those with an economic impact of $100 million or more or those deemed to have a material impact on the economy or a sector of the economy. Because guidance documents are non-binding statements, OMB Watch has been concerned the designation of economic significance would be impossible to determine.

In its report A Failure to Govern: Bush's Attack on the Regulatory Process, OMB Watch states, "This creates a largely speculative analysis to be conducted by the agencies, even assuming reasonably anticipated effects." OMB Watch also points out, "The Bulletin does not, however, require a formal regulatory impact analysis, so it is unclear just how this determination is to be conducted."

The compliance assistance memo addresses these concerns. OIRA says, "We expect agencies to use common-sense principles and readily available facts" in determining whether a guidance document is economically significant. OIRA urges agencies to anticipate the adoption rate of guidance as well as the potential for costs and benefits. In cases where such assumptions prove too difficult, OIRA suggests agencies consider guidance "as if it were adopted widely by all affected parties," thus magnifying the estimation of an economic impact.

The memo also addresses the issue of agency Regulatory Policy Officers (RPOs), which are to oversee agency decisions about regulations and communicate with OIRA about regulatory matters. The amended E.O. increases the responsibilities of RPOs and requires that those officials be presidential appointees. OMB Watch and other critics have expressed concern these provisions will further politicize the regulatory process and ultimately allow the White House to exert greater influence in agency proceedings. Not only does the memo fail to allay these concerns, it begs additional questions on the RPO appointment process.

One amendment to the E.O. states "no rulemaking shall commence" without the approval of the RPO. Previously, the White House made no attempt to define the point at which a rulemaking commences.

The memo does little to clarify this point, stating, "As a general matter, a rulemaking commences when the agency has decided as an institutional matter that it will engage in a rulemaking." The memo does not define the terms "institutional matter" and "engage." The memo does state rulemaking shall commence no later than when it receives a Regulation Identification Number (RIN). An RIN is assigned to a proposed regulation upon its first publication in the Federal Register. This leaves open issues about the role of the RPO in influencing research that may lead to regulatory activity.

Another amendment to the E.O. states, "Each agency head shall designate one of the agency's Presidential Appointees to be its Regulatory Policy Officer." This implies an existing agency official who the president has appointed to an office will take on new responsibilities as an RPO.

However, the memo implies a position, not an individual, will acquire new responsibilities. According to the memo, non-presidentially-appointed officials would be able to serve as RPOs if the individual is serving temporarily: "If a person who is not a Presidential appointee is serving in the acting capacity in a position that is presidentially-appointed (PA), the amended Executive Order does not require an agency head to designate another official to serve as the Regulatory Policy Officer."

The memo also fails to address whether the newly conferred RPO will require Senate confirmation. Considering the significantly expanded responsibilities of the RPO, this question will need to be addressed. This might be one area in which Congress may wish to exert its constitutional authority and challenge the RPO provision.

Another amendment to the E.O. places an increased emphasis on identifying a market failure before regulating. In A Failure to Govern, OMB Watch expressed concern about this revision: "The new language will institutionalize an anti-regulatory approach by using a market failure criterion in place of actually identifying threats to public health and safety."

The memo addresses this issue only briefly. It states, "This is not a substantive change to the Regulatory Principles of Executive Order 12866. Rather, this change makes clear that agencies must state 'in writing' the problem the regulation seeks to address." If this is true, it is unclear what problem the amendment intended to address with the change in language emphasizing market failure. In other words, the Bush administration did not need to modify an Executive Order to require agencies to submit existing work "in writing"; it simply could have issued a memo to agency heads.

Moreover, it is unclear what the statement "in writing" should entail. The memo gives no further guidance as to what kind of assessment agencies should perform when determining a market failure as a reason to regulate.

Agencies were to have designated an RPO by March 19 and have until July 24 to comply with most other provisions of the E.O. amendments and the Bulletin. As of today, there is no list of the RPOs, no description of their roles in agency rulemaking, or any information on how to communicate with these people who now have enhanced powers to influence rulemaking outcomes. OMB Watch continues to oppose the implementation of the White House directives. As OMB Watch states in A Failure to Govern, "There is real danger to our constitutional system from this arrogation of power. Equally significant, in our opinion, is the real danger presented to the American public from the delay or refusal to regulate dangerous activities."