Academic journal article Harvard Journal of Law & Public Policy

Regulatory and Quasi-Regulatory Activity without OMB and Cost-Benefit Review

Academic journal article Harvard Journal of Law & Public Policy

Regulatory and Quasi-Regulatory Activity without OMB and Cost-Benefit Review

Article excerpt

Whenever a federal agency proposes a significant regulatory action, that action must be reviewed by the Office of Information and Regulatory Affairs in the White House Office of Management and Budget (OMB). (1) OMB review is designed to ensure that the action is consistent with presidential priorities and is coordinated with the related actions of other federal agencies. (2) In addition, the federal agency must provide a rationale for the action and an assessment of its potential benefits and costs. (3) OMB clears the regulatory action if there is a reasoned determination that its benefits justify its costs. (4) This review, coupled with the cost-benefit requirement, is designed to ensure that federal agencies have carefully considered all the consequences of the regulations they propose. (5)

Although OMB and cost-benefit review are required for significant regulatory actions, a substantial amount of regulatory activity occurs without any OMB or cost-benefit review. Some of this activity is clearly regulatory in nature, in the sense that it creates binding legal obligations on regulated entities, while other activity might best be described as "quasi-regulatory," because the actions shape the regulatory environment and impact regulated entities but are not necessarily or directly binding.

This Article illustrates four types of regulatory and quasi-regulatory activities that operate outside OMB and cost-benefit review: (1) agency issuance of quasi-regulatory documents such as memoranda, policy statements, and guidance documents; (2) agency approval of state regulatory policies under federal laws that authorize selective waiver of federal preemption of state regulation; (3) federal agency issuance of hazard determinations related to technologies, substances, and practices that impact the litigation and regulatory environment; and (4) federal agency decisions to enter into binding agreements with pro-regulation litigants favoring certain regulatory outcomes, where settlements create nondiscretionary agency duties to initiate new rulemakings. This Article illustrates how these four types of regulatory and quasi-regulatory activities have had a profound effect on important areas of the economy such as coal mining, automobile production, and housing construction, and suggests that Congress should consider subjecting all or some of these regulatory activities to routine OMB and cost-benefit review.


Federal regulators often issue informal, quasi-regulatory documents such as memoranda of understanding, policy statements, and guidance documents. These quasi-regulatory documents can create major policy shifts that impose significant burdens on industries or compel those industries to engage in costly litigation if they intend to protect their rights under administrative law.

A vivid illustration of this phenomenon is the recent use of quasi-regulatory documents to institute dramatic policy changes in the granting of permits for surface coal mining operations in Appalachia. In the mid-1900s, the most prevalent form of coal mining in Appalachia was underground mining. (6) But over the past twenty years, the coal industry increasingly has engaged in surface mining in Appalachia, even at the tops of mountains, a practice called "mountaintop mining." (7) Today, surface mining accounts for about thirty-seven percent of the coal mined in Appalachia. (8)

Proponents of surface and mountaintop mining argue that it is safer and more efficient (on a cost-per-ton basis) than underground mining. (9) Mountaintop mining avoids the subsidence issues that periodically have caused environmental harm to communities located above abandoned underground mines. (10) In addition, it is a valuable source of economic activity in Appalachia. Mountaintop mining has created about 14,000 mining jobs with salaries that are high for rural Appalachia, and an additional 60,000 jobs that are related to the mining industry. …

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