Introduction to Rulemaking

The APA divides regulatory procedures into two categories: “rulemaking” and “adjudication.” According to the APA, everything that isn’t rulemaking is considered to be adjudication. Further, both rulemaking and adjudication are separated into “formal” and “informal.” There is formal rulemaking, informal rulemaking, formal adjudication, and informal adjudication. 

APA section 553 says that formal procedures are triggered when enabling statutes require rules to be made “on the record after opportunity for an agency hearing.” As we will see in a later section, courts have interpreted this part of the APA very narrowly, so formal processes are rarely required.

Each of these four types of procedures has different procedural requirements according to the APA. Here is a quick overview of the four types of procedures:

1. Formal Rulemaking: Formal rulemaking procedures are rarely used. Formal rulemaking imposes trial-like adjudicatory processes (hearings, testimony, etc.) on the rulemaking process. Formal rulemaking takes a lot of time and resources. The hearings in the Peanut Butter wars podcast took almost four months and produced a transcript of 7,736 pages. Agencies would prefer to avoid these long, resource-intensive processes.
2. Informal Rulemaking: This is the commonly used procedure for rulemaking. It follows the “notice and comment” procedures described in APA section 553. In informal rulemaking, agencies publish advanced notice of proposed rulemaking in the Federal Register so that the public has an opportunity to participate in the rulemaking process. 
3. Formal Adjudication: Like formal rulemaking, formal adjudication is a rare occurrence. It requires trial-like procedures. Administrative Law Judges (ALJ) hear these adjudications.
4. Informal adjudication is “everything else.” Often, the processes for informal adjudication are specified in enabling statutes or described in agencies’ regulations.

Several factors beyond the APA add complexity to the rulemaking and adjudication procedures. For one, the rulemaking process does not begin magically with a notice of proposed rulemaking published in the Federal Register, as per APA section 553(b). Before formulating a proposed rule, agencies do years of studies, prioritizing, planning, studying, and consulting with experts and stakeholders (people and groups who will be affected by the regulation). Similarly, the rulemaking process rarely ends with the publication of the final rule in the Federal Register. Final rules are often challenged through judicial review as adversely affected stakeholders exercise their right to review under APA Section 702. In the Peanut Butter Wars, the peanut butter companies sued the FDA after the agency issued its final order. The industries regulated by the Clean Air Act rule in The Regulators were waiting for the final rule to file complaints in the federal courts.  Judicial review plays a prominent role in agency rulemaking.

Beyond pre- and post-procedure activities, there are also several factors that add complexity to the notice and comment part of the rulemaking process in APA section 553:

• Judicial interpretations of APA section 553 add layers of complexity to the agency’s procedural requirements. 
• Statutes beyond the APA add additional procedural requirements for agencies to follow. The APA rulemaking requirements are boilerplate, default rulemaking requirements that are often supplemented by other statutory requirements. The National Environmental Policy Act (NEPA) requires agencies to consider the environmental impacts of certain agency actions. Other statutes, like the Paperwork Reduction Act and the Regulatory Flexibility Act, are meant to reduce “red tape” on regulated entities by limiting the amount of paperwork agencies can impose on regulated entities and forcing agencies to consider the regulatory burdens new regulations may put on small businesses.
• Enabling statutes can also supplement, or even override, the APA’s rulemaking requirements. For instance, many environmental laws require agencies to conduct environmental studies and cost-benefit analyses before finalizing new environmental rules. Agency mandates require all sorts of additional processes, like oral hearings or additional testimony.
• Agencies sometimes voluntarily engage in extra procedures to reduce the chances of judicial review and other rulemaking slowdowns. Agencies build consensus among stakeholders by engaging in a process called negotiated rulemaking ("neg-reg" or "reg-neg"), asking for pre-notice feedback on rulemaking priorities, or seeking advice from Federal Advisory Committees before issuing notice of a proposed rule.
• Executive agencies must comply with Executive Orders, including E.O. 12,866, which requires agencies to draft and submit “regulatory impact statements” to the White House Office of Information and Regulatory Affairs (“OIRA”). OIRA reviews regulations to consider their costs and benefits.

This course focuses specifically on APA Section 553 informal rulemaking, also known as “notice and comment” rulemaking. As we learn about APA section 553 informal rulemaking, keep in mind that there are many things that determine how rules will be promulgated beyond the “boilerplate” 553 procedures.

1. Can you identify any of the procedures in the Uncertain Hour Podcast that were in the readings?  What were they?
2. After reading the Congressional Research Service overview in last week's reading and the introduction from this week's reading, what surprised you about the rulemaking process outlined in the Regulator's video?  
3. What were the key constituencies trying to influence the rulemaking process in the Peanut Butter Regulations?  In the Clean Air Regulations? 
4. How do you think this policymaking process is different from the Congressional process for passing a bill into law?  How is it similar?
5. After watching the Regulators documentary example, do you think the rulemaking process was fair?  What concerns from the constituents resonated with you?  Were those concerns addressed?  How about the Peanut Butter regulations?

How and Why Do Agencies Start the Rulemaking Process?

Before we begin learning about the steps of the informal rulemaking procedure (APA Section 553), we will first explore how agencies decide to promulgate a rule. The word “promulgate” means to formally proclaim or declare that a new law is in effect after its final approval. In the administrative law context, “promulgate” refers to the process of enacting administrative final rules (making regulations). A regulation is “promulgated” when the final rule is published in the Federal Register at the conclusion of the rulemaking process.

While APA section 553 describes how agencies must make a rule from notice, comment, and the publication of the final rule, the rulemaking process really begins long before notice of a proposed rule is published in the Federal Register, when the agency begins to consider whether to propose the rule in the first place. Agencies do not simply decide, internally, what to regulate and how to regulate it. The decision-making processes that agencies undertake to determine which rules to create involve significant external influence. As public policy professionals, you may be in a position to advocate for regulatory reform amidst other stakeholders also advancing their initiatives. For instance, if you are advocating for safe food regulations, your concerns will be weighed against those of food corporations, and if you are an environmental advocate seeking clean air regulations, you will be fighting to have your voice heard against energy companies and other industrial groups that are interested in less stringent air regulations. Here are some tips for participating in agency rulemaking from an ex-agency official:

Initiating Agency Action Colloquium

5 Admin. L. J. of Am. U. 24 (1991)

Comments of Patricia Bailey (Commissioner of the Federal Trade Commission from 1979-1988)

[…] The first thing to do is to think about what you're trying to do. Agency actions are taken pursuant to statutes and regulations on congressional oversight indictments. And in that respect, they are making legal decisions. But that is the only respect in which you can call a lotof these decisions legal, while regulations and statutes are at the foundation of agency action, decisions that are being made are what government should do, not really so much what the government is compelled to do by the statute. And so you have to remember, I think, when you go forward to do battle with the government agency, that an agency is not a courtroom. [… People who work in agencies are] making policy decisions.

Getting the agency to act in a certain way requires certain policy advocacy skills. And in no particular order, I would say that those skills are an ability to understand the agency's problem, to have a fairly firm grip on the legislative process, the ability to deal with the political environment that the agency finds itself in, and an understanding of basic policy analysis tools that most all agencies use. The final skill would be, of course, to know when none of these other skills would work, and to know what to do then.

Let me elaborate a little bit. Let's say that you are dealing with an agency where a decision is going to be made and a proposal has already been made about it. I think that there is no need to come whining to the agency that some policy or decision that they make is going to harm your client or harm consumers or do harm to someone. Because almost any decision that an agency makes is going to harm someone. Allegation without more does not surprise them and does not cause them to change course.

You have to know what the agency's mission is, what its purpose is, what its causes are. And that may enable you to argue that whatever action it is that they are proposing to take will damage their own interests. This is often a good tactic to take, because, hopefully, you can get them to see that whatever it is you want them to do is in their own best interests, based on your understanding of what they have been told to do and what they are trying to do. And at the same time, don't ever try to conceal your own self-interest, because your reasons from the outside are inherently suspect.

If you understand an agency's position, you may discover that what is primary for the agency is really secondary or even unimportant to you. But what may be crucial to you is only secondary for the agency. If you can look at it that way, you may be able to get something that is very important to you eliminated or added, whatever your interest is, in a way that will enable the agency to deal with the problem without compromising its own cause. A 100% win is not attainable. It is probably a waste of money to pursue, and unwise in the end.

Now, understanding the bearcutter process is important because it is very easy to stumble in at the wrong place and to make the wrong arguments to the wrong people, and to get sort of hopelessly bogged down. The government decisionmaking process sometimes seems vulnerable, whereas it's only fragmented. So, if you get an organization chart, that is the beginning of wisdom. It doesn't help a lot, but it gives you at least some idea. Wherever you go there are going to be technical experts and economists and lawyers and planners and program generalists and a whole category of other people. As the input of people in these divisions begins to rise up the decision ladder, the proposed action will receive less and less in-depth review.

Now, regardless of how serious and significant the issue may be, the decision reached will be based largely on the material generated at the staff level by the staff. To be most effective, input of data and arguments from outsiders must be made at that level. It will make less and less of an impact as a matter for decision moves up the chain. I cannot tell you the number of people I know who want to come in and talk to the Secretary of Commerce about a matter that somebody has said in the regulatory agenda he's going to make a decision on this week. The problem, however, is that it is too late, it is just too late to do that, unless you have certain kinds of issues which I will mention in a minute. You need to sort out who you're talking to. I watch with amazement as lawyers make insistent legal arguments to economists… “… our keen legal arguments do not interest them.”

[…] You have to educate yourselves about the agency's normal procedures. And all government agencies have the same kind of modus operandi. They have these lengthy in-depth analyses by the stack, but somewhere—and you should find out where—somebody is responsible for making an overall synthesis of these arguments so that it tells a story that makes sense to somebody. And then there's going to be a summary at the top for the people at the highest levels of the decision chain. So you should prepare your papers in the same format.

Understand that once the papers leave the staff unit, the decisions made in that unit will not be reversed. The lawyers are not going to reverse anything that the economists have written. And that's true all across this spectrum. In the end, the arguments of the unit may be rejected, but they're not going to be reversed by anyone. So you have to get in on the ground floor. You cannot risk missing out at that level. […]

[Do] not gratuitously insult the staff of an agency. What will happen is that most likely the agency will close ranks against you, freeze you out. That is going to be true even if you have a pretty good case or an argument. I have seen it happen a lot. I call it the "New York lawyers' syndrome." It is sort of, you know, "These people are really not very bright. They're not very something." They have an animosity toward my client, born surely of their ignorance. And it could as well be called "the Chicago's economist syndrome" or "the cumulus single-minded public advocate approach." There is a way not to deal with these things. In court you can go in and make light of somebody else's argument. But to try that in an agency; you're on your way out.

Now I would say, try to understand the political environment that the agency is involved in. Don't talk about unelected bureaucrats with arbitrary unchecked power; that is not how it seems to them. With OMB (the Office of Management and Budget) on one shoulder and the White House on another and congressional oversight investigative appropriations committees, agency constituents-whomever they may be—labor, agriculture, business, and the media. The […] media is always there, disclosing things, commenting on things, criticizing them and subjecting them to ridicule. It doesn't seem to [the agencies] like they have unchecked power. So you should keep in mind when you're urging an agency to take a certain kind of action how it is going to appear to the significant others that surround that agency. Because that is the way that agency will be looking at it.

I would also say that if your views are an anathema to some of those people that you are trying to persuade, if you represent Exxon and you're trying to deal with the EPA on oil spill regulation or something, what you might try to do is to form a coalition and get someone else to make your argument. I think that would be the best thing. Agencies like to reach consensus decisions so that everyone gets something and nobody with a really legitimate concern is left somewhere out in the streets screaming as loud as they can on the way to Capitol Hill or to the Washington Post. So they probably will give you a little bit. You know, something to get you on board-to be able to do your job to find out how much you can give them to reach their policy goals and how little you will have to give to reach these objectives. […]

It is helpful if you know the rudiments of policy analysis-cost/benefit analysis, risk assessment, knowledge of market forces and all that stuff. All agencies talk a lot about that now. And actually these are useful tools. But, don't try to play games. Don't come in and say, “Well, you know, this is cost/benefit and we're going to pay all of the costs so we want all of the benefits to go here.” If you do that without any sort of analysis, you're not going to help yourselves, because agencies increasingly have more sophisticated means of doing these things. And that is what you are up against. […]

I only offer one caution about the Congress that became very obvious in the last few years. One thing the Congress can do is to get an agency not to do something, because they can always threaten to shut off the money. For a particular project, we had to stop working on a few over at the FTC three times because the money was cut off. […] So the limits of congressional pressure really come from that side. In sum, it is much easier to stop something than to start it.

Petitions for Rulemaking

Like industries and interest groups that lobby members of Congress, agency lobbyists have become experts at getting involved in agency rulemaking, integrating themselves into agencies’ decisionmaking processes. It has been said that rulemaking is now a “blood sport” where regulated industries spend millions of dollars to influence agency actors and exert political pressure on agencies. One way that those advocating for the public can counter industry lobbyists is to petition agencies to begin the rulemaking processes. Enabling statutes often require agencies to protect public health, safety, and interests. APA section 553(e) says that “[e]ach agency shall give an interested person the right to petition for issuance, amendment, or repeal of a rule.”

While the APA doesn’t provide specific procedural requirements for petitioning for rulemaking, agencies are prohibited from ignoring petitions for rulemaking. APA section 555(e) requires agencies to provide “prompt notice” of a denial of a “written application, petition, or other request of an interested person made in connection with any proceeding.” This notice of denial must be “accompanied by a brief statement of the grounds for denial.” 

Filing a petition for rulemaking is a way to force agencies to take action when they have not done so on their own. If an agency starts the rulemaking you petition for, you have successfully pushed the agency to act. If the agency does not start the rulemaking process or does not deny the petition and accompany the denial with its rationale for denying the request within a reasonable amount of time, the petitioner can seek judicial review under the APA section 702. APA section 702 says that a person suffering a legal wrong because of “agency action” has the right to seek judicial review, and APA section 551(13) defines “agency action” to include an agency’s “failure to act.” Finally, APA section 706(1) says that courts can “compel agency action unlawfully withheld and unreasonably delayed.” So, according to the APA, an agency’s failure to act is considered an “agency action” within the permissible scope of judicial review.

It is hard for courts to review agency inaction because, when an agency hasn’t done anything, there is no substantive agency record for a court to review. Without an agency decision, courts have little substance to work with in determining whether the agency has done anything wrong. An agency will usually claim that it hasn’t responded to a petition for rulemaking because it hasn’t had the time or resources to begin the rulemaking process. Agencies get a lot of leeway in deciding how to prioritize their various initiatives and responsibilities, and courts tend to give agencies a lot of deference, or “the benefit of the doubt” when agencies make those choices.

So, when there isn’t an agency record for the court to review, how can a court decide whether the agency’s decision-making process is acceptable? The court is not in a position to know about all of the agency’s priorities or make an informed determination about how much time and resources the various priorities require. Federal courts have adopted a list of factors (the TRAC factors) to consider as they decide whether an agency’s delay is permissible.

Telecommunications Research & Action Center v. Federal Communications Commission

750 F.2d 70 (D.C. Cir. 1984)

HARRY T. EDWARDS, Circuit Judge:

The Telecommunications Research & Action Center (“TRAC”) and several other not-for-profit corporations and public interest groups petition this court for a writ of mandamus to compel the Federal Communications Commission (“FCC” or “the Commission”) to decide certain unresolved matters now pending before the agency. The essence of TRAC's claim is that the FCC has unreasonably delayed determining whether American Telephone and Telegraph Company (“AT&T”) must reimburse ratepayers for [...] allegedly unlawful overcharges. [...]

Representative Timothy Wirth, Chairman of the Subcommittee on Telecommunications, Consumer Protection and Finance of the House Committee on Energy and Commerce, has twice written to the FCC to inquire about the unexplained delay in agency action. In 1981, FCC officials responded that they expected a staff recommendation that fall. However, no such recommendation was produced. In the spring of 1984, agency officials modified their response and estimated that a staff recommendation would be issued that summer. The agency failed on this commitment, too. Now, in the face of this court action, the Commission has recently indicated that it plans to resolve the matter on or before November 30, 1984. [...]

III. Merits of the Unreasonable Delay Claim

[G]iven the clear legislative preference for review of final action, we must be circumspect in exercising jurisdiction over interlocutory petitions. Postponing review until relevant agency proceedings have been concluded “permits an administrative agency to develop a factual record, to apply its expertise to that record, and to avoid piecemeal appeals.” [...] 

Claims of unreasonable agency delay clearly fall into that narrow class of interlocutory appeals from agency action over which we appropriately should exercise our jurisdiction. It is obvious that the benefits of agency expertise and creation of a record will not be realized if the agency never takes action. Agency delay claims also meet Judge Leventhal's suggested criteria for our interlocutory intervention — not only is there an outright violation of 5 U.S.C. § 555(b)'s mandate that agencies decide matters in a reasonable time, there also is no need for the court to consider the merits of the issue before the agency. Finally and most significantly, Congress has instructed statutory review courts to compel agency action that has been unreasonably delayed. 5 U.S.C. § 706(1).

In the context of a claim of unreasonable delay, the first stage of judicial inquiry is to consider whether the agency's delay is so egregious as to warrant mandamus. Although this court has decided several cases involving claims of unreasonable delay, [...] we have not articulated a single test for when the writ should issue. On reading these cases together, however, one can discern the hexagonal contours of a standard. Although the standard is hardly ironclad, and sometimes suffers from vagueness, it nevertheless provides useful guidance in assessing claims of agency delay: (1) the time agencies take to make decisions must be governed by a “rule of reason”; (2) where Congress has provided a timetable or other indication of the speed with which it expects the agency to proceed in the enabling statute, that statutory scheme may supply content for this rule of reason; (3) delays that might be reasonable in the sphere of economic regulation are less tolerable when human health and welfare are at stake; (4) the court should consider the effect of expediting delayed action on agency activities of a higher or competing priority; (5) the court should also take into account the nature and extent of the interests prejudiced by delay; and (6) the court need not “find any impropriety lurking behind agency lassitude in order to hold that agency action is ‘unreasonably delayed.’” 

Because, in the instant case, the FCC has assured us that it is moving expeditiously on both overcharge claims, we need not test the delay here against the above standard to determine if it is egregious enough to warrant mandamus. But in light of the Commission's failure to meet its self-declared prior deadlines for these proceedings, we believe these delays are serious enough for us to retain jurisdiction over this case until final agency disposition.

In [an earlier case] we announced that:

the entire ratemaking procedure in the 1934 Communications Act revolves around a “rule of reason” .... It assumes that rates will be finally decided within a reasonable time encompassing months, occasionally a year or two, but not several years or a decade .... Complex regulation must still be credible regulation; the delay at issue here threatens the FCC's credibility .... Many of the same considerations that impel judicial protection of the right to a “speedy trial” in criminal cases or implementation of civil decrees with all deliberate speed are not inapposite in agency deliberations. Those situations generally involve protection of constitutional rights, but delay in the resolution of administrative proceedings can also deprive regulated entities, their competitors or the public of rights and economic opportunities without the due process the Constitution requires.

In that case we found a four year delay to be unreasonable. [...] In the instant case, the FCC has delayed almost five years on the rate of return inquiry [...] These delays have permitted AT&T's allegedly excessive returns to “become for all practical purposes, the accepted” ones. Even the agency recognizes, at least with regard to the rate of return delay, that “an unfortunately long time has elapsed since [this] matter first appeared.” Whether or not these delays would justify mandamus, we believe they clearly warrant retaining jurisdiction. [...]

1. What events do you think would prompt an agency to initiate are rulemaking process aside from a petition?
2. What are the TRAC factors that courts consider for determining if a delay in rulemaking is warranted?

APA section 553(b) requires that agencies publish “general notice of proposed rulemaking” in the Federal Register. A “Notice of Proposed Rulemaking” in the Federal Register (often abbreviated as “NPRM” or “NOPR”) serves as constructive notice of a new rule, and is legally sufficient notice even if an affected party is not aware of the notice. Public policy professionals doing regulatory work should read regulatory updates and news, or look at Regulations.gov or the Federal Register regularly to see whether there are any new proposed rules that may impact their clients or work.

According to APA section 553(b), NPRMs must include the “time, place, and nature” of the public proceedings so that people can participate in the commenting process. NPRMs must also state the legal authority under which the proposed rule is proposed (the enabling statute). Agencies also have to provide “either the terms or substance of the proposed rule or a description of the subjects and issues involved.” 

Agencies usually publish much more than the bare minimum notice required by APA section 553(b). An NPRM usually contains the full text of the proposed rule and an extensive “preamble” that gives background and describes what the rule is intended to do. Thorough NPRMs have evolved because statutes have added requirements to rulemaking on top of the “boilerplate” APA requirements, and also because agencies want to avoid getting sued for lack of notice by providing plenty of notice.

But, even with long, in-depth NPRMs, agencies still sometimes fail to provide sufficient notice. The APA’s notice requirement was supposed to ensure that agencies sufficiently apprised “interested persons” of the issues involved so that they could “present responsive data or argument.” S. Doc. No. 248, 79th Cong., 2d Sess. 200 (1946). When agencies fail to provide adequate notice to apprise stakeholders of the issues involved in the rulemaking, courts may remand the final rules back to the agencies, requiring them to undergo new notice and comment periods.

It is not unusual for agencies to be challenged about the sufficiency of the notice they provide when proposing rules. Whenever agencies adopt final rules that are different from what the NPRM describes, stakeholders may claim that the agencies failed to provide adequate notice. The stakeholder has to wait for the final rule to come out though… The courts must then weigh whether the notice was sufficient, and whether the change to the proposal was minor or more consequential. Sometimes, agencies note unresolved issues that may change in the NPRM preamble, but other times, agencies change their rulemaking decisions mid-course because of information that commenters provide or other things they learn in the course of the rulemaking process.

The courts have to balance the interest of the public in being notified about what agencies are proposing in the rulemaking process with the interest of administrative flexibility - allowing the agency to improve rules without continually having to re-start the notice and comment process with a new notice for every amendment. Agencies claim that the latter would prevent them from ever changing a proposed rule, but, if agencies can change rules without giving new notice, people are denied the opportunity to participate and influence rulemaking outcomes. 

The test courts apply to make this difficult balancing choice is the “logical outgrowth test.” Courts have decided that the public has notice when the final rule is a “logical outgrowth” of the rulemaking process. Specifically, the court sees whether the final rule materially alters the issues in the rulemaking or, if the final rule substantially departs from the terms or substance of the proposed rule. In those cases, notice is inadequate for the purposes of the Administrative Procedure Act. 

The Chocolate Manufacturers case in the next chapter demonstrates the application of the logical outgrowth language.

Chocolate Manufacturers Association of the United States v. Block

755 F.2d 1098 (4th Cir. 1985)

JAMES SPROUSE, Circuit Judge:

Chocolate Manufacturers Association (CMA) appeals from the decision of the district court denying it relief from a rule promulgated by the Food and Nutrition Service (FNS) of the United States Department of Agriculture (USDA or Department). CMA protests that part of the rule that prohibits the use of chocolate flavored milk in the federally funded Special Supplemental Food Program for Women, Infants and Children (WIC Program). Holding that the Department's proposed rulemaking did not provide adequate notice that the elimination of flavored milk would be considered in the rulemaking procedure, we reverse.

I

Since 1946 USDA has administered a variety of child nutrition programs under the National School Lunch Act and the Child Nutrition Act of 1966. [...] The WIC Program was established by Congress in 1972 to assist pregnant, postpartum, and breastfeeding women, infants and young children from families with inadequate income whose physical and mental health is in danger because of inadequate nutrition or health care. Under the program, the Department designs food packages reflecting the different nutritional needs of women, infants, and children and provides cash grants to state or local agencies, which distribute cash or vouchers to qualifying individuals in accordance with Departmental regulations as to the type and quantity of food.

In 1975 Congress revised and extended the WIC Program through fiscal year 1978 and, for the first time, defined the "supplemental foods" which the program was established to provide. The term shall mean those foods containing nutrients known to be lacking in the diets of populations at nutritional risk and, in particular, those foods and food products containing high-quality protein, iron, calcium, vitamin A, and vitamin C.... The contents of the food package shall be made available in such a manner as to provide flexibility, taking into account medical and nutritional objectives and cultural eating patterns.

Pursuant to this statutory definition, the Department promulgated new regulations specifying the contents of WIC Program food packages. These regulations specified that flavored milk was an acceptable substitute for fluid whole milk in the food packages for women and children, but not infants. This regulation formalized the Department's practice of permitting the substitution of flavored milk, a practice observed in the WIC Program since its inception in 1973 as well as in several of the other food programs administered by the Department.

In 1978 Congress, in extending the WIC Program through fiscal year 1982, redefined the term "supplemental foods" to mean those foods containing nutrients determined by nutritional research to be lacking in the diets of pregnant, breastfeeding, and postpartum women, infants, and children, as prescribed by the Secretary. State agencies may, with the approval of the Secretary, substitute different foods providing the nutritional equivalent of foods prescribed by the Secretary, to allow for different cultural eating patterns.

Congress stated further: The Secretary shall prescribe by regulation supplemental foods to be made available in the program under this section. To the degree possible, the Secretary shall assure that the fat, sugar, and salt content of the prescribed foods is appropriate.

To comply with this statutory redefinition, the Department moved to redraft its regulations specifying the WIC Program food packages. In doing so it relied upon information collected during an extensive investigative effort which had begun in 1977. In June 1977 the Department held public hearings in seven cities and elicited testimony on the structure and administration of the WIC Program. The Department invited many interested and informed parties to attend these hearings — the governor and chief health officer of every state, the House Education and Labor Committee, the Senate Select Committee on Nutrition Evaluation, state WIC coordinators, industry representatives, and professional and advocacy groups. In addition to information gathered at the public hearings, the Department received periodic reports from the National Advisory Council on Maternal, Infant, and Fetal Nutrition, as well as recommendations from a Food Package Advisory Panel convened in October 1978.

Using this information as well as its own research as a basis, the Department in November 1979 published for comment the proposed rule at issue in this case. 44 Fed.Reg. 69254 (1979). Along with the proposed rule, the Department published a preamble discussing the general purpose of the rule and acknowledging the congressional directive that the Department design food packages containing the requisite nutritional value and appropriate levels of fat, sugar, and salt. Discussing the issue of sugar at length, it noted, for example, that continued inclusion of high sugar cereals may be “contrary to nutrition education principles and may lead to unsound eating practices.” It also noted that high sugar foods are more expensive than foods with lower sugar content, and that allowing them would be “inconsistent with the goal of teaching participants economical food buying patterns.”

The rule proposed a maximum sugar content specifically for authorized cereals. The preamble also contained a discussion of the sugar content in juice, but the Department did not propose to reduce the allowable amount of sugar in juice because of technical problems involved in any reduction. Neither the rule nor the preamble discussed sugar in relation to flavoring in milk. Under the proposed rule, the food packages for women and children without special dietary needs included milk that could be “flavored or unflavored.” 

The notice allowed sixty days for comment and specifically invited comment on the entire scope of the proposed rules: “The public is invited to submit written comments in favor of or in objection to the proposed regulations or to make recommendations for alternatives not considered in the proposed regulations.” Over 1,000 comments were received from state and local agencies, congressional offices, interest groups, and WIC Program participants and others. Seventy-eight commenters, mostly local WIC administrators, recommended that the agency delete flavored milk from the list of approved supplemental foods.

In promulgating the final rule, the Department, responding to these public comments, deleted flavored milk from the list, explaining:

In the previous regulations, women and children were allowed to receive flavored or unflavored milk. No change in this provision was proposed by the Department. However, 78 commenters requested the deletion of flavored milk from the food packages since flavored milk has a higher sugar content than unflavored milk. They indicated that providing flavored milk contradicts nutrition education and the Department's proposal to limit sugar in the food packages. Furthermore, flavored milk is more expensive than unflavored milk. The Department agrees with these concerns. There are significant differences in the sugar content of fluid whole milk and low fat chocolate milk. Fluid whole milk supplies 12.0 grams of carbohydrate per cup compared to 27.3 grams of carbohydrate per cup provided by low fat chocolate milk. If we assume that the major portion of carbohydrate in milk is in the form of simple sugar, fluid whole milk contains 4.9% sugar contrasted with 10.9% sugar in low fat chocolate milk. Therefore, to reinforce nutrition education, for consistency with the Department's philosophy about sugar in the food packages, and to maintain food package costs at economic levels, the Department is deleting flavored milk from the food packages for women and children. Although the deletion of flavored milk was not proposed, the comments and the Department's policy on sugar validate this change. 

After the final rule was issued, CMA petitioned the Department to reopen the rulemaking to allow it to comment, maintaining that it had been misled into believing that the deletion of flavored milk would not be considered. In a letter to CMA dated November 18, 1981, the Department indicated that it would reopen the issue of flavored milk for "further public comments" and would request “rationale both supporting and opposing the disallowance of flavored milk in the WIC Program.” It subsequently reversed this position, however, and declined to reopen the rulemaking procedure.

On this appeal, CMA contends first that the Department did not provide notice that the disallowance of flavored milk would be considered, and second that the Department gave no reasoned justification for changing its position about the nutritional value of chocolate in the food distributed under its authority. The Department responds to the first contention by arguing that its notice advised the public of its general concern about high sugar content in the proposed food packages and that this should have alerted potentially interested commenters that it would consider eliminating any food with high sugar content. It also argues in effect that the inclusion of flavored milk in the proposed rule carried with it the implication that both inclusion and exclusion would be considered in the rulemaking process. Because we agree with CMA that the Department provided inadequate notice and, therefore, that it must reopen the comment period on the rule, we do not reach the issue of the reasonable justification for its change of position.

II

The requirement of notice and a fair opportunity to be heard is basic to administrative law. Our single chore is to determine if the Department's notice provided interested persons, including CMA, with that opportunity. We must decide whether inclusion of flavored milk in the allowable food packages under the proposed rule should have alerted interested persons that the Department might reverse its position and exclude flavored milk if adverse comments recommended its deletion from the program.

Section 4 of the Administrative Procedure Act (APA) requires that the notice in the Federal Register of a proposed rulemaking contain “either the terms or substance of the proposed rule or a description of the subjects and issues involved.” 5 U.S.C. § 553(b)(3). The purpose of the notice-and-comment procedure is both “to allow the agency to benefit from the experience and input of the parties who file comments ... and to see to it that the agency maintains a flexible and open-minded attitude towards its own rules.” National Tour Brokers Ass'n v. United States, 591 F.2d 896, 902 (D.C.Cir.1978). The notice-and-comment procedure encourages public participation in the administrative process and educates the agency, thereby helping to ensure informed agency decisionmaking. 

The Department’s published notice here consisted of the proposed rule and a preamble discussing the negative effect of high sugar content in general and specifically in relation to some foods such as cereals and juices, but it did not mention high sugar content in flavored milk. The proposed rule eliminated certain foods with high sugar content but specifically authorized flavored milk as part of the permissible diet. In a discussion characterized by pointed identification of foods with high sugar content, flavored milk was conspicious by its exclusion. If after comments the agency had adopted without change the proposed rule as its final rule, there could have been no possible objection to the adequacy of notice. The public was fully notified as to what the Department considered to be a healthy and adequate diet for its target group. The final rule, however, dramatically altered the proposed rule, changing for the first time the milk content of the diet by deleting flavored milk. The agency concedes that the elimination of flavored milk by the final rule is a complete reversal from its treatment in the proposed rule, but it explains that the reversal was caused by the comments received from 78 interested parties — primarily professional administrators of the WIC Program.

This presents then not the simple question of whether the notice of a proposed rule adequately informs the public of its intent, but rather the question of how to judge the adequacy of the notice when the proposal it describes is replaced by a final rule which reaches a conclusion exactly opposite to that proposed, on the basis of comments received from parties representing only a single view of a controversy. In reviewing the propriety of such agency action, we are not constrained by the same degree of deference we afford most agency determinations. “Though our review of an agency's final decision is relatively narrow, we must be strict in reviewing an agency's compliance with procedural rules.” BASF Wyandotte Corp. v. Costle, 598 F.2d at 641; see also Weyerhauser Co. v. Costle, 590 F.2d 1011, 1025-28 (D.C.Cir.1978) (whereas a court defers to an agency's technical judgments, it is less hesitant to reject the agency's interpretation of statutes, and in reviewing an agency's procedural integrity, the court relies on its own independent judgment). “The question of adequacy of notice where a proposed rule is changed after comment ... requires careful consideration on a case-by-case basis.” 

There is no question that an agency may promulgate a final rule that differs in some particulars from its proposal. Otherwise the agency “can learn from the comments on its proposals only at the peril of starting a new procedural round of commentary.” International Harvester Co. v. Ruckelshaus, 478 F.2d 615, 632 n. 51 (D.C.Cir.1973). An agency, however, does not have carte blanche to establish a rule contrary to its original proposal simply because it receives suggestions to alter it during the comment period. An interested party must have been alerted by the notice to the possibility of the changes eventually adopted from the comments. Although an agency, in its notice of proposed rulemaking, need not identify precisely every potential regulatory change the notice must be sufficiently descriptive to provide interested parties with a fair opportunity to comment and to participate in the rulemaking. 

As we have indicated, appellate review of changes in a proposed rule after comments is more specifically controlled by the circumstances of each case than most administrative appeals. Nevertheless, a review of decisions of our sister circuits performing similar tasks is helpful. In BASF Wyandotte Corp. v. Costle, 598 F.2d 637 (1st Cir.1979), the court considered an EPA regulation controlling the discharge of pollutants into navigable waters by the pesticide industry. The EPA originally proposed dividing the organic pesticide industry into three subcategories, setting different pollutant standards for each one. The industry, arguing for expansion of the number of subcategories and, therefore, pollutant standards, submitted comments demonstrating that the proposed three subcategories were indistinguishable. The EPA, while agreeing with the comments, chose a different solution: it altered its initial rule by eliminating the subcategories and applying uniform standards throughout the entire organic pesticide industry. The industry complained that the EPA's decision to contract rather than expand the number of subcategories took them entirely by surprise. “The essential inquiry,” the court said, “is whether the commentators have had a fair opportunity to present their views on the contents of the final plan.” The First Circuit reasoned that even if the initial rule had proposed uniform standards, the content of petitioner's comments would not have been different for they still would have argued, albeit more voluminously and vociferously, for more subcategories. The petitioners, therefore, “had a fair opportunity to present their views.” [...]

The test devised by the First Circuit for determining adequacy of notice of a change in a proposed rule occurring after comments appears to us to be sound: notice is adequate if the changes in the original plan “are in character with the original scheme,” and the final rule is a “logical outgrowth” of the notice and comments already given. Other circuits also have adopted some form of the "logical outgrowth" test. Stated differently, if the final rule materially alters the issues involved in the rulemaking or, if the final rule “substantially departs from the terms or substance of the proposed rule,” the notice is inadequate.

There can be no doubt that the final rule in the instant case was the “outgrowth” of the original rule proposed by the agency, but the question of whether the change in it was in character with the original scheme and whether it was a “logical outgrowth” is not easy to answer. In resolving this difficult issue, we recognize that, although helpful, verbal formulations are not omnipotent talismans, and we agree that in the final analysis each case “must turn on how well the notice that the agency gave serves the policies underlying the notice requirement.” Under either view, we do not feel that CMA was fairly treated or that the administrative rulemaking process was well served by the drastic alteration of the rule without an opportunity for CMA to be heard.

It is apparent that for many years the Department of Agriculture has permitted the use of chocolate in some form in the food distribution programs that it administers. The only time the Department has proposed to remove chocolate in any form from its programs was in April 1978 when it sought to characterize chocolate as a candy and remove it from the School Lunch Program. That proposal was withdrawn after CMA commented, supporting chocolate as a part of the diet. Chocolate flavored milk has been a permissible part of the WIC Program diet since its inception and there have been no proposals for its removal until the present controversy.

The Department sponsored commendable information-gathering proceedings prior to publishing its proposed rule. Together with its own research, the information gathered in the pre-publication information solicitations formed the basis for the proposed rule. Most of the same information was presented to Congress prior to enactment of the 1978 statute that precipitated the 1979 rulemaking here in controversy. The National Advisory Council on Maternal, Infant, and Fetal Nutrition provided information and advice. Regional council meetings were open to the public and held in diverse areas of the country. Department of Agriculture personnel attended a number of regional, state, and local meetings and gathered opinions concerning possible changes in the food packages. The agency also gathered a food package advisory panel of experts seeking their recommendations. Food packages were designed based on the information and advice gleaned from these sources. In all of these activities setting out and discussing food packages, including the proposed rule and its preamble, the Department never suggested that flavored milk be removed from the WIC Program.

The published preamble to the proposed rule consisted of twelve pages in the Federal Register discussing in detail factors that would be considered in making the final rule. Two pages were devoted to a general discussion of nutrients, including protein, iron, calcium, vitamin A, vitamin C, folic acid, zinc, and fiber, and the dangers of overconsumption of sugar, fat, and salt. The preamble discussed some foods containing these ingredients and foods posing specific problems. It did not discuss flavored milk.

In the next eight pages of the preamble, the nutrition content of food packages was discussed — under the general headings of “cereal” and “juice” for infants; and “eggs,” “milk,” “cheese,” “peanut butter and mature dried beans and peas,” “juice,” “additional foods,” “cereals,” “iron,” “sugar,” “whole grain cereals,” “highly fortified cereals,” and “artificial flavors and colors” for women and children. The only reference to milk concerned the correct quantity to be provided to children, i.e., 24 quarts per month instead of 28 quarts. Although there was considerable discussion of the sugar content of juice and cereal, there was none concerning flavored milk. Likewise, there was considerable discussion of artificial flavor and color in cereal but none concerning flavored milk. The only reference to flavored milk was in the two-page discussion of the individual food packages, which noted that the proposed rule would permit the milk to be flavored or unflavored. The proposed rule which followed the preamble expressly noted that flavored or unflavored milk was permitted in the individual food packages for women and children without special dietary needs.

At the time the proposed rulemaking was published, neither CMA nor the public in general could have had any indication from the history of either the WIC Program or any other food distribution programs that flavored milk was not part of the acceptable diet for women and children without special dietary needs. The discussion in the preamble to the proposed rule was very detailed and identified specific foods which the agency was examining for excess sugar. This specificity, together with total silence concerning any suggestion of eliminating flavored milk, strongly indicated that flavored milk was not at issue. The proposed rule positively and unqualifiedly approved the continued use of flavored milk. Under the specific circumstances of this case, it cannot be said that the ultimate changes in the proposed rule were in character with the original scheme or a logical outgrowth of the notice. We can well accept that, in general, an approval of a practice in a proposed rule may properly alert interested parties that the practice may be disapproved in the final rule in the event of adverse comments. The total effect of the history of the use of flavored milk, the preamble discussion, and the proposed rule, however, could have led interested persons only to conclude that a change in flavored milk would not be considered. Although ultimately their comments may well have been futile, CMA and other interested persons at least should have had the opportunity to make them. We believe that there was insufficient notice that the deletion of flavored milk from the WIC Program would be considered if adverse comments were received and, therefore, that affected parties did not receive a fair opportunity to contribute to the administrative rulemaking process. That process was ill-served by the misleading or inadequate notice concerning the permissibility of chocolate flavored milk in the WIC Program and “does not serve the policy underlying the notice requirement.”

The judgment of the district court is therefore reversed, and the case is remanded to the administrative agency with instructions to reopen the comment period and thereby afford interested parties a fair opportunity to comment on the proposed changes in the rule.

REVERSED AND REMANDED WITH INSTRUCTIONS.

In Chapter 2.2, we learned about how and why agencies start the rulemaking process. As we learned, when agencies promulgate regulations, they usually use the informal rulemaking process, which is far less burdensome than the formal rulemaking procedure. Today, we will look at best practices and reasons for commenting on agencies’ proposed rules.

Diversity of Perspectives in Public Institution Decisionmaking

When we interact with agencies and provide comments in reaction to agencies’ proposals, we are adding our perspectives to the conversation and describing how the agency’s decision-making impacts the public. Agency decisions are determined by stakeholders, including agency experts and political appointees, regulated industries, and public interests impacted by the regulated industries and regulations.

Often, individual perspectives compete against the storytelling of industry lobbyists and agencies’ initiatives. It can be overwhelming for some groups to consider these other perspectives. It is also sometimes tempting to adopt the perspectives of these competing interests that seem much more powerful than those who don't have the same kind of representation.

Why Public Comments Matter 

Here is a PDF from Harvard Law School’s Center for Health Law and Policy Innovation illustrating some of these points in a health law context.

Commenting on proposed rules is an important tool for advocates because agencies are required to consider the comments and incorporate them into a statement of basis and purpose in the final rule according to APA section 553(c). Comments can shape the regulation by pointing out legal errors, critiquing the likely impacts of a rule, and pointing out possible unintended consequences of the proposed rule. Comments can also applaud good decision-making or provide alternatives that may improve the proposal. Comments also allow experts to chime in and provide for people who experience the impact of the regulated industry to share how the regulated activities affect their lives.

Sometimes, agencies propose rules to test whether the rule will be accepted by regulated industries and the public. If the agency receives an outpouring of critical comments on a proposed rule, a final rule may not materialize, and the rulemaking may stop and be reevaluated by the agency.

Comments can also set the foundations for future lawsuits. Even if your comments feel futile and don’t change the rulemaking, they become part of the administrative record considered by courts that review the agency’s actions. Additionally, if agencies fail to adequately consider the comments in accordance with APA section 553(c), a judge may invalidate the rule on procedural grounds.

Good Rulemaking Practices - Tips and Resources

Elizabeth D. Mullin, author of The Art of Commenting: How to Influence Environmental Decisionmaking With Effective Comments, has created guides for written and verbal commenting.

There are no APA or other requirements for commenting. Comments can be from anyone, and they can be of any length and contain any comments, from personal feelings to scientific research. The commenting process is broad and undefined to democratize participation in agency decision-making. It is meant to be open to all.

Although there are no formal requirements, there are some best practices for policy professionals participating in the commenting process:

Research the purpose and goals of the enabling statute, executive order, or other political or factual forces that prompted the rulemaking. Also, look into the history of the rulemaking. Is this an amendment to an existing regulation? Are there any other relevant regulations at play? Is the agency acting on the recommendation of a Federal Advisory Committee or internal study?

Draft an outline for your comment. Define your objectives and write them out. Separate your comment into subheadings and clearly organize your arguments/points.

Organize with others. Reach out to other organizations doing similar work to partner with them in a single comment or coordinate your comments to strengthen your message.

During writing: Be clear, concise, and organized

Use subheadings and topic sentences to draw attention and delineate your main points.

Make your strongest arguments. Consider and incorporate agency goals, explaining how your arguments will help the agency satisfy its policy objectives and legal requirements. You can do this by:

• Identifying legal violations
• Suggesting specific language
• Illustrating problems with examples
• Offering solutions to help agencies reach goals
• Back up your claims by citing solid primary and secondary authorities. Base your ideas in scientific studies, clear legal arguments that cite the proper legal authorities, and citations that support your arguments.

Before submitting: Proofread, and have someone read and provide feedback on the comment to ensure your arguments come across.

Regulations.gov and The Realities of Online Rulemaking Participation

Commenting on federal agencies’ proposed regulations, like most of our communications, has become an online activity. Congress passed the E-Government Act of 2002, Pub. L. No. 107-347 § 2(a)(1) codified at 44 U.S.C. §3601 to bring federal government processes online. Under this law, agencies were required to provide electronic rulemaking dockets online and to accept online public comments on proposed rules electronically. In 2011, President Obama issued Executive Order 13,563, which required executive agencies to provide the public with opportunities to comment on proposed regulation online and to provide rulemaking dockets on Regulations.gov. Executive Order 13,579 extended the same requirements to independent agencies. 

Since then, Regulations.gov has become a go-to online hub for finding rulemaking dockets and commenting on proposed regulations. The website makes commenting on regulations easier than ever before, providing the commenter has internet access. Regulations.gov is where to go if you want to comment on a regulation or check on an agency’s rulemaking docket. There is a separate FederalRegister.gov website to look at and search through the Federal Register. These two websites, together, make agency rulemaking more accessible than ever.

In some cases, this online accessibility may hamper the democratic goals of commenting and participating in rulemaking. Online systems can be gamed. In one famous rulemaking that determined the fate of net neutrality, a single proposed rule got 24 million comments. But most of the comments were filed by bots and fake email accounts. 

The rule was the Federal Communications Commission (FCC) “net neutrality” rule that stripped away equal access to the internet. The proposed “Restoring Internet Freedom Order” would reclassify broadband internet services as “information services” instead of common carrier telecommunications services. Common carriers provide services to the general public for a set price. In contrast, private carriers provide services to limited numbers of customers at varying prices. Common telecommunications carriers serve the general public and are regulated by the FCC under the Telecommunications Act of 1934 to ensure that they provide equal access and protect users’ privacy. The proposed rule would let private internet companies charge whatever fees they want to whoever they want and bypass privacy requirements.

The millions of bot comments, both from those in favor of the rule and from advocacy groups with “click a button to make a comment” options in their campaigns to protect net neutrality, flooded the system, drowning out the debate with thousands of AI-generated comments and duplicative comments.

Here is a Senate Report discussing the online commenting problems titled “Abuses of the Federal Notice-And-Comment Rulemaking Process,”

Administrative law scholars had long feared that automated commenting may dilute the commenting process by introducing bots responses and other digitally-drafted comments into the commenting process. Lowering the bar to engagement would let not just people, but also computers, participate in the system. It would also make the commenting process susceptible to getting “swamped” with thousands of comments.

So, the comment process is both more transparent and accessible than ever, and simultaneously more easily manipulated. This conundrum is one that governments will have to deal with as we move to more online systems. (We see similar issues in FOIA portals and other junctures where the public can interact with government decisionmaking and transparency.)

Case Law Limits on Rulemaking Procedures

In the 1970’s the Supreme Court decided three cases that set limits on how the courts can interfere in the rulemaking process:

United States v. Allegheny-Ludlum Steel Corp.: APA section 553 rarely triggers the requirement of formal rulemaking, even when stakeholders want more procedures and opportunities to participate in the rulemaking process.

United States v. Florida East Coast Railway Co.: Limits hearing requirements agencies have to undertake in rulemaking (reiterating Allegheny-Ludlum)

Vermont Yankee Nuclear Power Corp. v. NRDC: Courts cannot impose additional procedures on agencies beyond those imposed by Congress (even more broad than railroad cases)

The first two cases, Allegheny-Ludlum Steel Corp. and Florida East Coast Railway Co., deal with disputes between regulated train companies and train shippers and the Interstate Commerce Commission (“ICC”) a now-defunct federal agency that was created to regulate U.S. railroad companies. Both of the ICC cases limit the use of formal rulemaking procedures. Each case explains that APA section 553(c) only applies when Congress specifies that rules will be made “on the record” after the “opportunity for a hearing.” Courts read the language in APA section 553(c) saying “When rules are required by statute to be made on the record after opportunity for an agency hearing, sections 556 and 557 of this title apply instead of this subsection.” to only trigger section 556 and 557 rulemaking requirements when enabling statutes say “on the record after opportunity for a hearing.” This language rarely appears in enabling statutes, so formal rulemaking is rarely required.

The third case, Vermont Yankee, limits court intervention in agency procedures more broadly. In Vermont Yankee, the Supreme Court says that courts cannot impose additional rulemaking procedures on agencies beyond those required by Congress through the APA and enabling statutes.

UNITED STATES v. ALLEGHENY-LUDLUM STEEL CORP.

406 U.S. 742 (1972)

MR. JUSTICE REHNQUIST delivered the opinion of the Court.

[The “ICC” was an agency that regulated railroads. It was abolished after Congress passed the ICC Termination Act of 1995. After World War I, Congress passed the Esch Act to empowered the ICC to regulate railroad cars to ensure that railroad companies were using their services efficiently. In 1969, the ICC promulgated two rules that required freight cars to be returned to the lines that owned them after they were unloaded. These rules were meant to supply more freight cars to the Nation’s shippers because shippers were suffering from freight car shortages at peak loading periods. The ICC found that a major cause for the inadequate supply of freight cars was the operation of a national “car-pool” system where freight cars were shared across railroad lines and not returned immediately to their own lines. This left some lines without their empty, ready-to-use freight cars for extended periods of time.

Several railroads and shippers sued to enjoin the ICC rules, contending that the car service rules would seriously disrupt established railroad industry practices and cancel out the rules’ intended benefits, so the rules are not “reasonable” as that term is used in the Esch Act. The railroads and shippers also claimed that the ICC failed to comply with the APA by not using formal rulemaking procedures.] 

[...] Appellees claim that the Commission's procedure here departed from the provisions of 5 U. S. C. §§ 556 and 557 of the Act. Those sections, however, govern a rulemaking proceeding only when 5 U. S. C. § 553 so requires. The latter section, dealing generally with rulemaking, makes applicable the provisions of §§ 556 and 557 only “[w]hen rules are required by statute to be made on the record after opportunity for an agency hearing . . . .” The Esch Act, authorizing the Commission “after hearing, on a complaint or upon its own initiative without complaint, [to] establish reasonable rules, regulations, and practices with respect to car service . . . ,” does not require that such rules “be made on the record.” That distinction is determinative for this case. “A good deal of significance lies in the fact that some statutes do expressly require determinations on the record.” 2 K. Davis, Administrative Law Treatise § 13.08, p. 225 (1958). Sections 556 and 557 need be applied “only where the agency statute, in addition to providing a hearing, prescribes explicitly that it be ‘on the record.’” Siegel v. Atomic Energy Comm'n, 130 U. S. App. D. C. 307, 314 (1968). We do not suggest that only the precise words “on the record” in the applicable statute will suffice to make §§ 556 and 557 applicable to rulemaking proceedings, but we do hold that the language of the Esch Car Service Act is insufficient to invoke these sections [...]

This proceeding, therefore, was governed by the provisions of 5 U. S. C. § 553 of the Administrative Procedure Act, requiring basically that notice of proposed rulemaking shall be published in the Federal Register, that after notice the agency give interested persons an opportunity to participate in the rulemaking through appropriate submissions, and that after consideration of the record so made the agency shall incorporate in the rules adopted a concise general statement of their basis and purpose. The “Findings” and “Conclusions” embodied in the Commission's report fully comply with these requirements, and nothing more was required by the Administrative Procedure Act.

We conclude that the Commission's action in promulgating these rules was substantively authorized by the Esch Act and procedurally acceptable under the Administrative Procedure Act. The judgment of the District Court must therefore be 

Reversed.

United States v. Florida East Coast Railway Co.

410 U.S. 224 (1973)

MR. JUSTICE REHNQUIST delivered the opinion of the Court.

Appellees, two railroad companies [...] challenged the order of the Commission on both substantive and procedural grounds. The District Court sustained appellees' position that the Commission had failed to comply with the applicable provisions of the Administrative Procedure Act, 5 U.S.C. § 551 et seq., and therefore set aside the order without dealing with the railroads' other contentions. The District Court held that the language of § 1(14)(a) of the Interstate Commerce Act, required the Commission in a proceeding such as this to act in accordance with the Administrative Procedure Act, 5 U.S.C. § 556(d), and that the Commission's determination to receive submissions from the appellees only in written form was a violation of that section because the appellees were “prejudiced” by that determination within the meaning of that section. [The Interstate Commerce Act § 1(14)(a), says:

"The Commission may, after hearing, on a complaint or upon its own initiative without complaint, establish reasonable rules, regulations, and practices with respect to car service by common carriers by railroad subject to this chapter…”]

Following our decision last Term in United States v. Allegheny-Ludlum Steel Corp., 406 U.S. 742 (1972), we noted probable jurisdiction and requested the parties to brief the question of whether the Commission's proceeding was governed by 5 U.S.C. § 553,or by §§ 556 and 557, of the Administrative Procedure Act. We here decide that the Commission's proceeding was governed only by § 553 of that Act, and that appellees received the “hearing” required by § 1(14)(a) of the Interstate Commerce Act. We, therefore, reverse the judgment of the District Court and remand the case to that court for further consideration of appellees’ other contentions that were raised there, but which we do not decide. [...]

II. APPLICABILITY OF ADMINISTRATIVE PROCEDURE ACT

In United States v. Allegheny-Ludlum Steel Corp., supra, we held that the language of § 1(14)(a) of the Interstate Commerce Act authorizing the Commission to act “after hearing” was not the equivalent of a requirement that a rule be made “on the record after opportunity for an agency hearing” as the latter term is used in § 553(c) of the Administrative Procedure Act. [...]

[The District Court for the Middle District of Florida concluded that the ICC proceedings were governed by the stricter requirements of §§ 556 and 557 of the Administrative Procedure Act, rather than by the provisions of § 553 alone.] The conclusion of the District Court for the Middle District of Florida, which we here review, was based on the assumption that the language in § 1(14)(a) of the Interstate Commerce Act requiring rulemaking under that section to be done “after hearing” was the equivalent of a statutory requirement that the rule “be made on the record after opportunity for an agency hearing.” Such an assumption is inconsistent with our decision in Allegheny-Ludlum [...]

III. “HEARING” REQUIREMENT OF § 1(14)(a) OF THE INTERSTATE COMMERCE ACT

Inextricably intertwined with the hearing requirement of the Administrative Procedure Act in this case is the meaning to be given to the language "after hearing" in § 1(14)(a) of the Interstate Commerce Act. Appellees, both here and in the court below, contend that the Commission procedure here fell short of that mandated by the "hearing" requirement of § 1(14)(a), even though it may have satisfied § 553 of the Administrative Procedure Act. The Administrative Procedure Act states that none of its provisions “limit or repeal additional requirements imposed by statute or otherwise recognized by law.” 5 U.S.C. § 559. Thus, even though the Commission was not required to comply with §§ 556 and 557 of that Act, it was required to accord the “hearing” specified in § 1(14)(a) of the Interstate Commerce Act [...] 

The term “hearing” in its legal context undoubtedly has a host of meanings. Its meaning undoubtedly will vary, depending on whether it is used in the context of a rulemaking-type proceeding or in the context of a proceeding devoted to the adjudication of particular disputed facts. It is by no means apparent what the drafters of the Esch Car Service Act of 1917, which became the first part of § 1(14)(a) of the Interstate Commerce Act, meant by the term [...] What is apparent, though, is that the term was used in granting authority to the Commission to make rules and regulations of a prospective nature [...]

Under these circumstances, confronted with a grant of substantive authority made after the Administrative Procedure Act was enacted, we think that reference to that Act, in which Congress devoted itself exclusively to questions such as the nature and scope of hearings, is a satisfactory basis for determining what is meant by the term “hearing” used in another statute. Turning to that Act, we are convinced that the term “hearing” as used therein does not necessarily embrace either the right to present evidence orally and to cross-examine opposing witnesses, or the right to present oral argument to the agency's decisionmaker.

Section 553 excepts from its requirements rulemaking devoted to “interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice,” and rulemaking “when the agency for good cause finds . . . that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.” This exception does not apply, however, “when notice or hearing is required by statute”; in those cases, even though interpretative rulemaking be involved, the requirements of § 553 apply. But since these requirements themselves do not mandate any oral presentation, it cannot be doubted that a statute that requires a “hearing” prior to rulemaking may in some circumstances be satisfied by procedures that meet only the standards of § 553. The Court's opinion in FPC v. Texaco Inc., 377 U. S. 33 (1964), supports such a broad definition of the term “hearing.”

Similarly, even where the statute requires that the rulemaking procedure take place “on the record after opportunity for an agency hearing,” thus triggering the applicability of § 556, subsection (d) provides that the agency may proceed by the submission of all or part of the evidence in written form if a party will not be “prejudiced thereby.” Again, the Act makes it plain that a specific statutory mandate that the proceedings take place on the record after hearing may be satisfied in some circumstances by evidentiary submission in written form only.

We think this treatment of the term “hearing” in the Administrative Procedure Act affords a sufficient basis for concluding that the requirement of a “hearing” contained in § 1(14)(a), in a situation where the Commission was acting under the 1966 statutory rulemaking authority that Congress had conferred upon it, did not by its own force require the Commission either to hear oral testimony, to permit cross-examination of Commission witnesses, or to hear oral argument. Here, the Commission promulgated a tentative draft of an order, and accorded all interested parties 60 days in which to file statements of position, submissions of evidence, and other relevant observations. The parties had fair notice of exactly what the Commission proposed to do, and were given an opportunity to comment, to object, or to make some other form of written submission. The final order of the Commission indicates that it gave consideration to the statements of the two appellees here. Given the “open-ended” nature of the proceedings, and the Commission's announced willingness to consider proposals for modification after operating experience had been acquired, we think the hearing requirement of § 1(14)(a) of the Act was met.

Appellee railroads cite a number of our previous decisions dealing in some manner with the right to a hearing in an administrative proceeding. Although appellees have asserted no claim of constitutional deprivation in this proceeding, some of the cases they rely upon expressly speak in constitutional terms, while others are less than clear as to whether they depend upon the Due Process Clause of the Fifth and Fourteenth Amendments to the Constitution, or upon generalized principles of administrative law formulated prior to the adoption of the Administrative Procedure Act. [Lamdan note: We will learn why the Due Process Clause of the Fifth and Fourteenth Amendments does not apply to quasi-legislative rulemaking when we read the Londoner and Bi-Metallic cases in a few weeks.]

[...] Here, the incentive payments proposed by the Commission in its tentative order, and later adopted in its final order, were applicable across the board to all of the common carriers by railroad subject to the Interstate Commerce Act. No effort was made to single out any particular railroad for special consideration based on its own peculiar circumstances. Indeed, one of the objections of appellee Florida East Coast was that it and other terminating carriers should have been treated differently from the generality of the railroads. But the fact that the order may in its effects have been thought more disadvantageous by some railroads than by others does not change its generalized nature. Though the Commission obviously relied on factual inferences as a basis for its order, the source of these factual inferences was apparent to anyone who read the order of December 1969. The factual inferences were used in the formulation of a basically legislative-type judgment, for prospective application only, rather than in adjudicating a particular set of disputed facts.

The Commission's procedure satisfied both the provisions of § 1(14)(a) of the Interstate Commerce Act and of the Administrative Procedure Act, and were not inconsistent with prior decisions of this Court. We, therefore, reverse the judgment of the District Court, and remand the case so that it may consider those contentions of the parties that are not disposed of by this opinion.

It is so ordered.

Paper Hearings 

Both Allegheny-Ludlum and Florida East Coast Railway conclude that APA section 553 notice and comment requirements can be satisfied through “paper hearings,” where all of the notice and comment requirements happen in writing, not through live testimony (like a hearing). Notice printed in the Federal Register, and comments submitted in paper or electronically (by email or through Regulations.gov) satisfy the public participation requirements in the APA. 

Especially in informal rulemaking, which is a quasi-legislative process, written communications satisfy the APA’s participation and notice requirements. Requirements for quasi-judicial processes (adjudication) are different.

Vermont Yankee: Limiting Judicial Review of Agency Rulemaking Procedures

Five years after the Florida East Coast Railway decision, the Supreme Court said, in Vermont Yankee, that courts reviewing agencies’ rulemaking procedures must find the minimal procedural requirements in APA section 553 adequate, absent “extremely compelling circumstances.” Before Vermont Yankee, the D.C. Circuit sometimes required agencies to augment notice and comment rulemaking procedures with more processes like discovery and live testimony. The Vermont Yankee decision prohibits courts from adding those extra, hybrid procedural requirements. Only Congress and the President (through mechanisms like Executive Orders) can impose procedural requirements on agencies. 

Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, Inc.

435 U.S. 519 (1978)

MR. JUSTICE REHNQUIST delivered the opinion of the Court.

[The Natural Resources Defense Council (“NRDC”) challenged a rule promulgated by the (“AEC”). The NRDC claimed that the AEC did not provide a meaningful opportunity to participate in rulemaking because it did not allow participants to undertake discovery or cross-examination processes. The D.C. Circuit Court of Appeals remanded the rule to the agency, finding that “the procedures followed during the hearings were inadequate.” The Supreme Court disagrees with that decision, explaining its reasoning in this case:] 

In 1946, Congress enacted the Administrative Procedure Act, which as we have noted elsewhere was not only “a new, basic and comprehensive regulation of procedures in many agencies,” but was also a legislative enactment which settled “long-continued and hard-fought contentions, and enacts a formula upon which opposing social and political forces have come to rest.” 5 U.S.C. § 553, dealing with rulemaking, requires in subsection (b) that “notice of proposed rule making shall be published in the Federal Register . . . ,” describes the contents of that notice, and goes on to require in subsection (c) that after the notice the agency “shall give interested persons an opportunity to participate in the rule making through submission of written data, views, or arguments with or without opportunity for oral presentation. After consideration of the relevant matter presented, the agency shall incorporate in the rules adopted a concise general statement of their basis and purpose.” Interpreting this provision of the Act in United States v. Allegheny-Ludlum Steel Corp., 406 U. S. 742 (1972), and United States v. Florida East Coast R. Co., 410 U. S. 224 (1973), we held that generally speaking this section of the Act established the maximum procedural requirements which Congress was willing to have the courts impose upon agencies in conducting rulemaking procedures. Agencies are free to grant additional procedural rights in the exercise of their discretion, but reviewing courts are generally not free to impose them if the agencies have not chosen to grant them. This is not to say necessarily that there are no circumstances which would ever justify a court in overturning agency action because of a failure to employ procedures beyond those required by the statute. But such circumstances, if they exist, are extremely rare [...]

It is in the light of this background of statutory and decisional law that we granted certiorari to review two judgments of the Court of Appeals for the District of Columbia Circuit because of our concern that they had seriously misread or misapplied this statutory and decisional law cautioning reviewing courts against engrafting their own notions of proper procedures upon agencies entrusted with substantive functions by Congress. We conclude that the Court of Appeals has done just that in these cases, and we therefore remand them to it for further proceedings.

[In December 1967, the AEC granted Vermont Yankee a permit to build a nuclear power plant in Vernon, Vt. Thereafter, Vermont Yankee applied for an operating license. NRDC objected to the granting of a license, however, and therefore a hearing on the application commenced on August 10, 1971. Excluded from consideration at the hearings, over NRDC's objection, was the issue of the environmental effects of operations to reprocess fuel or dispose of wastes resulting from the reprocessing operations. This ruling was affirmed by the Appeal Board in June 1972.

In November 1972, the AEC also instituted rulemaking proceedings “that would specifically deal with the question of consideration of environmental effects associated with the uranium fuel cycle in the individual cost-benefit analyses for light water cooled nuclear power reactors.” This rule was promulgated specifically to supplement the Vermont Yankee Appeal Board ruling. In April 1974, the Commission issued a rule that required no qualitative evaluation of the environmental hazards posed by the uranium fuel cycle. NRDC appealed from the Commission's adoption of the rule.]

Much of the controversy in this case revolves around the procedures used in the rulemaking hearing [...] Vermont Yankee argues that the court invalidated the rule because of the inadequacy of the procedures employed in the proceedings [...] 

But this much is absolutely clear. Absent constitutional constraints or extremely compelling circumstances the “administrative agencies ‘should be free to fashion their own rules of procedure and to pursue methods of inquiry capable of permitting them to discharge their multitudinous duties.’” FCC v. Schreiber, 381 U. S., at 290, quoting from FCC v. Pottsville Broadcasting Co., 309 U. S., at 143. Indeed, our cases could hardly be more explicit in this regard. The Court has upheld this principle in a variety of applications [...]

Respondent NRDC argues that 5 U. S. C. § 553 merely establishes lower procedural bounds and that a court may routinely require more than the minimum when an agency's proposed rule addresses complex or technical factual issues or “Issues of Great Public Import.” We have, however, previously shown that our decisions reject this view. We also think the legislative history, even the part which it cites, does not bear out its contention. The Senate Report explains what eventually became [5 U. S. C. § 553] thus:

“This subsection states . . . the minimum requirements of public rule making procedure short of statutory hearing. Under it agencies might in addition confer with industry advisory committees, consult organizations, hold informal ‘hearings,’ and the like. Considerations of practicality, necessity, and public interest . . . will naturally govern the agency's determination of the extent to which public proceedings should go. Matters of great import, or those where the public submission of facts will be either useful to the agency or a protection to the public, should naturally be accorded more elaborate public procedures.” S. Rep. No. 752, 79th Cong., 1st Sess., 14-15 (1945).

The House Report is in complete accord:

“‘[U]niformity has been found possible and desirable for all classes of both equity and law actions in the courts . . . . It would seem to require no argument to demonstrate that the administrative agencies, exercising but a fraction of the judicial power may likewise operate under uniform rules of practice and procedure and that they may be required to remain within the terms of the law as to the exercise of both quasi-legislative and quasi-judicial power.’ . . . . “The bill is an outline of minimum essential rights and procedures. . . . It affords private parties a means of knowing what their rights are and how they may protect them . . . . ” H. R. Rep. No. 1980, 79th Cong., 2d Sess., 9, 16-17 (1946).

And the Attorney General's Manual on the Administrative Procedure Act 31, 35 (1947), a contemporaneous interpretation previously given some deference by this Court because of the role played by the Department of Justice in drafting the legislation, further confirms that view. In short, all of this leaves little doubt that Congress intended that the discretion of the agencies and not that of the courts be exercised in determining when extra procedural devices should be employed.

There are compelling reasons for construing [5 U. S. C. § 553] in this manner. In the first place, if courts continually review agency proceedings to determine whether the agency employed procedures which were, in the court's opinion, perfectly tailored to reach what the court perceives to be the “best” or “correct” result, judicial review would be totally unpredictable. And the agencies, operating under this vague injunction to employ the “best” procedures and facing the threat of reversal if they did not, would undoubtedly adopt full adjudicatory procedures in every instance. Not only would this totally disrupt the statutory scheme, through which Congress enacted “a formula upon which opposing social and political forces have come to rest,” Wong Yang Sung v. McGrath, 339 U. S., at 40, but all the inherent advantages of informal rulemaking would be totally lost.

Secondly, it is obvious that the court in these cases reviewed the agency’s choice of procedures on the basis of the record actually produced at the hearing, and not on the basis of the information available to the agency when it made the decision to structure the proceedings in a certain way. This sort of Monday morning quarterbacking not only encourages but almost compels the agency to conduct all rulemaking proceedings with the full panoply of procedural devices normally associated only with adjudicatory hearings.

Finally, and perhaps most importantly, this sort of review fundamentally misconceives the nature of the standard for judicial review of an agency rule. The court below uncritically assumed that additional procedures will automatically result in a more adequate record because it will give interested parties more of an opportunity to participate in and contribute to the proceedings. But informal rulemaking need not be based solely on the transcript of a hearing held before an agency. Indeed, the agency need not even hold a formal hearing. See 5 U.S.C. § 553(c). Thus, the adequacy of the “record” in this type of proceeding is not correlated directly to the type of procedural devices employed, but rather turns on whether the agency has followed the statutory mandate of the Administrative Procedure Act or other relevant statutes. If the agency is compelled to support the rule which it ultimately adopts with the type of record produced only after a full adjudicatory hearing, it simply will have no choice but to conduct a full adjudicatory hearing prior to promulgating every rule. In sum, this sort of unwarranted judicial examination of perceived procedural shortcomings of a rulemaking proceeding can do nothing but seriously interfere with that process prescribed by Congress [...]

Reversed and remanded.

Exemptions to Notice and Comment Rulemaking Requirements

In some situations, agencies can make rules without going through the procedural process described in APA section 553: 

When APA section 553 Does Not Apply to Rulemaking Processes

First, according to APA section 553(a), 553 doesn’t apply when (1) a military or foreign affairs function of the United States is involved or (2) the rule is a matter of agency management or personnel or to public property, loans, grants, benefits, or contracts. Congress decided that these types of decisions should not be left to the public. 

The “Good Cause” Exception

Second, APA section 553(b) provides exceptions to notice and comment rulemaking when (A) an agency is making interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice or (B) when the agency for good cause finds that notice and public procedure are:

1) Impracticable

2) Unnecessary or

3) Contrary to the public interest

APA section 553(b)(B) requires that the agency include its rationale for bypassing APA section 553 requirements in its rule when an agency bypasses notice and comment with one of these exceptions. 

Each of the three exceptions has its own body of case law interpreting it, but generally, the exceptions are “narrowly construed and only reluctantly countenanced” according to American Federation Government Employees v. Block, 655 F.2d1153 (D.C. Cir. 1981). 

In some cases, agencies will invoke the “good cause” exception when acting quickly is in the public interest. For instance, when there are oil spills or public health emergencies, agencies have promulgated rules without waiting for public input. Additionally, when rules do not impact the public interest, or public input would be “unnecessary” in situations where the rules are making minor, technical amendments to regulations, they may not require notice and comment according to the APA. Finally, when rulemaking reflects changes that have already come to pass, like regulations that amended country names after the Soviet Union collapsed, agencies may invoke the good cause exception to forgo notice and comment procedures. 

Courts have considered the good cause exception in the context of 1) emergencies, 2) situations where prior notice would subvert Congressional intent or deadlines, and 3) situations where Congress meant to waive APA section 553 requirements. In Hawaii Helicopter Operators Association v. FAA the Ninth Circuit Court of Appeals considers the good cause exception in cases of emergency and in New Jersey v. EPA, the D.C. Circuit considers the good cause exception in light of statutory deadlines.

Introduction: What is “Guidance”?

Sometimes, agencies publish materials that are not rules (from the rulemaking process) or orders (from the adjudication process). These publications are called “guidance.” Guidance often tells regulated entities how to comply with agency rules or orders. Guidance takes many forms: manuals, pamphlets, letters, blog posts— anything an agency publishes that isn’t a rule or order is probably guidance.

The APA does not directly discuss guidance, but APA Section 553(b)(A) and 553(d)(2) exempt “interpretative rules” and “general statements of policy” from rulemaking procedural requirements. Some legal scholars call interpretative rules and general statements of policy “nonlegislative rules,” but they can simply be referred to as "guidance." These agency publications bypass rulemaking procedures, so they are not legally binding, and thus not “rules.” 

Guidance can be written for a variety of purposes. Some guidance advises regulated entities about how to comply with agency rules. Some guidance announces or justifies the agency’s plans to make a rule or decisions about enforcing a regulation. Guidance is an efficient and helpful way to implement regulatory policies. Guidance informs the public and helps regulated entities comply with regulatory requirements. 

Agencies can also use guidance to warn regulated parties about potential enforcement actions. For instance, the Securities and Exchange Commission (“SEC”) staff writes “no-action letters” at the request of entities subject to SEC regulations. No-action letters recommend that the agency will not take legal action should the entity engage in specific situations not clarified in SEC regulations. Other agencies, like the Department of Education, write “Dear Colleague” letters to convey policy statements about how they will interpret statutes. Agencies with complex procedural regulations like the Internal Revenue Service (“IRS”) and the Federal Emergency Management Agency (“FEMA”) write in-depth manuals about how to do things like file taxes and apply for emergency federal aid.

How Can You Tell Whether An Agency Has Issued a Legislative Rule or Non-Binding Guidance?

Because agency guidance is advice that bypasses the rulemaking process, there are often legal controversies over whether an agency’s guidance is truly non-binding, or whether it is rulemaking that binds regulated entities, illegally bypassing the APA Section 553 rulemaking process. Although agencies may claim that guidance is not binding, agencies often follow guidance inflexibly, as though it is binding. When agencies treat guidance as binding, they undermine the APA’s procedural requirements and forego public participation in the rulemaking process.

Federal courts sometimes find that guidance violates the APA’s procedural requirements— the guidance is actually more of a binding, legislative rule that should have undergone APA Section 553 notice and comment rulemaking. (Remember, the APA Section 702 gives you the right to sue an agency for failing to follow APA requirements, including rulemaking procedures.) 

While various Circuit courts apply a variety of tests to assess whether an agency has issued guidance or a binding rule that requires notice and comment, the crux of the various tests includes these two considerations:

1) Does the rule have a present, binding effect?

2) Does the statement leave the agency and its decisionmakers free to exercise discretion?

Case Law Examples Applying Guidance/Rulemaking Tests

Here are two cases where courts analyze agency publications to determine whether they are non-binding guidance documents, or rules that have improperly bypassed APA Section 553 rulemaking procedures. The first case, Hoctor v. U.S. Dep’t of Agriculture, is dedicated to anyone who watched Tiger King during our semester apart. In the second case, Texas v. United States, a district court decides whether Deferred Action for Parents of Americans and Lawful Permanent Residents (“DAPA”) is guidance or rulemaking that violates the APA. I included this case because it allows us to explore immigration law, which is very administrative-law intensive area of the law, and also because it gives us a peek at how important judicial nominations are to progressive lawyering. 

[Lamdan removed racist, biased terminology from the Texas decision - Google the Judge’s name if you’d like more background on his approach to immigration law and why the case went before his court. Lamdan did not remove evidence of the Judge’s misunderstanding of basic administrative law principles and blatant errors, like calling the APA the “Administration Procedure Act.” Also note the Judge’s legal writing: is your legal writing more clear, concise, free of passive voice, pull-quotes from other cases, and adverbs? Chances are, the answer is “yes.” Whenever you feel any hesitation that you are capable of legal greatness (aka imposter syndrome), remember this opinion.]