• Take Action!



• Watchdog Blog



• Clean Up Washington



• White House for Sale



• Open Government



• Consumer and Civil Justice



• Election Reform



• Key Reports



• Congressional Voting Records



• The Archives



• Link to Us

Unintended Consequences of the S. 746 Regulatory Obstacle Course

May 1999

Introduction

These briefing papers outline how S. 746, the misleadingly named "Regulatory Improvement Act of 1999," would make it more difficult to protect nursing home residents from abuse and neglect, guarantee civil and disability rights, control factory farm runoff, prevent the sale and marketing of tobacco products to children and adolescents, and protect our nation's food supply from deadly microbial pathogens.

The first paper walks through how S. 746 would work in the real world. The metaphor of a "Regulatory Obstacle Course" sums up what agencies would have to overcome to get a major rule through the bill's highly prescriptive risk assessment, cost-benefit analysis, net benefits determination, and peer review mandates as well as its changes to OMB authority and new standards for judicial review.

The following papers illustrate how the S. 746 Regulatory Obstacle Course would, predictably, have unintended consequences in five areas. The potential for unforeseen results due to S. 746 is far greater, because nowhere does the bill define precisely which issues, rules and statutes it covers. Nor has any analysis been done that compares S. 746's "one-size-fits-all" mandates with the specific analysis, criteria and standards in current law governing health, safety, the environment, and disability rights. The greater the unknown, the greater the likelihood of unintended consequences. Unfortunately, these five examples are just the tip of the iceberg.

S. 746 does contain a list of specific exemptions - but food safety, nursing home safety, disability rights, factory farm pollution controls and youth smoking prevention are not on it. For the most part, agencies and issues that are excused from the bill's Regulatory Obstacle Course represent matters that business wants completed in a timely fashion. It should be noted that S. 746's exemptions are not the same as Executive Order 12866. Independent agencies such as the Consumer Product Safety Commission are exempt from the Executive Order; they are not exempt from S. 746. A list of S. 746's "double standard" exemptions is appended.

The particular harm S. 746 would do to public protections varies. But common to the case studies outlined in these papers are the following adverse consequences:

Delay. The Regulatory Obstacle Course would add months if not years of delay to the already too slow rulemaking process that these agencies must go through to issue important public protections.

Resources. The bill is a major unfunded mandate on under-budgeted agencies; complying with its paperwork requirements would divert staff from the agencies' core missions.

Costs over protections. S. 746 emphasizes industry cost considerations over public protections.

Court challenges. The bill creates new grounds for industry opponents to challenge safeguards in court; furthermore, at every step of the way it requires agencies to make a rulemaking record that will assist industry in mounting cost-based court challenges.

Undemocratic. S. 746 undermines the public's right to notice and comment by "frontloading" the rulemaking process with technical studies considered by "conflict of interest" review panels that can meet behind closed doors before any proposed rule is made public.

The conclusion that emerges from these case studies is that instead of improving the regulatory process, S. 746 would damage it.

S. 746 Creates a "Regulatory Obstacle Course" for Important Public Safeguards

Sponsored by Senators Fred Thompson (R-TN) and Carl Levin (D-MI), S. 746 is misleadingly called the "Regulatory Improvement Act of 1999." Instead of improving the process health and safety agencies follow to issue public safeguards, S. 746 would damage it. The bill creates a "one size fits all" Regulatory Obstacle Course that would delay and weaken urgently needed public protections. Food safety, nursing home safety and quality of care, factory farm pollution, clean air and water standards, managed care patients' rights, worker health and safety, tobacco control, civil and disability rights are just some of the areas that S. 746 would subject to its Regulatory Obstacle Course.

The Risk Assessment Treadmill

The first step in the Regulatory Obstacle Course is mandatory risk assessment - in many instances, a substitution of rigid, formal studies for common sense. Before health and safety agencies can even begin to address a major health, safety or environmental risk, they must conduct a risk assessment according to S. 746's highly prescriptive methodology. There are three reasons why this mandate is both bad public policy and bad science:

(1) If the risk or danger is evident, action to protect the public from harm should not be delayed by formalistic studies to prove the obvious. But that is what S. 746 would require. In 1993, the tragic deaths of children were traced to hamburgers contaminated with E.coli 0157. USDA immediately proposed modernizing the century-old "poke and sniff" meat inspection system - and even then it still took more than three years before a final rule was issued. If S. 746 had been in effect, it would have forced USDA to spend additional months or years on a bean-counter risk assessment study to "prove" the obvious - that microbial pathogens in meat can be deadly, especially to children, the frail elderly, pregnant women and individuals with compromised immune systems.

(2) S. 746's "one-size-fits-all" methodology doesn't "fit" every problem. The bill's detailed specifications for analyses were designed for exposure to cancer causing chemicals. They don't work for worker safety (acute injury prevention) standards. They don't work for youth smoking prevention. And they don't work for food safety. For example, to combat deadly microbial pathogens, USDA is currently conducting a risk assessment study on E. coli 0157 using a risk process model to identify the points in the farm-to-table continuum where the risk of contamination is the greatest. S. 746's prescribed methodology doesn't "fit" this problem.

(3) A process that invites industry delaying tactics. S. 746 tells agencies they must solicit data from the public and consider that data when conducting a risk assessment. This seemingly innocuous mandate is anything but. Industries that oppose tough safeguards for the public - e.g., Big Tobacco, agribusiness, major industrial polluters - all employ and fund armies of researchers and scientists to generate "data" and "studies" that question whether their products and actions are hazardous. S. 746 is constructed to give them unlimited access - there is no time limit on when data must be submitted in order to be considered - to bombard agencies with "data" to keep the "risk assessment treadmill" going. New information provided at any point in the process could force agencies back to square one, adding years of delay.

The Net Cost-Benefit Hurdle

If the agency ever got off the risk assessment treadmill, it would run smack into the net cost-benefit hurdle. S. 746 mandates a series of cost-benefit analyses and the identification of one single regulatory option that best meets its greatest "net benefits" test. If an agency chooses a safeguard that is more protective, it must also put into the record a description of any reasonable, less costly options that exist and explain why they were not selected.

The net cost-benefit hurdle creates a Catch-22 situation. Take, for example, a conscientious EPA administrator who is attempting to be faithful to the Clean Air Act's mandate to require maximum achievable control technology to reduce airborne toxins. S. 746 will have nonetheless mandated a number of cost-benefit analyses and the identification of a single "greatest net benefits" option that will all but inevitably be cheaper for industry, but provide less protection for the public, than the Clean Air Act, read by itself, would require. Here's the dilemma:

• If the administrator determines that the option that best fits the Clean Air Act's "maximum achievable control technology" test also meets S. 746's greatest "net benefits" test, the rule may be overturned as arbitrary and capricious because the record does not contain sufficient data and evidence to prove that case according to S. 746.

• But if he or she finds that the more protective solution fails S. 746's "net benefits" test, and then chooses it anyway on the grounds that the Clean Air Act so requires, the rule may be overturned because a court finds that explanation unreasonable. After all, the record will show that the agency identified another option that was reasonable and more cost-effective.

In either case, an administrator's decision to choose the more protective rule creates both legal and political jeopardy. Given the long delays which conducting S. 746's risk assessment, cost-benefit analyses, net benefits determination and peer review have already caused, how many administrators will risk selecting the more protective standard - knowing that if it is overturned by OMB or in court, they will have to go back to the starting line of S. 746's Regulatory Obstacle Course?

The Peer Review Pitfall

S. 746 also mandates that risk assessments for major rules ($100 million annual cost), and cost-benefit analyses for rules with more than $500 million annual impact, must be "peer-reviewed." The system this bill creates should more accurately be called "conflict of interest review:"

(1) Parties with a direct stake in the outcome of the rulemaking can participate. S. 746 does not prohibit participation by individuals employed or funded by the regulated industry. Thus scientists working for Big Tobacco, oil companies, or agribusiness could sit in judgement over public protections in which those industries have a direct financial stake. In fact, industry-paid experts could predominate, since public interest groups cannot afford to hire experts to participate, and experts who work for the regulatory federal agency are barred as insufficiently "independent."

(2) Secret, undemocratic process undermines the public's right to know and participate. S. 746 exempts its peer review panels from the open government provisions of the Federal Advisory Committee Act (FACA). The panels could thus meet in secret, without recording minutes, with no requirement for balanced composition. To make matters worse, S. 746 mandates that their review of risk assessment and cost-benefit analyses take place before the public knows what rule is under consideration or has been given any right to comment. It is counter to basic democratic principles to give a select few such a privileged place in the rulemaking process. Moreover, contrary to state-of-the-art peer review practice, the agency is required to respond in writing to significant comments peer reviewers put in writing. This would give panel members enormous leverage to shape the rulemaking record.

(3) More delay; drain on scarce agency resources. The final problem with the S. 746 peer review mandate is time and money. This process will be extremely time-consuming - and tens of thousands of dollars per panel will be diverted from other important priorities. For agencies already cash-starved by budget reductions, bearing this burden will sap their ability to carry out their core mission. Congress should not impose this expensive "unfunded mandate" on budget-strapped agencies.

The OMB "Bermuda Triangle"

S. 746 would also enable the Office of Management and Budget (OMB) to go back to the practices used to stall or weaken health, safety and environmental protections in the Reagan-Bush years. OMB would no longer have to put in writing why it did not approve an agency rule and would only have to log "significant" - as opposed to "substantive"- meetings and calls with non-governmental entities regarding rules under review. The bill also reverses the Clinton Administration's Executive Order 12866, which established a fixed 90-day OMB review period with a one-time 30 day extension at the joint request of the agency head and the OMB Director. Under S. 746, OMB would be able to unilaterally extend its review of rules indefinitely, a technique used by previous administrations to delay, if not bury altogether, new regulations.

Go Directly to Court

The judicial review provision of S. 746 is bound to cause serious mischief in the courts, and will force agencies to regulate defensively, by doing less rather than more:

(1) S. 746's message is that Congress intended to elevate industry cost considerations. Although S. 746 professes that it is not intended to cancel out the protective standards set in the Clean Air Act, Clean Water Act, Occupational Safety and Health Act, Americans with Disabilities Act, and other statutes, the bill and the rulemaking record it mandates send a diametrically opposite message to federal agencies - maximize economic efficiency. That message will not be lost on reviewing courts, as industry will inevitably challenge many new rules.

(2) The "net benefits" test is a prescription for judicial invalidation of a rule. The function of the net benefits test is to require agencies to put into the record a single rulemaking option that is the most economically efficient in achieving their rulemaking objectives. If an agency then goes ahead and issues a more protective standard, this record places the agency in a highly vulnerable position in a judicial review proceeding. Regardless of what the agency's underlying mandate dictates, the court will measure the agency's rulemaking choice against S. 746's net benefits test and the more cost-effective options the agency did not pursue.

(3) S. 746 raises the specter of agency rules being set aside or remanded because the agency failed to perform its cost-benefit analysis, risk assessment, or net benefits analysis in the manner prescribed by the Act. This is a serious problem that marks a significant change from prior versions of the bill. In a nutshell, the problem is this: the Act sets up highly prescriptive standards for conducting cost-benefit analyses and risk assessments; it also spells out in detail precisely how an agency must conduct its net benefits test. Section 627(e) says that "[if] an agency fails to perform" these analyses, the rule may be set aside or remanded. To be sure, a court could read the language in Section 627(e) to apply only when an agency made no pretense of performing these functions. But that is not what the Act now says. There is no qualifier like "completely" or "entirely" failed to perform to signal to a reviewing court that is the sort of failure Congress sought to guard against.

The Regulatory Obstacle Course S. 746 puts in the path of public health, safety, environmental, and civil rights protections would harm rather than improve federal agencies' ability to protect the public. It would cause years of additional delay, waste scarce agency resources on paperwork, tilt the regulatory playing field toward weaker, less protective standards, revive the OMB "Bermuda Triangle," and give opponents of strong public protections that did manage to overcome the Regulatory Obstacle Course new grounds for court challenges.

Nursing Home Safety and the S. 746 Regulatory Obstacle Course

America's most vulnerable at risk. "The 1.6 million elderly living in nursing homes are among the sickest and most vulnerable populations in the nation."⁽¹⁾ Thus begins a recent GAO report on safety and quality of care in the U.S.'s 17,000-plus nursing homes. The report's principal finding: "more than one-fourth of the homes had deficiencies that caused actual harm to residents or placed them at-risk of death or serious injury...about 40 percent of the homes that had such problems in their first survey during the period we examined (July 1995 to October 1998) had them again in their last survey during the period."⁽²⁾

Better protection and enforcement needed. The Health Care Financing Administration (HCFA), GAO, Congress, and the states with front-line responsibility for inspecting and enforcing federal regulations agree that HCFA must act fast to provide better protection and enforcement for this at-risk population. The Administration is in the middle of a "Nursing Home Initiative" campaign which includes more than 20 changes to federal regulations so that quality of care and safety problems can be promptly identified and corrected. In addition, the GAO's most recent reports have identified additional serious deficiencies in the nursing home regulatory framework that have not yet been addressed. Finally, court challenges brought by the industry could result in HCFA being required to recall its State Operations Manual and instead issue regulations on how states should measure and enforce patient safety and quality of care laws.

S. 746's Regulatory Obstacle Course would delay and hinder needed reforms. HCFA is already struggling to find the resources to improve conditions in American nursing homes. In addition to issuing tougher regulations, the agency must also significantly increase funding for more frequent and thorough inspections, more timely and aggressive investigation of serious complaints and tougher enforcement against violators, particularly repeat violators.⁽³⁾

But if S. 746 were in effect, HCFA would have to pull staff and resources out of the field and put them into desk jobs to comply with the bill's Regulatory Obstacle Course. This would seriously delay standards and protections that were needed yesterday; it would also provide the nursing home industry with new tools to weaken, block or challenge in court tough safeguards. Here's how it would work:

Risk Assessment Treadmill

Section 624 of S. 746 mandates that a highly prescriptive risk assessment study be conducted for all major rules [annual economic impact of more than $100 million; this is the equivalent of $.17 per nursing home resident per day] "the primary purpose of which is to address health, safety or environmental risk." Nowhere in the bill or in current law is that phrase defined. On its face, it would clearly apply to major rules to prevent the risk of bed sores, serious injury or death due to falls, or deadly medication errors in nursing homes. It seems absurd to require HCFA to conduct the kind of highly prescriptive risk assessment S. 746's methodology mandates, which was developed and is appropriate for measuring cancer risk from exposure to hazardous chemicals. But the agency would ignore this requirement at its peril. Section 627(e) of the bill permits a court to overturn a rule solely on the basis that the risk assessment study has not been done. Thus if S. 746 were in effect, HCFA would have to devote time and resources to complying with its risk assessment requirement before taking action to protect vulnerable individuals.

Cost-benefit and "Net Benefits" Hurdle

On previous occasions when Congress or the states have launched major efforts to improve the quality of care and the safety of nursing home residents, representatives of the nursing home industry have actively and aggressively used the regulatory process to oppose tough standards because they do not wish to pay for them. S. 746's requirement to conduct multiple cost-benefit studies, and to identify a single regulatory option that is the most cost-effective, or shows the greatest "net benefits," will give the industry new hooks to fight tough rules.

To illustrate how this would work in practice, consider two concrete examples from the fight over how to implement the Nursing Home Reform Act (NHRA) of 1987:

"Highest practicable level of physical and mental well being." The NHRA required nursing homes and facilities to ensure that residents attain and maintain the highest practicable level of physical and mental well being. HCFA's implementing regulation required facilities to conduct an individual assessment of every resident to establish the standard required to comply with the NHRA. For instance, if an 88-year old man could walk and eat without assistance upon entering the nursing home, the facility was required to provide adequate care for him to maintain those activities of daily life (ADL) unless a medical condition caused deterioration.

The nursing home industry argued against individual assessments, claiming they were too costly and "subjective." They advocated setting standards according to statistical norms for age cohorts, and for measuring compliance by whether the average ADL scores of a facility's residents met or exceeded the norm.

Extensive or limited survey to measure compliance. HCFA required that hundreds of items be surveyed by state inspectors to determine whether facilities were complying with the NHRA. Some items - e.g., observing nursing home staff administering medications - are extremely time consuming and thus expensive to survey, and generally result in the discovery of very few violations. Patient advocates claim this extensive surveying has a deterrent effect: the fact that medication errors are on the survey makes the facility provide more training and staff take extra care to avoid violations. Industry and some states argued that only items with significant measurable results - i.e., numbers of documented violations - should be included in the survey.

On these two key safety issues, HCFA chose the more protective approach for patients over industry objections that they were not "cost-effective." Had S. 746 been in effect, it would have tilted the playing field toward the nursing home industry's cost arguments. The cost to industry of individualized assessments and extensive surveys can be readily quantified, while the value of ensuring that each individual in a nursing home attain his or her own highest practicable level of physical and mental well being is not readily quantifiable. Nor can a dollar figure be assigned to the value of the extra care facilities take to avoid medication errors when they are included in the survey.

While S. 746 would have ostensibly permitted HCFA to choose the more protective rule, the agency would have first had to identify on the record the single regulatory option that showed the greatest "net benefit," and justify deviating from it. If after completing that time-consuming calculation HCFA had nonetheless selected individual assessment of residents and an extensive survey process, its choice would have been both politically and legally vulnerable. The industry could have used the record, which showed that a "more cost-effective" [less costly to industry] option that reasonably met the rulemaking objective existed, to challenge the rule at OMB or in court.

In the final analysis, S. 746's cost-benefit analyses and "net benefits" test would either be a costly waste of time and resources, or they would have the effect of tilting the regulatory process toward giving greater consideration to industry costs over patient safety and quality of care.

Peer Review Pitfall

Those who can afford to hire experts to sit on peer review panels would have more say than patient and public interest representatives. There was extensive public participation in the development of the NHRA regulations. More than 27,000 groups and individuals commented on the Facilities regulation, and as required by the Administrative Procedure Act, HCFA responded to all their comments. But if S. 746 had been in effect, this open, democratic process would have been undermined by the special status the bill gives to "peer review" panels.

For instance, before HCFA could even make public a notice of proposed rule making, it would have to convene S. 746's special panels to "peer review" its risk assessment and cost-benefit analyses. Because conflicts of interest are not prohibited, representatives of the nursing home industry could participate.

Even worse, the panels could meet in secret, keep no minutes, and not be balanced in composition because the bill exempts them from the open government provisions of the Federal Advisory Committee Act (FACA). In practice, the panels would likely be unbalanced - the only "player" with the resources to hire lawyers, risk assessors, economists, and other consultants to represent its position is the nursing home industry. Furthermore, HCFA experts - even if they had not worked on the rule under review - would be excluded as not sufficiently "independent." To call this undemocratic process "peer review" is a misnomer - it should more accurately be called "conflict of interest" review.

OMB Review - Revival of the "Bermuda Triangle"

S. 746 would allow the Office of Management and Budget (OMB) to go back to the practices used to stall or weaken health, safety and environmental protections in the Reagan-Bush years. OMB would no longer have to put in writing why it did not approve an agency rule and would only have to log "significant" - as opposed to "substantive" - meetings and calls with non-governmental entities regarding rules under review. S. 746 also reverses the Clinton Administration's Executive Order 12866, which established a fixed 90-day OMB review period with a one-time 30-day extension at the joint request of the agency head and the OMB Director. Under S. 746, OMB would be able to unilaterally extend its review of rules indefinitely, a technique used by previous administrations to seriously delay a new regulation, if not bury it altogether.

Judicial Review

Finally, S. 746 would give the nursing home industry new ammunition to challenge in court any tough protective regulations that did emerge from the rulemaking process. By focusing the spotlight on risk assessments and net cost-benefit determinations, S. 746 emphasizes economic concerns over often less quantifiable benefits and humanistic values. Despite its carefully couched text, the one message that cries out of S. 746 is that Congress wants regulators to give precedence to industry cost concerns.

Even though there is language in S. 746 that tells courts that it does not supplant the decisional criteria of the Nursing Home Reform Act or other laws to protect vulnerable nursing home residents, courts will seek to interpret its provisions to effectuate both S. 746's requirements and those of the other statutes. A court could reach the common-sense conclusion that Congress did not want the economic analytical requirements of S. 746 to be an empty gesture and see the bill as a message from Congress to insist on a far higher degree of economic justification for regulatory choices than was the rule in the past.

HCFA's scarce resources should go to more aggressive inspection and enforcement activities. But if S. 746 becomes law, taxpayer dollars will fund more economists, statisticians, bureaucrats, and lawyers to comply with the bill's red tape requirements and to deal with court challenges rather than more field inspectors to safeguard nursing home residents.

Disability Rights and the S. 746 Regulatory Obstacle Course

A little known fact about S. 746, this year's corporate-backed legislation to impose a Regulatory Obstacle Course on federal agencies charged with protecting public health, safety, and the environment, is that disability rights would also be subjected to it.

Civil Rights Not Included in the List of Exemptions

When Congress passed the Unfunded Mandates Relief Act in 1995, it recognized that cost-benefit analysis is an inappropriate measure for civil rights and specifically exempted civil rights laws from the bill. But S. 746, which excludes numerous matters supported by business from its Regulatory Obstacle Course, contains no such exemption.

Americans with Disabilities Act

Congress balanced costs and rights. Congress passed the Americans with Disabilities Act (ADA) in 1990 to address discrimination on the basis of disability, a severe and pervasive social problem that affects more than 50 million Americans with disabilities. The ADA requires employers to make "reasonable accommodation" for persons with disabilities who are otherwise qualified to do a job (Title I). Title III of the Act requires that public accommodations remove architectural and structural communication barriers in existing facilities where "readily achievable." These standards were established by Congress after careful consideration of what should be the proper balance between the rights of individuals and the cost of compliance to employers and owners and operators of public accommodations.

Cost-benefit tests don't "fit" civil rights. If S. 746 had been in effect when the regulations to implement the ADA were developed, the Department of Justice and other agencies would have had to conduct its prescriptive cost-benefit analyses. They would have had to identify a single regulatory option as the most cost-effective [for employers and businesses], that is, as showing the greatest "net benefits."

Because rights cannot be translated into dollars and cents, the calculations and computations required by S. 746 are impossible to perform in a manner that promotes better rulemaking. How can one construct a mathematical equation in which the "costs" of a standard designed to provide reasonable access and accommodation for persons with disabilities can be subtracted from the "benefits?" We can estimate the costs, but what about the benefits? What is the dollar value of knowing that your local movie theater or restaurant is accessible? What are curb cuts worth?

S. 746 elevates costs over access. Either S. 746's cost-benefit analyses would be an enormous waste of time and money, or they would skew the balance set by Congress by elevating consideration of industry costs over access rights.

To illustrate how S. 746 would have affected ADA implementation, take the question of how to define what is "accessible." The public accommodations regulation sets specific, objective standards for accessibility; for example, it spells out exactly how wide doors must be and how bathrooms must be designed. Industry argued instead for a "flexible regulatory options" approach that would have simply stated that facilities must be accessible and let each establishment decide on its own exactly what that meant. Disability rights advocates countered that without objective standards, it would be a case of "my opinion against yours" whether any particular place was really accessible. Individual businesses could say "we met the spirit of the law," while many wheelchair users would be unable to gain access.

S. 746 would have given industry two grounds to argue against the adoption of specific, objective standards for accessibility: the bill's stated preference for "flexible regulatory options" (which was rejected when the ADA was debated in Congress) and its requirement to identify a single option with the greatest "net benefits." If the agency nonetheless chose the more protective alternative which was also more costly to industry, it would do so having made the rulemaking record mandated by S. 746 that a flexible regulatory alternative existed, but was not chosen, and that a reasonable alternative that better met the bill's "net benefits" test also existed, but also was not chosen. Thus both the "flexible regulatory options" and the "net benefits" tests could be used by industry opponents to put a tough rule like the ADA's accessibility standards in political and perhaps legal jeopardy.

Future Consequences

Many significant rulemakings affecting disability rights will be on the agenda in the next months and years. These include revisions to the ADA Accessibility Guidelines, new guidelines for accessible housing, guidelines for newly constructed and altered passenger vehicles covered by the ADA, and standards to implement the Rehabilitation Act Amendments of 1998, which require federal departments or agencies to ensure that their electronic and information technology is accessible to people with disabilities. Furthermore, the Supreme Court is currently considering five cases which could substantially affect the interpretation of key portions of the ADA, including the question of what constitutes a disability for employment purposes. Depending on the outcome of these cases, new regulations could also be required.

Elevation of costs over access. If S. 746 were in effect, these future rulemakings to guarantee basic civil rights for persons with disabilities would be subject to its prescriptive mandates. For example, before the Department of Justice could update its ADA accessibility rule to ensure that it remains consistent with technological developments, changes in model codes and national standards and continues to meet the needs of people with disabilities, it would first have to conduct the multiple cost-benefit analyses required by S. 746 and identify a single option that showed the greatest "net benefits." Since the value of civil rights cannot be assigned a price tag, these cost-based analyses and "net benefits test" would either be a waste of time and resources - or they could be used to elevate consideration of business compliance costs in an effort to weaken or lower standards.

Undemocratic "special" review panels. If the estimated economic impact of the rule were more than $500 million annually, S. 746 would require that special "peer review panels" be given a privileged special place in the rulemaking process. Before the Department of Justice could make its proposed rule known to the public at large, it would have to convene these special panels to critique its cost-benefit analyses. Individuals who worked for companies with a direct financial stake in the outcome of the rule could participate because S. 746 does not prohibit conflicts of interest. But experts from the Department, even if they had played no role in developing the rule, would be barred from participation as insufficiently "independent." Even worse: because the bill exempts these panels from the open government provisions of the Federal Advisory Committee Act (FACA), they could meet in secret and keep no minutes. The public's right to notice and comment would be severely undermined by this undemocratic process.

OMB Review - Revival of the "Bermuda Triangle"

S. 746 would allow the Office of Management and Budget (OMB) to go back to the practices used to stall or weaken public protections in the Reagan-Bush years. OMB would no longer have to put in writing why it did not approve an agency rule and would only have to log "significant" - as opposed to "substantive" - meetings and calls with non-governmental entities regarding rules under review. S. 746 also reverses the Clinton Administration's Executive Order 12866, which established a fixed 90-day OMB review period with a one-time 30-day extension at the joint request of the agency head and the OMB Director. Under S. 746, OMB would be able to unilaterally extend its review of rules indefinitely, a technique used by previous administrations to seriously delay a new regulation, if not bury it altogether.

Judicial Review

Finally, S. 746 would give corporate opponents new ammunition to challenge in court any tough protective regulations that did emerge from the rulemaking process. By focusing the spotlight on net cost-benefit determinations, S. 746 emphasizes economic concerns over often less quantifiable benefits and humanistic values. Despite its carefully couched text, the one message that cries out of S. 746 is that Congress wants regulators to give precedence to industry cost concerns.

Even though there is language in S. 746 that tells courts that it does not supplant the decisional criteria of the ADA or other laws to protect civil rights, courts must seek to interpret its provisions to effectuate both statutes. A court could reach the common-sense conclusion that Congress did not want the economic analytical requirements of S. 746 to be an empty gesture and see the bill as a message from Congress to insist on a far higher degree of economic justification for access standards than was the rule in the past.

Scarce agency resources should go to more aggressive enforcement of disability rights. But if S. 746 becomes law, taxpayers will instead fund more economists, statisticians, bureaucrats, and lawyers to comply with the bill's red tape requirements and to deal with court challenges.

Factory Farm Pollution Control and the S. 746
Regulatory Obstacle Course

Factory farm pollution - animal waste runoff from the approximately 10,000 large animal feedlots in the U.S. - is poisoning America's rivers, lakes and streams. Pollution from factory farms, other livestock operations and chemical fertilizers has created a "dead zone" the size of the state of New Jersey at the mouth of the Mississippi River. In addition to the harm done to fish, wildlife, and the environment, new discoveries are linking factory farm pollution to such serious human health hazards as nitrates, microbial pathogens and heavy metals in water as well as emissions of nitrogen and toxic gases such as hydrogen sulfide and ammonia into the air.

Agricultural operations have traditionally been exempt from federal environmental regulation such as the Clean Water Act. However, the dramatic boom in factory farms has led to increasing environmental problems and human health risks. Current regulations allow the use of primitive open-air waste lagoons and sprayfield techniques to manage animal waste. These types of waste systems emit odors and harmful air pollutants, contaminate groundwater and drinking wells, pollute wetlands and nearby waterways and threaten public health. Factory farms should be required to use the best technologies available and meet stringent effluent limitations to control air and water pollution.

Current Control Plan

In February 1998, the Administration's Clean Water Action Plan identified polluted runoff from animal feeding operations (AFOs) as the most important remaining source of water pollution in the U.S. Approximately 20,000 concentrated [very large] animal feeding operations (CAFOs) exist. At present only 2,000 CAFOs are required to be permitted under the Clean Water Act.⁽⁴⁾ USDA and EPA were jointly charged with developing a "unified national strategy to minimize the water quality and public health impacts of AFOs." Federal Register/Vol. 63, No. 182, p. 50193.

EPA and USDA's final strategy, published by the two agencies in March 1999, relies mostly on voluntary compliance. Regulatory controls will be extended to all CAFOs, but will still cover less than five percent of the 450,000 total AFOs. The plan envisions the EPA issuing regulations by December 2001 for poultry and swine and December 2002 for beef and cattle. These regulations will include new state permitting requirements and updated guidelines for the treatment of effluent to go into effect in 2005. But if S. 746 becomes law, EPA will be hampered by performing the tasks required by its "one-size-fits-all" Regulatory Obstacle Course.

Possible Legislation

Congress may also pass legislation that would have to be implemented through regulation. Bills introduced in the House and Senate last year would have imposed tougher pollution control standards on factory farms; they were strongly opposed by the large corporations responsible for most factory farm runoff. But even if Congress overcomes industry opposition and passes legislation that requires tougher standards, the S. 746 Regulatory Obstacle Course would give these corporate polluters a "second bite at the apple" to use the regulatory process to delay or weaken vital public health and environmental protections.

Risk Assessment Treadmill

S. 746 mandates that a highly complex and prescriptive risk assessment process be completed before rulemaking can begin. This risk assessment would be subjected to S. 746's "peer review" mandate (discussed below). Not until these steps were completed - which could take additional months or even years of data collection, analysis, and review - could an agency even begin to craft and propose a rule.

The risk to public health and the environment from uncontrolled factory farm pollution is perfectly apparent; numerous scientific studies have documented its harmful effects. But, if S.746 were in effect, years of data collection and additional studies would be required before USDA or EPA could take action to stop the damage that we already know is occurring.

Cost-benefit and "Net Benefits" Hurdle

Elevation of industry cost considerations over public protection. When Congress passed the Clean Water Act, it gave EPA direction on how to balance industry compliance costs with providing the maximum possible public protection. Following its statutory directive, EPA promulgated regulations that require covered operators to use the "best practicable control technology currently available" to prevent discharges of animal waste pollutants into waterways.

S. 746 would delay and distort EPA's rulemaking. Before taking action, the agency would be required to conduct cost-benefit analyses for a range of regulatory options and arrive at a net cost-benefit determination - that is, identify the single option that is most cost-effective for industry, or shows the greatest "net benefits." These costly and time-consuming studies would either be a waste of time - because they are irrelevant to the decision-making criteria for EPA established by the Clean Water Act - or they would displace and most likely weaken the Act's criteria. The greatest "net benefits" option would all but inevitably be cheaper for industry but also provide less protection for public health and the environment than the Clean Water Act's standards.

Political and legal pressure for weaker standards. S. 746 purports to allow an agency director to go with the more protective rule; to do so, he or she must put into the record the fact that a more cost-effective option that met the rulemaking objective existed, and explain why he or she did not select it. This record would serve as a blueprint for industry opponents of the tougher safeguards to challenge the rule politically and/or in court. The "chilling effect" of this scenario is obvious.

How many "prudent" directors would opt for the more protective rule, knowing that losing in court would put the regulatory process back at square one?

Peer Review Pitfall

"Conflict of interest" peer review. S. 746 mandates that the risk assessment for major rules [$100 million annual cost] and cost-benefit analyses for rules with an annual cost of $500 million be "peer-reviewed". This provision is a misnomer. As commonly understood, the purpose of peer review is to bring neutral, disinterested expertise to bear on a scientific or technical issue. S. 746's mandated process could more accurately be called "conflict of interest" review, because there is no bar on panelists who have a direct financial stake in the outcome. The potential for conflict of interest is made worse by the fact that the panels can meet in secret, without keeping minutes and with no requirement for balanced membership, because the bill exempts them from the open government provisions of the Federal Advisory Committee Act (FACA). EPA and USDA experts, even if they had no role in the studies under review, would be automatically excluded as not "independent."

Proponents of S. 746 point out that EPA's Science Advisory Board allows participation by private sector representatives with a direct stake in the outcome. But they ignore a number of crucial differences between the EPA process and S. 746: the EPA meetings take place in public, minutes are kept, the composition of the panel must be balanced and experts who work for the agency outside the office in which the work was done are not barred from participating.

Public notice and comment downgraded. S. 746 panel members would be put in a privileged position over the rest of the public. Agribusiness industry influence could predominate for the simple reason that with no requirement for balanced composition, industry has far greater resources to employ experts and finance academics to represent their views than environmentalists, public health advocates, or small family farmers.

This is especially undemocratic because the special panels would get their shot at critiquing the basis for a rule before any notice of proposed rulemaking was published, and thus before the public even knew what the agency was considering and had any opportunity to comment on it. Provided in private, the panel's comments would not be subjected to the criticisms and corrections that members of the public could and probably would contribute if they were part of an open public notice and comment period.

OMB Review - Revival of the "Bermuda Triangle"

S. 746 would allow the Office of Management and Budget (OMB) to go back to the practices used to stall or weaken health, safety and environmental protections in the Reagan-Bush years. OMB would no longer have to put in writing why it did not approve an EPA rule and would only have to log "significant" -- as opposed to "substantive" -- meetings and calls with non-governmental entities regarding rules under review. S. 746 also reverses the Clinton Administration's Executive Order 12866, which established a fixed 90-day OMB review period with a one-time 30 day extension at the joint request of the agency head and the OMB Director. Under S. 746, OMB would be able to unilaterally extend its review of rules indefinitely.

Judicial Review

S. 746 would give factory farm polluters new ammunition to challenge in court any tough protective regulations that did emerge from the rulemaking process. By focusing the spotlight on risk assessments and net cost-benefit determinations, S. 746 emphasizes economic concerns over often less quantifiable benefits and humanistic values. Despite its carefully couched text, the one message that cries out of S. 746 is that Congress wants regulators to give precedence to industry cost concerns.

Even though there is language in S. 746 that tells courts that it does not supplant the decisional criteria of the Clean Water Act or other public health statutes, courts must seek to interpret its provisions to effectuate both statutes. A court could reach the common-sense conclusion that Congress did not want the economic analytical requirements of S. 746 to be an empty gesture and see the bill as a message from Congress to insist on a higher degree of economic justification for regulatory choices than was the standard in the past.

The scarce resources of federal environmental, public health and safety agencies should go to more aggressive inspection and enforcement activities. But if S. 746 becomes law, taxpayers will fund more economists, statisticians, bureaucrats, and lawyers to comply with the bill's red tape requirements and to deal with court challenges rather than more field inspectors to safeguard the public.

Youth Smoking Prevention and the
S.746 Regulatory Obstacle Course

The Supreme Court has recently decided to hear the government's appeal of the Fourth Circuit Court decision overturning FDA's 1996 regulations restricting the sale and distribution of cigarettes and smokeless tobacco to protect children and adolescents. We believe the Court will uphold the rule; if it does not, however, legislation to affirm FDA authority over tobacco products and new regulations to implement that legislation will be necessary. In either case, the example of FDA's 1996 youth smoking rule can be used to illustrate how S. 746's Regulatory Obstacle Course would have delayed and weakened regulatory safeguards to address the sale and marketing of tobacco products to children and adolescents.

Risk Assessment Treadmill

The risks of youth smoking are apparent. FDA based its rule to restrict the sale and marketing of tobacco products to children and adolescents on massive evidence from scientific studies that demonstrated the link between starting to smoke as a child, nicotine addiction, lifelong health hazards and early death from tobacco-related disease. The agency conducted more than a year-long investigation into the role that nicotine plays in tobacco products, patterns of tobacco product use, and the role of advertising and promotional practices in young people's decision to use tobacco products. Among the agency's findings:

• Approximately three million American adolescents currently smoke and an additional one million adolescent males use smokeless tobacco.
• Each year, another one million young people become regular smokers.
• Eighty-two percent of adults who ever smoked had their first cigarette before age 18 and more than half of them had already become regular smokers by that age.
• Approximately one of out of three adolescent-onset smokers will die prematurely as a result of using tobacco products.

S. 746 would have required additional years of study to "prove" the obvious. If S. 746 had been in effect when FDA crafted the 1996 regulations, that evidence would not have been sufficient. No matter how apparent the public he

more resources

Because Public Citizen does not accept funds from corporations, professional associations or government agencies, we can remain independent and follow the truth wherever it may lead. But that means we depend on the generosity of concerned citizens like you for the resources to fight on behalf of the public interest. If you would like to help us in our fight, click here.