President Curbs Power of Agencies to Issue Regulatory ‘Guidance’

Published May 1, 2007

An executive order by President George W. Bush, aimed at curbing the power of federal agencies to regulate businesses through “guidance,” will be watched closely by business and environmental groups in the coming months.

Guidance is the practice of agencies issuing guidelines businesses must follow, without going through formal rulemaking procedures.

On January 18 Bush issued an amendment to Executive Order 12866, first issued by President Bill Clinton in 1993. The Bush amendment requires federal agencies to identify the specific market failure a proposed guidance is intended to address, and to obtain approval of the agency’s Regulatory Policy Office, before issuing a new guidance.

Agencies also would have to project the costs and benefits of their proposed guidance.

From ‘Guidance’ to Requirement

Federal agencies issue guidance to interpret policy and technical questions. Though guidance documents are not official rules, they often have taken on the force of rules and have added billions of dollars to business compliance costs, according to critics.

“I think this [amended executive order] is a good thing,” said Angela Logomasini, director of risk and environmental policy at the Competitive Enterprise Institute. “The way it has been, agencies that can’t get things they want through the regulatory process offer guidance. They have no accountability.

“Environmentalists would rather have agencies regulate without limits, so I think this is a modest but important policy change,” Logomasini said. “It will encourage agencies to think a bit before pulling a fast one.”

Opposition to Change

David Willett, press secretary for the Sierra Club, a national environmental organization, said the organization has not issued a formal response to Bush’s move, but added, “We are generally concerned with steps that put political appointees in greater positions of power in federal agencies, because those people are likely to be under the sway of whoever is in the White House.

“That seems to be one of the tacks this White House is taking,” Willett said. “This executive order is a way to try to put decisions into the hands of political appointees rather than career people who look at the long-term more than politicians, who often are more interested in short-term advantage.”

Half-Million Guidance Documents

There are 192,000 federal regulations on the books, and more than 500,000 guidance documents, according to the U.S. Chamber of Commerce.

“President Bush’s amendment is a paragon of common sense and good governance,” said William Kovacs, the Chamber’s vice president of environment, energy, and regulatory affairs. “It’s the first truly significant attempt by an administration to hold federal bureaucrats to account and insist they act with discretion when imposing new and expensive burdens on businesses and consumers.”

‘Abuse of Due Process’

Maureen Martin, senior fellow for legal affairs at The Heartland Institute, said she is pleased by Bush’s order.

“The problem with guidance is that agencies use it as a substitute for rulemaking, which is an abuse of due process,” Martin said. “In the 1980s–the early days of environmental law–agency guidance was helpful because it filled the gap between Congress’s enactment of a law and promulgation of rules adopted with formal notice and public comment.”

Martin added, “Often, however, years or even decades went by without formal rulemaking proceedings, and the informal guidance documents, sometimes pushing the boundaries of the law, took on full legal trappings, and companies targeted by guidance-driven agency enforcement actions often settled them because they lacked the resources to challenge the guidance in court.”

Steve Stanek ([email protected]) is managing editor of Budget & Tax News.