[Federal Register: March 28, 2002 (Volume 67, Number 60)]
[Notices]               
[Page 15013-15045]
[[Page 15013]]

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Part II

Office of Management and Budget
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Draft Report to Congress on the Costs and Benefits of Federal 
Regulations; Notice

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OFFICE OF MANAGEMENT AND BUDGET

 
Draft Report to Congress on the Costs and Benefits of Federal 
Regulations

AGENCY: Office of Management and Budget, Executive Office of the 
President.

ACTION: Notice and request for comments.

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SUMMARY: OMB requests comments on the attached Draft Report to Congress 
on the Costs and Benefits of Federal Regulation. The Draft Report is 
divided into four chapters. Chapter I discusses regulatory policy 
during the Administration's first year. It discusses OMB's role in 
coordinating regulatory policy, its open and transparent approach to 
regulatory oversight, and its function as overseer of information and 
quality analysis. Chapter II presents estimates of the costs and 
benefits of Federal regulation and paperwork with an emphasis on the 
major regulations issued over the last 30 months. Chapter III discusses 
developments in regulatory policy governance that have recently taken 
place in the international arena and its relevance for the U.S. Chapter 
IV asks for recommendations from the public for the reform of Federal 
rules.

DATES: To ensure consideration of comments as OMB prepares this Draft 
Report for submission to Congress, comments must be in writing and 
received by OMB no later than May 28, 2002.

ADDRESSES: Comments on this Draft Report should be addressed to John 
Morrall, Office of Information and Regulatory Affairs, Office of 
Management and Budget, NEOB, Room 10235, 725 17th Street, NW., 
Washington, DC 20503.
    You may also submit comments by facsimile to (202) 395-6974, or by 
electronic mail to jmorrall@omb.eop.gov.

FOR FURTHER INFORMATION CONTACT: John Morrall, Office of Information 
and Regulatory Affairs, Office of Management and Budget, NEOB, Room 
10235, 725 17th Street, NW., Washington, DC 20503. Telephone: (202) 
395-7316.

SUPPLEMENTARY INFORMATION: Congress directed the Office of Management 
and Budget (OMB) to prepare an annual Report to Congress on the Costs 
and Benefits of Federal Regulations. Specifically, Section 624 of the 
FY2001 Treasury and General Government Appropriations Act, also known 
as the ``Regulatory Right-to-Know Act,'' (the Act) requires OMB to 
submit a report on the costs and benefits of Federal regulations 
together with recommendations for reform. The Act says that the report 
should contain estimates of the costs and benefits of regulations in 
the aggregate, by agency and agency program, and by major rule, as well 
as an analysis of impacts of Federal regulation on State, local, and 
tribal government, small business, wages, and economic growth. The Act 
also states that the report should go through notice and comment and 
peer review.

John D. Graham,
Administrator, Office of Information and Regulatory Affairs.

Draft Report to Congress on the Costs and Benefits of Federal 
Regulations; Executive Summary

    This Draft Report to Congress on regulatory policy was prepared 
pursuant to the Regulatory Right-to-Know Act (Section 624 of the 
Treasury and General Government Appropriations Act, 2001), which 
requires such an account each year. It provides (a) an overview of the 
Bush Administration's centralized approach to federal regulatory 
policy; (b) a statement of the costs and benefits of federal 
regulations, including assessments of their impact on State, local and 
tribal governments, small businesses, wages and economic growth; and 
(c) recommendations for regulatory reforms. The report will be 
published in final form after revisions to this draft are made based on 
public comment, external peer review, and interagency review.
    Its major features and findings include:
    1. In the last six months, OMB has cleared 41 significant federal 
regulations aimed at responding to the terrorist attacks of September 
11th. These rules addressed urgent matters such as homeland security, 
immigration control, airline safety, and assistance to businesses 
harmed by the resulting economic disaster experienced in several 
regions of the country.
    2. The Bush Administration's approach to regulatory review, through 
OMB's Office of Information and Regulatory Affairs (OIRA), is 
characterized by openness, transparency, analytic rigor, and 
promptness. OIRA's website puts that perspective on display, with daily 
updates and an unprecedented amount of information about OIRA's 
activities. The 20 significant rules that OMB returned to agencies for 
reconsideration from July 1, 2001 to March 1, 2002 are more than the 
total number of rules returned to agencies during the Clinton 
Administration. Inadequate analysis by agencies is the most common 
reason for returns. The number of OMB reviews consuming more than the 
allotted 90 days has declined from what had regularly been 15-20 rules 
to near zero in recent months. OMB has also demonstrated its commitment 
to necessary federal regulation by clearing numerous well-analyzed 
rules and prompting agencies to initiate or complete cost-effective 
rulemaking opportunities. In order to perform its role with greater 
competence, OIRA is expanding its staffing expertise in several fields 
of science and engineering that are central to reviewing regulatory 
proposals.
    3. Under the Bush Administration, OIRA is taking a proactive role 
in suggesting regulatory priorities for agency consideration. In order 
to play this role constructively, we have devised the ``prompt'' letter 
as a modest device to bring a regulatory matter to the attention of 
agencies. OIRA's initial five prompt letters have addressed a range of 
issues at four different agencies, including the use of lifesaving 
defibrilators in the workplace, food labeling requirements for trans 
fatty acids, and better information regarding the environmental 
performance of industrial facilities.
    4. Pursuant to statutory mandate, OIRA has issued government-wide 
guidelines to enhance the quality of information that federal agencies 
disseminate to the public. OIRA is now working with agencies to 
finalize their guidelines by October 1, 2002. These guidelines will 
offer a new opportunity for affected members of the public to challenge 
agencies when poor quality information is disseminated. OMB has 
required each agency to develop an administrative mechanism to resolve 
these challenges, including an independent appeals mechanism.
    5. The report summarizes regulatory reform activities now underway 
in developed countries throughout the world, with special focus on the 
European Union.
    6. Major federal regulations cleared by OMB from April 1, 1995 to 
September 30, 2001 were examined to determine their quantifiable 
benefits and costs. The estimated annual benefits range from $49 
billion to $68 billion while the estimated costs range from $51 billion 
to $54 billion. Estimates of the total benefits and costs of all 
federal regulations currently in effect are found in the Appendix, 
because they are based substantially on figures that the agencies did 
not produce and OMB did not review. The estimates of total benefits, 
which are highly uncertain, range from

[[Page 15015]]

about one-half to three times the total costs, which are pegged at $520 
billion to $620 billion per year. Total cost figures are roughly 
comparable to the federal government's total discretionary budget 
authority in FY 2001.
    Finally, OMB seeks public comment on all aspects of this Draft 
Report. OMB is also calling for public nominations of regulatory 
reforms in the following three areas:
     Reforms to specific existing regulations that, if adopted, 
would increase overall net benefits to the public, considering both 
qualitative and quantitative factors. These reforms might include (1) 
extending or expanding existing regulatory programs; (2) simplifying or 
modifying existing rules or (3) or rescinding outmoded or unnecessary 
rules.
     Identification of specific regulations, guidance 
documents, and paperwork requirements that impose especially large 
burdens on small businesses and other small entities without an 
adequate benefit justification.
     Reviews of problematic agency ``guidance'' documents of 
national or international significance that should be reformed through 
notice and comment rulemaking, peer review, interagency review, or 
rescission.
    Nominations should be presented in the format provided in the 
report to facilitate orderly consideration by OMB, agencies, and the 
public. OMB will consider the nominations, provide a preliminary 
evaluation, and report these evaluations in the final draft of this 
report. OMB will request that agencies consider all nominations but 
especially those that OMB's preliminary evaluation suggest merit ``high 
priority.''
    In addition, OMB would welcome: (1) Comments on any cases where 
consultations under the Unfunded Mandates Reform Act between federal 
agencies and State, local, and tribal governments were not sufficient 
or timely enough to have a meaningful impact on the rulemaking process; 
and (2) suggestions of analytical issues needing refinement or 
development to improve OMB's analytic guidance document.

Chapter I: Regulatory Policy Under the Bush Administration: The 
First Year

    Federal regulation is a fundamental instrument of national policy. 
It is one of the three major tools--besides spending and taxing--used 
to implement policy. It is used to advance numerous public objectives, 
from homeland security to privacy, environmental protection, food 
safety, transportation safety, delivery of quality health care, equal 
employment opportunity, energy security, educational quality, 
immigration control and consumer protection. Yet regulation also is 
costly. While the exact cost of regulation is uncertain, the total cost 
is comparable to discretionary spending--about $640 billion in 2001. 
Regulation can increase the cost of producing goods and services in the 
economy, thereby raising prices to the consumer, creating potential 
competitive problems for U.S. firms in a global economy, exacerbating 
fiscal challenges to State and local governments, and placing jobs and 
wages at risk. Regulatory policy does not lend itself to simple answers 
because the underlying scientific and economic issues often are 
complex, there may be tradeoffs between laudable social objectives, and 
success often hinges on the details about how a rule is designed, 
implemented and enforced.
    The Bush Administration supports federal regulations that are 
sensible and based on sound science, economics, and the law. Through 
OMB's Office of Information and Regulatory Affairs (OIRA), the 
Administration is stimulating development of a regulatory process that 
adopts new rules when markets fail, simplifies and modifies existing 
rules to make them more effective and/or less costly or intrusive, and 
rescinds outmoded rules whose benefits do not justify their costs. In 
pursuing this agenda, OIRA has pursued an approach based on the 
principles of regulatory analysis and policy espoused in Executive 
Order 12866, signed into law by President Clinton in 1993.
    The regulatory reforms now being implemented and described below, 
while modest, incremental and generally procedural in nature, promise 
to have a powerful positive long run effect on the quality of federal 
regulation. With regard to federal regulation, the Bush 
Administration's objective is quality, not quantity. Those rules that 
are adopted promise to be more effective, less intrusive, and more 
cost-effective in achieving national objectives while demonstrating 
greater durability in the face of political and legal attack.
    One of OIRA's most important functions is coordinating the 
President's regulatory policy. As discussed in last's year's annual 
report to Congress, the first regulatory action taken by the Bush 
Administration was issuance of the ``Card Memorandum,'' a January 20, 
2001 directive from the President's Chief of Staff, Andrew H. Card, 
Jr., to agency heads to take steps to ensure that policy officials in 
the incoming Administration had the opportunity to review any new or 
pending regulations. In last year's report, we provided a summary of 
actions taken by agencies pursuant to rules targeted for scrutiny by 
the Card memo, and by a subsequent OMB memorandum to agencies. In 
Appendix A of this report, we provide an update of these actions. In 
the next section, we discuss another coordinating role OMB is playing--
one that was unexpected.

A. The Regulatory Response to September 11th

    After the shocking terrorist attacks of September 11, 2001, the 
American public looked to the federal government to take action not 
only to prevent future security threats but also to provide relief for 
individuals affected by the tragedies. In response, the federal 
government revisited its current practices and procedures, and sought 
solutions to address these concerns. Also in response to the attacks, 
several agencies including Departments of Justice, Transportation, 
Labor, Health and Human Services, and Commerce and the Office of 
Personnel Management, Small Business Administration, and Office of 
Management and Budget issued new regulations. Table 1 lists the 41 
significant federal regulations issued in response to the terrorist 
attacks.

               Table 1.--The 41 Regulations Responding to the Terrorist Attacks of Sept. 11, 2001
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           Agency                      Sub agency                         Title                Rulemaking stage
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DOC.........................  BXA.........................  India and Pakistan: Lifting of    Final Rule.
                                                             Sanctions, Removal of Indian
                                                             and Pakistani Entities, and
                                                             Revision in License Review
                                                             Policy.
DOJ.........................  BOP.........................  National Security: Prevention of  Interim Final
                                                             Acts of Rule Violence and         Rule.
                                                             Terrorism.
DOJ.........................  LA..........................  September 11th Victim             Pre-rule.
                                                             Compensation Fund of 2001.
DOJ.........................  LA..........................  September 11th Victims            Final Rule.
                                                             Compensation Fund of 2001.

[[Page 15016]]

DOJ.........................  INS.........................  Custody Procedures..............  Interim Final
                                                                                               Rule.
DOJ.........................  INS.........................  Review of Custody Determinations  Interim Final
                                                                                               Rule.
DOJ.........................  LA..........................  September 11th Victim             Interim Final
                                                             Compensation Fund of Rule 2001.   Rule.
DOL.........................  ETA.........................  Disaster Unemployment Assistance  Interim Final
                                                             Program Amendment.                Rule.
DOT.........................  FAA.........................  Screening of Checked Baggage on   Final Rule.
                                                             Flights within the United
                                                             States.
DOT.........................  FAA.........................  Aircraft Security under General   Final Rule.
                                                             Operating and Flights Rules.
DOT.........................  FAA.........................  Flight Crew Compartment Access    Final Rule.
                                                             and Door Design.
DOT.........................  OST.........................  Procedures for Compensation of    Final Rule.
                                                             Air Carriers.
DOT.........................  FRA.........................  Locational Requirement for        Interim Final
                                                             Dispatching of U.S. Rail          Rule.
                                                             Operations.
DOT.........................  FAA.........................  Flight Crew Compartment Access    Final Rule.
                                                             and Door Designs.
DOT.........................  FAA.........................  Criminal History Background       Final Rule.
                                                             Checks.
DOT.........................  FAA.........................  Security Screeners:               Other.
                                                             Qualifications, Training and
                                                             Testing.
DOT.........................  FAA.........................  Security Considerations in the    Other.
                                                             Design of the Flight Deck on
                                                             Transport Category Airplanes.
DOT.........................  TSA *.......................  Imposition and Collection of      Other.
                                                             Passenger Civil Aviation
                                                             Security Fees in the Wake of
                                                             September 11, 2001.
DOT.........................  TSA.........................  Aviation Security Infrastructure  Interim Final
                                                             Fees.                             Rule.
DOT.........................  TSA.........................  Security Programs for Aircraft    Interim Final
                                                             with a Maximum Certificated       Rule.
                                                             Takeoff Weight of 12,500 Pounds
                                                             or More.
DOT.........................  TSA.........................  Civil Aviation Security Rules...  Interim Final
                                                                                               Rule.
DOT.........................  FAA.........................  Airspace and Flight Operations    Final Rule.
                                                             Requirements for the 2002
                                                             Winter Olympic Games, Salt Lake
                                                             City, UT.
DOT.........................  FAA.........................  Procedures for Reimbursement of   Notice of Proposed
                                                             Proposed Airports, On-Airport     Rulemaking.
                                                             Parking Lots and Vendors of On-
                                                             Airfield Direct Services to Air
                                                             Carriers for Security Mandates.
DOT.........................  FAA.........................  Firearms, Less-Than-Lethal        Request for
                                                             Weapons, and Emergency Services   comments.
                                                             on Commercial Air Flights.
DOT.........................  FAA.........................  Temporary Extension of Time       Final Rule.
                                                             Allowed for Certain Training
                                                             and Testing.
DOT.........................  FAA.........................  Security control of Air Traffic.  Final Rule;
                                                                                               request for
                                                                                               comments.
DOT.........................  FAA.........................  Temporary Flight Restrictions...  Final Rule.
HHS.........................  SAMHSA......................  Substance Abuse and Mental        Interim Final
                                                             Health Services Administration    Rule.
                                                             Mental Health and Substance
                                                             Abuse Emergency Response
                                                             Criteria.
OMB.........................  ............................  Regulation for Air Carrier        Final Rule.
                                                             Guarantee Loan Program.
OPM.........................  ............................  Absence and Leave Use of          Interim Final
                                                             Restored Annual Leave.            Rule.
OPM.........................  ............................  Absence and Leave Use of          Final Rule.
                                                             Restored Annual Leave.
OPM.........................  ............................  Administratively Uncontrollable   Interim Final
                                                             Overtime Pay.                     Rule.
SBA **......................  ............................  Size Standards; Inflation         Interim Final
                                                             Adjustment.                       Rule.
SBA.........................  ............................  Disaster Loan Program...........  Interim Final Rule
SBA.........................  ............................  Small Business Size Standards:    Interim Final
                                                             Travel Agencies.                  Rule.
Treasury....................  FinCEN......................  Amendment to the Bank Secrecy     Interim Final
                                                             Act Regulations Rule.             Rule.
Treasury....................  FinCEN......................  Proposed Amendment to the Bank    Notice of Proposed
                                                             Secrecy Act Regulations.          Rulemaking.
Treasury....................  FinCEN......................  Cooperative Efforts to Deter      Temporary Rule and
                                                             Terrorist Rule and Financing      Notice of
                                                             and Money Notice of Laundering.   Proposed
                                                                                               Rulemaking.
Treasury....................  Departmental Offices........  Counter Money Laundering          Temporary Rule and
                                                             Requirements--Correspondent       Notice of
                                                             Accounts with Foreign Shell       Proposed
                                                             Banks; Rulemaking Recordkeeping   Rulemaking.
                                                             Related to Foreign Banks with
                                                             Correspondent Accounts.
Treasury....................  IRS.........................  Special Form 720 Filing Rule....  Final Rule Rule
                                                                                               without Notice of
                                                                                               Proposed
                                                                                               Rulemaking.
Treasury and other Financial Institutions ***.............  Identity Verification Program...  Notice of Proposed
                                                                                               Rulemaking.
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* Traffic Safety Administration.
** Small Business Administration.
*** Office of Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit
  Insurance Corporation, Office of Thrift Supervision, and National Credit Union.

    As an integral part of the expedited issuance of these rules, OIRA 
conducted its full regulatory review and coordination function under 
Executive Order 12866. OIRA ensured that all affected agencies were 
aware of what other agencies were proposing and facilitated their 
timely comments on the proposed actions. These efforts made sure that 
all September 11th related rules received priority attention from the 
appropriate reviewers and that the Administration's best solutions to 
the circumstances caused by the terrorist attacks were implemented.
    The Administration issued two types of rules in response to the 
events of September 11th. The first improves and strengthens national 
security. The

[[Page 15017]]

second directs relief to the individuals affected by the attacks.
    The Department of Justice promulgated several rules that addressed 
the need for heightened security at home and compensation for victims 
of the attacks. Shortly after the September 11th, 2001 terrorist 
attack, the President signed the ``September 11th Victim Compensation 
Fund of 2001'' into law as Title IV of the Air Transportation Safety 
and System Stabilization Act. The Act authorizes compensation to any 
individual (or the personal representative of a deceased individual) 
who was physically injured or killed as a result of the terrorist-
related aircraft crashes on that day. The Victims Compensation Fund is 
designed to provide a no-fault alternative to tort litigation for 
individuals who were physically injured or killed as a result of the 
aircraft hijackings and crashes on September 11th. This regulation 
established procedural rules for administration of the Victims 
Compensation Fund.
    A second Justice rule involved the monitoring of communications 
between an inmates and their attorneys or their agents, where the 
Attorney General has determined that such actions are reasonably 
necessary in order to deter future acts of violence or terrorism, and 
upon a specific notification to the inmate and attorneys involved. 
Under the rule, a privilege team of individuals not involved in the 
underlying investigation would sift through the attorney-client 
communications. The privilege team would disclose information to the 
investigators and prosecutors only upon approval of a federal judge, 
unless the team leader determined that acts of violence or terrorism 
are imminent.
    On the immigration side, the Department of Justice and the 
Immigration and Naturalization Service issued two rules signaling the 
need for tighter security. INS established an automatic stay of the 
judge's decision in cases where the individual is ordered to be 
released, allowing INS to continue to detain the alien while it appeals 
the decision. An additional INS rule extended the period an individual 
can be held in custody after his or her initial arrest. This rule 
afforded the INS additional time to run background security clearances 
on individuals to determine whether they were security risks.
    The Department of Transportation and the Federal Aviation 
Administration issued over a dozen rules in four key areas: flight-deck 
security requirements, airline compensation, background checks, and 
flight rules. In order to improve security on aircrafts, the FAA issued 
a series of rules to strengthen cockpit doors and locks to protect 
against unauthorized access to the cockpit. FAA also issued an interim 
final rule to require more permanent measures such as the replacement 
of cockpit doors. In addition, to fund enhanced security measures, such 
as airport screener services, a rule was promulgated that allowed for a 
$2.50 security fee per segment traveled, with a maximum of $10.00 per 
round trip. The fee is to be used for enhanced security protections.
    In compensation, FAA issued a rule which set forth procedures for 
the allocation for approximately $5 billion to air carriers affected by 
the events of September 11th. In the final two categories of rules, the 
FAA promulgated several regulations regarding criminal history 
background checks, security procedures, screening of passengers, and 
screening of checked baggage.
    The Treasury Department issued a series of rules to tighten the 
security of financial banking and establish procedures to identify 
suspicious transactions as part of the counter money-laundering 
program. With the need to deter the financing of terrorist acts, the 
Treasury also issued a rule permitting information sharing among 
financial institutions and the federal government.
    The second category of rules promulgated seeks to provide 
assistance to individuals affected by the September 11th attacks. The 
Department of Labor issued a rule regarding disaster relief for 
individuals unemployed as a result of the attacks, clarifying 
eligibility requirements. In addition, the Office of Personnel 
Management set forth a rule to assist agencies dealing with individuals 
who were forced to take leave during the national emergency and risked 
losing annual leave time. A second OPM regulation clarified technical 
procedures on compensation of individuals whose work is now related to 
the September 11th tragedy and recent security concerns. This would 
include law enforcement officials who have been temporarily reassigned 
work in response to recent national emergency declaration.
    The Department of Health and Human Services issued a rule regarding 
mental health and substance abuse that was drafted prior to the 11th. 
After the events, the Department added language to the preamble 
discussing the attacks, though no changes to the regulation itself were 
made. Finally, the Small Business Administration set forth rules on 
disaster loan programs and inflation that may occur as a result of the 
terrorist attacks and economic downturns.
    Since the events of September 11, the Administration has sought to 
address the need for heightened national security in addition to 
assistance for disaster victims. OIRA has collaborated with the 
agencies on 41 significant regulatory actions made necessary by the 
events of September 11th. The regulatory actions summarized above 
occurred in the months soon after the attacks in order to implement 
solutions expeditiously.

B. An Open Approach to Centralized Regulatory Oversight

    The Bush Administration supports strong, centralized oversight by 
OMB's Office of Information and Regulatory Affairs (OIRA) to stimulate 
development of a smarter regulatory process. To best achieve this goal, 
OIRA has developed a more transparent and open approach to centralized 
regulatory oversight. This policy of openness reflects the preferences 
of the current OMB Director and OIRA Administrator but also responds to 
past complaints that OMB decision making was secretive and rooted more 
in interest-group politics than professional analysis. Although some 
critics continue to perceive OIRA as a mysterious organization, the 
long-term, cumulative impact of the steps described below should 
demystify the process of regulatory oversight.
    OMB has taken the following specific steps to enhance the openness 
of the regulatory review process:
     OIRA is improving implementation of the public disclosure 
provisions in E.O. 12866, including both the letter and spirit of the 
provisions relating to communications with outside parties interested 
in regulations under review by OIRA. The Administrator's relevant 
guidance to OIRA staff is available on OIRA's website: http://
www.whitehouse.gov/omb/inforeg/regpol.html>.
     For meetings subject to the disclosure provisions of E.O. 
12866, OIRA maintains a log (which notes the meeting date, topic, lead 
agency, and participants) on OIRA's website and docket room. We also 
invite the relevant agency and file any documents submitted at EO 12866 
meetings in our docket room with copies provided to the agency.
     Under the E.O. 12866 disclosure procedures, we are posting 
information about written correspondence from outside parties on 
regulations under review by OIRA. Information on this correspondence--
including the date of the letter, the sender and his or her 
organizational affiliation, and the

[[Page 15018]]

subject matter--is available on the OIRA website. Copies of these 
letters are also available in the docket room.\1\
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    \1\ Please call (202) 395 -6880 for access to the docket room 
located in Room 10102, the New Executive Office Building, 725 17th 
St., NW., Washington DC 20503.
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     OIRA has increased the amount of information available on 
the OIRA website. In addition to the information on meetings and 
correspondence noted above, OIRA makes available communications from 
the OIRA Administrator to agencies, including ``prompt,'' ``return,'' 
and ``post clearance'' letters, as well as the Administrator's 
memorandum to the President's Management Council (September 20, 2001) 
on ``Presidential Review of Agency Rulemaking by OIRA.''
     OIRA has adopted an open-door approach to meetings with 
outside parties, leading to meetings with more than 100 outside groups 
from July 2001 to December 2001 on matters of general regulatory policy 
or specific rules.
     OIRA has initiated a multi-year process aimed at linking 
up to the Administration's E-government initiative, thereby allowing 
outside parties electronic access to the information now contained in 
OIRA's docket room while giving the public greater opportunity to 
provide and view the electronic input of others on OIRA decision-
making.
    Openness does not necessarily reduce controversy. In pursuit of the 
policies and priorities of the Bush Administration, OIRA is already 
establishing procedures and making decisions that are controversial. 
That is the nature of regulatory policy. However, the objective of 
openness is to transform controversy from a dispute about decision 
process (who was able to speak with OMB officials before the decision 
was made?) to a dispute about the substance of regulatory analysis or 
policy (e.g., do the benefits of this rule justify the costs?). Indeed, 
explicitness about the grounds for regulatory decision making will in 
some cases sharpen public controversy by making differences of opinion 
more apparent to everyone interested in regulatory outcomes. Thus, OIRA 
does not regard absence of public controversy as a measure of success 
of regulatory oversight.

C. Gatekeeper for New Rulemakings

    Presidential Executive Order 12866 provides OIRA with substantial 
authority to review rulemaking proposals from agencies. During the 
Clinton Administration, concerns were raised that the sound principles 
and procedures in this Order were not always implemented and enforced 
by OIRA.
    An average of 600 significant rulemaking actions were approved per 
year during the Clinton Administration. During the last three years of 
the Clinton Administration, there were exactly zero rules returned to 
agencies by OMB for reconsideration.\2\ The absence of returns could 
indicate either that the agency-OIRA relationship was tilted too 
heavily in favor of the agencies or that the agencies were meeting 
OIRA's expectations. Although it is often better for OIRA to work with 
an agency to resolve a problem rather than simply return a rule, the 
degree of OIRA's actual effectiveness can be questioned when it 
declines to use its authority to return rules.
---------------------------------------------------------------------------

    \2\ During the full eight years of the Clinton Administration, 
OMB returned for reconsideration approximately one rule in 500.
---------------------------------------------------------------------------

    Under the Bush Administration, OIRA has revived the ``return 
letter,'' making clear that OMB is serious about the quality of new 
rulemakings. From July 2001 to December 2001, there were 18 significant 
rulemakings returned to agencies for reconsideration.\3\ As the data in 
Table 2 illustrate, this represents a significant rate of return when 
measured against recent history. The technical and policy rationales 
for these returns are stated in letters to agency officials that are 
made public and posted on OIRA's web site. In five cases, after 
modifications and later submission for review under E.O. 12866, OIRA 
approved the rule. More importantly, agencies are beginning to invite 
OIRA staff into earlier phases of regulatory development in order to 
prevent returns late in the rulemaking process. It is at these early 
stages where OIRA's analytic approach can most improve on the quality 
of regulatory analyses and the substance of rules.
---------------------------------------------------------------------------

    \3\ A detailed table of the number of regulations reviewed by 
OMB by agency and type of action taken from January 1, 2001 to the 
present is maintained on our website at http://www.whitehouse.gov/
library/omb/OMBRCYTD-2001.html>.

               Table 2.--Executive Order Reviews 1981-2001
------------------------------------------------------------------------
                                           Total
                  Year                    reviews    Returns    Percent
------------------------------------------------------------------------
All....................................     35,111        414        1.2
2001...................................        700         18        2.6
2000...................................        579          0        0.0
1999...................................        583          0        0.0
1998...................................        486          0        0.0
1997...................................        507          4        0.8
1996...................................        503          0        0.0
1995...................................        619          3        0.5
1994...................................        861          0        0.0
1993...................................      2,167          9        0.4
1992...................................      2,286          9        0.4
1991...................................      2,525         28        1.1
1990...................................      2,138         21        1.0
1989...................................      2,220         29        1.3
1988...................................      2,362         29        1.2
1987...................................      2,315         10        0.4
1986...................................      2,011         29        1.4
1985...................................      2,213         34        1.5
1984...................................      2,113         58        2.7
1983...................................      2,484         32        1.3
1982...................................      2,641         56        2.1
1981...................................      2,798         45        1.6
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[[Page 15019]]

    In a September 20, 2001 memorandum to the President's Management 
Council, the OIRA Administrator summarized for top agency officials the 
supporting information that must accompany a draft significant 
regulatory action. The six specific elements are described below.
     First, the agency should articulate how the draft 
regulatory action is consistent with the principles and procedures of 
E.O. 12866 and the underlying statute(s). An important aspect of OIRA's 
review of a draft rule is an evaluation of the possible impact on the 
programs of other Federal agencies. OIRA will make an assessment, in 
collaboration with policy officials from interested agencies, as to 
whether the draft action is consistent with the policies and priorities 
of the Administration.
     Second, the agency must prepare a formal regulatory impact 
analysis for rulemaking actions deemed economically significant. This 
analysis should include an assessment of benefits and costs 
(quantitative and qualitative) and a rigorous analysis of several 
regulatory alternatives. The RIAs should be timely and prepared in a 
way consistent with OMB's government-wide guidance, as explained by OMB 
on March 22, 2000 and June 19, 2001. An RIA is necessary regardless of 
whether the underlying statute governing agency action requires, 
authorizes or prohibits cost-benefit analysis as an input to 
decisionmaking. The public and Congress have an interest in benefit and 
cost information, regardless of whether it plays a central role in 
decisionmaking under the agency's statute. Congress has mandated that 
OMB provide this information in this annual report to Congress on the 
costs and benefits of regulation.
     Third, for draft regulatory actions that are supported by 
risk assessments of health, safety and environmental hazards, OIRA 
recommends that agencies adopt the basic informational quality and 
dissemination standards that Congress adopted in the Safe Drinking 
Water Act Amendments of 1996. These standards were recently codified in 
OMB's government-wide guidelines on information quality.
     Fourth, OIRA recommends that draft RIAs, including 
supporting technical documents (e.g., risk assessments), be subjected 
to formal, independent external peer review by qualified specialists. 
Given the growing public interest in peer review at agencies, OIRA 
recommends that (a) peer reviewers be selected primarily on the basis 
of necessary technical expertise; (b) peer reviewers be expected to 
disclose to agencies prior technical/policy positions they may have 
taken on the issues at hand; (c) peer reviewers be expected to disclose 
to agencies their sources of personal and institutional funding (public 
and private); and (d) peer reviews be conducted in an open and rigorous 
manner. OIRA will give a measure of deference to agency analysis that 
has been developed in conjunction with such peer review procedures. 
EPA's recent decision to affirm an arsenic standard in drinking water 
of 10 parts per billion is a good illustration of a recent regulatory 
decision that was supported by rigorous external peer reviews.
     Fifth, for regulatory actions with impacts on State, 
local, and tribal governments, OIRA staff will insist on agency 
certification of compliance with Executive Orders 13132 and 13175 and 
compliance with the Unfunded Mandates Reform Act. The OMB Director has 
pledged to Congress that OIRA will return any rulemaking proposal to 
agencies that has not been subjected to adequate consultation with 
affected State, local, and tribal officials.
     Sixth, the Regulatory Flexibility Act as amended by the 
Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) 
requires that OIRA ensure that impacts on small businesses and other 
small entities are taken into account in the regulatory process. This 
work is done in part in collaboration with the Small Business 
Administration's Chief Counsel for Advocacy. OIRA looks to see that an 
appropriate analysis of small business impacts has been performed, 
including an evaluation of regulatory alternatives designed to reduce 
the burden on small businesses without compromising the statutory 
objective. In the cases of OSHA and EPA rulemakings under SBREFA that 
are expected to have economically significant impacts on a substantial 
number of small entities, OIRA staff participate in Small Business 
Advocacy Panels prior to publication of a rulemaking proposal.
    In addition, under E.O. 13045, OIRA reviews proposed regulatory 
actions that may pose disproportionate environmental or safety risks to 
children.\4\ E.O. 13045 requires agencies to prepare an evaluation of 
the risks to children of planned regulations including an explanation 
of why the planned regulation is preferable to other potentially 
effective and reasonably feasible alternatives considered by the 
agency.
---------------------------------------------------------------------------

    \4\ See E.O. 13045, Protection of Children From Environmental 
Health Risks and Safety Risks, April 21, 1997.
---------------------------------------------------------------------------

    Finally, OIRA administers the provisions of Executive Order 13211, 
especially the required ``Statements of Energy Effects,'' in situations 
where a rule may have significant impacts on energy supply, 
distribution or use. OIRA published guidance for implementing the new 
energy executive order on July 13, 2001.
    Despite the apparent complexity of these analytical and procedural 
requirements, OIRA is committed to performing its regulatory reviews 
within the 90-day period set out in E.O. 12866. As Table 3 reveals, 
OIRA has already made substantial progress in reducing the number of 
reviews that consume more than the allotted 90 days. The OIRA 
Administrator has informed OIRA staff that no review will be permitted 
to extend beyond 90 days without the explicit permission of the OIRA 
Administrator.

                                 Table 3.--EO 12866 Reviews Over 90 Days by Date
----------------------------------------------------------------------------------------------------------------
                                                                             Pending                   Percent
                            Month                                 Year       Over 90      Pending      Over 90
                                                                               Days                      days
----------------------------------------------------------------------------------------------------------------
January.....................................................         1999           15           77         19.5
April.......................................................         1999           10           84         11.9
July........................................................         1999           11           84         13.1
October.....................................................         1999           16           76         21.1
January.....................................................         2000           15           83         18.1
April.......................................................         2000           19          124         15.3

[[Page 15020]]

July........................................................         2000           24          101         23.8
October.....................................................         2000           42          154         27.3
January.....................................................         2001           50          117         42.7
April.......................................................         2001            4           72          5.6
July........................................................         2001           25           97         25.8
October.....................................................         2001            1           62          1.6
January.....................................................         2002            0           86          0.0
----------------------------------------------------------------------------------------------------------------

    OIRA regards the 90-day review limit as a performance indicator for 
a strong regulatory gatekeeper. In previous Administrations there were 
cases where OIRA reviews consumed more than six months or even more 
than a year without any conclusion for the agency. OIRA intends to 
provide agencies with prompt and explicit responses to its draft 
rulemaking actions.

D. Proactive Role in Establishing Regulatory Priorities

    Historically, OIRA has been a reactive force in the regulatory 
process, responding to proposed and final rulemakings generated by 
federal agencies. Under the Bush Administration, OIRA is taking a 
proactive role in suggesting regulatory priorities for agency 
consideration. In order to play this role constructively, we have 
devised the ``prompt'' letter as a modest device to bring a regulatory 
matter to the attention of agencies.
    OIRA's initial five prompt letters have addressed a range of issues 
at four different agencies:
     A letter to FDA requested that a consumer labeling rule 
involving the trans fatty-acid content of foods be finalized in order 
to reduce an established risk factor for coronary artery disease;
     A letter to OSHA urged that actions be taken to promote 
the availability and proper use of automated external defibrilators, a 
technology that can save lives among people suffering from sudden 
cardiac arrest;
     A letter to NHTSA urged initiation of a new rulemaking 
that would require vehicle manufacturers to test cars and light trucks 
for occupant protection in what are called ``offset'' frontal 
collisions, a crash mode responsible for a significant number of lower 
extremity injuries to occupants;
     A letter to EPA urged administrative and legislative 
action to reduce public exposure to fine particles in outdoor air 
emissions, coupled with a targeted, multi-year research program aimed 
at discovering which sources of particles are most responsible for the 
adverse health impacts of breathing fine particulate matter; and
     A letter to EPA encouraged steps to improve the utility of 
the data available on the environmental performance of industrial 
facilities. Better environmental information plays an essential role in 
advancing our objectives of protecting public health and the 
environment. The letter suggested that EPA explore several steps to 
enhance the practical utility of the information available to the 
public by establishing a single facility identification number, setting 
up an integrated system for reporting and access of data across 
multiple programs, and improving the timeliness of the availability of 
Toxic Release Inventory data.
    Prompt letters do not have the mandatory implication of a 
Presidential directive. Unlike a ``return letter,'' which is authorized 
by E.O. 12866, the prompt letter simply constitutes an OIRA request 
that an agency elevate a matter in priority, recognizing that agencies 
have limited resources and many conflicting demands for priority 
attention. The ultimate decision about priority setting remains in the 
hands of the regulatory agency.
    An important feature of the prompt letter can be its public nature, 
aimed at stimulating agency, public and congressional interest in a 
potential regulatory priority. Although prompt letters could be treated 
as confidential pre-decisional communications, OIRA believes that it 
was wiser to make these prompt letters publicly available in order to 
focus congressional and public scrutiny on the important underlying 
issues.
    OIRA's experience with the first five prompt letters suggests that 
(a) preliminary dialogue between OIRA and agency staff is advisable; 
(b) touching base with OMB budget officials and interested EOP staff is 
wise; and (c) informal communication with policy officials at agencies 
is necessary, though it is important for OIRA to send some prompt 
letters that policy officials at agencies would prefer not to receive.
    The original ideas for the initial five prompt letters came from 
OIRA personnel but there is no reason why members of the public should 
not suggest ideas for prompt letters to the OIRA Administrator. These 
suggestions can be faxed to the OIRA Administrator at (202) 395-3047 
(note OIRA is still not receiving first-class mail due to the anthrax 
threat) or submitted in the public comment process leading to the 
publication of this annual report. Agencies are still responding to the 
first five prompt letters, but the original letters and initial agency 
responses are posted on OIRA's web site.

E. Overseer of Analysis and Information Quality

    The public image of OIRA, insofar as one exists, is an office that 
concentrates on clearing, modifying, or returning specific rulemaking 
proposals by agencies. OIRA also plays an important role, as a result 
of its broad-based responsibility, for ensuring the quality of 
information used and disseminated by agencies, including the 
information posted on agency web sites, issued in routine, yet 
important statistical reports, and used in regulatory impact analyses.
    In the Bush Administration, OIRA has taken a strong interest in 
improving the quality of information and analysis used and disseminated 
by agencies. This initiative complements a variety of the initiatives 
in the President's Management Agenda.
    The Paperwork Reduction Act of 1980, as amended in 1995, provides 
OMB broad authority in the field of information policy. OMB Circular A-
130, ``Management of Federal Information Resources,'' provides 
structure and content to the executive branch's commitment to 
information dissemination.
    During the Clinton Administration, concerns were raised that 
scientific information produced with federal financial support and used 
to support binding agency actions were not always available for public 
scrutiny and reanalysis. With new authority from Congress, OMB played 
an important

[[Page 15021]]

role, through OMB Circular A-110, in clarifying the degree of public 
access to such information required through the Freedom of Information 
Act.
    In Section 515 of the Treasury and General Government 
Appropriations Act for Fiscal Year 2001 (Public Law 106-554), Congress 
further directed OMB to issue government-wide guidelines to ensure and 
maximize the quality of information disseminated by federal agencies. 
After two rounds of public and interagency comment, OMB issued these 
final guidelines on September 28, 2001 and January 3, 2002.\5\ Each 
federal agency, including the independent agencies, must now issue 
tailored information-quality guidelines that are compatible with OMB's 
general guidelines. Section 515 reflects a concern by Congress that 
some agencies are distributing information to the public that is of 
questionable quality, objectivity, usefulness and security.
---------------------------------------------------------------------------

    \5\ A final corrected version was published on February 22, 2002 
(67 FR 8452). It is also available on our web site at http://
www.whitehouse.gov/omb/>.
---------------------------------------------------------------------------

    The OMB guidelines provide affected parties concerned about poor 
quality information with the opportunity to seek administrative 
corrections to agency information, with assurances that their 
complaints will be addressed in a timely manner. Although some agencies 
already have well-developed information quality management procedures, 
OMB believes agency practices are uneven and relatively little thought 
has been devoted to assuring the objectivity of agency responses to 
complaints from the public.
    Improving information quality is costly and thus it is important 
that the value of better information to the public be considered. In 
this regard, the OMB guidelines draw a consequential distinction 
between ``influential'' and ordinary information, where ``influential'' 
is defined, when used in the context of ``scientific, financial and 
statistical information,'' as information that the agency ``can 
reasonably determine * * * will have or does have a clear and 
substantial impact on important public policies or important private 
sector decisions.'' Influential information is subject to higher 
quality standards by the OMB guidelines.
    With several important exceptions and qualifications, the OMB 
guidelines require that influential information disseminated by 
agencies be reproducible by qualified third parties. If influential 
information is to be disseminated without the capability of 
reproduction, it is subject to some special robustness and transparency 
requirements. The OMB guidelines provide agencies a measure of 
flexibility in the interpretation and implementation of these 
expectations.
    In order to facilitate better public and scientific input into the 
process of information-quality improvement, OMB has encouraged agencies 
to commission the National Research Council of the National Academy of 
Sciences to undertake several workshops aimed at assisting agencies in 
the development of their information quality guidelines. OMB is also 
organizing several interagency committees to address information 
quality issues that are likely to be common across two or more federal 
agencies. OMB will review the proposed and final information guidelines 
prepared by agencies pursuant to statutory mandate.
    OMB's new information quality guidelines establish stricter 
standards for agency analyses of original data than for the data 
themselves. OMB believes that agencies are in a better position than 
OMB to establish specific quality standards for the generation of 
original and supporting data.
    With regard to the quality of regulatory impact analyses prepared 
by agencies, OIRA has initiated a process of refinement to its formal 
analytic guidance documents. This activity, to be co-chaired by the 
OIRA Administrator and a member of the Council of Economic Advisors 
(CEA), will be supported by public comment, agency comments, and 
external peer review. In this draft report, OMB is seeking comment on 
the particular analytic issues that should be addressed in the 
refinement of OMB's analytic guidelines. At a minimum, OMB-CEA intend 
to address the following issues
     The practice of applying a 7% real discount rate to future 
costs and benefits;
     The methods employed to account for latency periods 
between exposure to toxic agents and development of chronic diseases;
     The methods employed to evaluate the risk of premature 
death, particularly the relative advantages and disadvantages of 
differing statistical approaches including the quality-adjusted-life 
year (QALY) approach;\6\
---------------------------------------------------------------------------

    \6\ The quality-adjusted-life-year or QALY approach weights 
life-years extended based on criteria established by medical 
experts, patients, and community residents to allow comparisons of 
different health outcomes. See M.R. Gold, J.E. Siegel, L.B. Russell, 
and M.C. Weinstein, (eds.) Cost-Effectiveness in Health and 
Medicine. New York, NY, Oxford University Press, 1996.
---------------------------------------------------------------------------

     The need for use of methods of risk assessment that supply 
central estimates of risk as well as upper and lower bounds on the true 
yet unknown risks;
     The need for methods of risk assessment to account for the 
vulnerabilities of specific subpopulations such as the children, the 
elderly, and the infirm; and
     Methods for valuing improvements in the health of 
children.
    We urge public commentators and agencies to nominate additional 
analytic issues for consideration in this process. The ultimate 
guidance that emerges from this process will be used by OIRA when 
evaluating the regulatory proposals and analyses submitted by agencies.

F. Expanded and Diversified Professional Staff

    In Supreme Court Justice Stephen Breyer's book Breaking the Vicious 
Circle, centralized regulatory oversight is viewed as a predominantly 
professional activity rooted in the analytical insights gleaned from 
tools that are taught in professional schools throughout the United 
States. OIRA's history and structure is based on this professional 
model. If OIRA were strictly a political review mechanism, there might 
be no need for career civil servants at OIRA. Yet the Bush 
Administration supports the development of a strong professional staff 
at OIRA to support Presidential management of the regulatory state. OMB 
has reviewed the situation and determined that additional allocations 
of staff are necessary at OIRA.
    As Table 4 shows, staffing at OIRA declined steadily from a peak of 
90 FTEs in 1981, when the Office was first created, to a low of 47 FTEs 
from 1997 to 2000. The decline occurred continuously for 20 years, 
through both Republican and Democratic Administrations. The decline in 
OIRA staffing has been steeper than the general decline experienced 
throughout the Office of Management and Budget. These staffing declines 
have occurred at the same time that OIRA has assumed new statutory 
responsibilities from the Congress on issues concerning unfunded 
mandates, paperwork reduction, small business, regulatory accounting, 
and information policy.

                      Table 4.--OIRA Staff Ceiling
------------------------------------------------------------------------
                                                              Full time
                        Fiscal year                          equivalents
                                                               ceiling
------------------------------------------------------------------------
1981.......................................................           90
1982.......................................................           79
1983.......................................................           77
1984.......................................................           80
1985.......................................................           75

[[Page 15022]]

1986.......................................................      * 75/69
1987.......................................................           69
1988.......................................................           69
1989.......................................................           62
1990.......................................................           65
1991.......................................................      * 65/60
1992.......................................................           60
1993.......................................................           57
1994.......................................................           52
1995.......................................................           50
1996.......................................................           49
1997.......................................................           47
1998.......................................................           47
1999.......................................................           47
2000.......................................................           47
2001.......................................................           49
2002.......................................................          54
------------------------------------------------------------------------
* Indicates a ceiling was reduced in mid-year.

    The Bush Administration has begun to reverse the 20-year decline in 
OIRA staffing, adding a total of seven new OIRA positions for a total 
of about 54 FTEs. Four of these positions will provide new science and 
engineering expertise to OIRA. This will enable us to develop a more 
diversified pool of expertise to ask penetrating technical questions 
about agency proposals. It will also enable us to collaborate more 
effectively with our colleagues in the Office of Science and Technology 
Policy. The remaining positions will buttress OIRA's staffing in 
information technology and policy for the E-Government initiative. The 
new staffing will complement OIRA's historical staffing strengths in 
economics, policy analysis, statistics and law.

G. Facilitator of Targeted Agency Reviews of Existing Rules

    There are so many federal regulations now on the books that there 
has never been an accurate, up-to-date count of their exact number. 
Since many of these rules are quite old, it is logical to suggest that 
existing rules be reviewed to determine whether they remain 
appropriate. Yet regulated entities often adapt creatively to federal 
rules in ways that reduce or minimize their adverse impact while 
fulfilling the social objective. The dynamics of post-regulation 
behaviors call into question the validity of efforts to simply add up 
the costs and benefits of existing rules based on analyses done prior 
to the original promulgation of rules.
    Thus, any comprehensive effort to look at existing rules requires 
original data collection and evaluation, a resource-intensive exercise 
for agencies and regulated entities. Across-the-board reviews of all 
existing rules have been attempted in the past but have not always been 
particularly successful and have induced a questionable allocation of 
limited agency and OIRA resources. The Bush Administration believes 
that a targeted review process for existing rules, pursuant to public 
comment and new statutory authority provided to OIRA, is the best 
available mechanism to facilitate review of existing rules outside of 
the authority under the Regulatory Flexibility Act.\7\
---------------------------------------------------------------------------

    \7\ Section 610 of the Regulatory Flexibility Act (5 U.S.C. 601 
et seq.) requires agencies to review rules that have a significant 
economic impact on a substantial number of small entities within 10 
years of their publication.
---------------------------------------------------------------------------

    Last year's version of this report to Congress represented OIRA's 
first effort to facilitate reviews of existing rules under unique 
statutory authority provided to OIRA. We requested that public 
commentators nominate specific existing rules that should be rescinded 
or changed to increase net benefits by either reducing costs or 
increasing benefits. We called for such nominations in a Federal 
Register notice that also requested public comment on a draft version 
of the year 2001 report to Congress. We provided a suggested format for 
nominations in order to facilitate organized public comment and both 
OIRA and agency consideration of nominations.
    We believe that OIRA's first effort at targeted reviews of existing 
rules was partially successful but can be improved. There were a total 
of 71 specific nominations covering 17 agencies suggested by 33 
commentators. A particularly diligent commentator, the Mercatus Center 
at George Mason University, submitted 44 nominations based on public 
filings before agencies they had been doing for several years.
    OIRA evaluated these nominations and assigned each nomination to 
one of three categories: (1) High priority, indicating that OIRA is 
inclined to agree with the comment and look into the suggestion, (2) 
medium priority, meaning that OIRA needs more information before it can 
give a clear indication of priority, and (3) low priority, meaning that 
OIRA is not convinced of the merits of the suggestion. There were a 
total of 23 nominations rated by OIRA as ``high priority.'' Appendix B 
to this report provides preliminary information about what agencies are 
doing about these 23 regulations. We intend to update this accounting 
of the outcome of reform nominations in our final report.
    Eight of the 23 nominations address EPA rules while another five 
address rules that might be considered environmental in nature (i.e., 
those concerning DOI, DOE and USDA rules). However, a closer 
examination of OIRA's decision making process reveals no implicit or 
explicit intent to target environmental rules for scrutiny.
    The distribution of nominated rules by agency reflects the concerns 
raised by public comments, not the interests of OIRA. Of the 71 
nominations, over half (43) might be considered ``environmental'' 
regulations, a pattern that is unsurprising since federal environmental 
regulation is of broad public interest and a source of persistent 
public controversy. OIRA was quite critical in its internal evaluation 
of all nominations, including those in the environmental arena. Only 13 
of the 33 ``environmental'' rule nominations were rated as ``high 
priority'' for agency reconsideration. A review of these 13 nominations 
reveals that some had already been established as an Administration 
priority for review. Few comments suggested repeal or loosening of 
environmental standards. The new reform ideas (e.g., regarding rules 
under Toxic Substances Control Act (TSCA) and Resource Conservation and 
Recovery Act (RCRA) were modest in nature. OIRA welcomes nominations 
from all interested parties, including regulated entities.
    Indeed OIRA desires the broadest possible public participation in 
the nomination process including input from environmental advocacy 
groups, consumer groups, and public health and safety groups. We will 
be taking several aggressive steps to broaden participation by these 
groups in coming years. OIRA will not rely exclusively on the Federal 
Register as a vehicle to publicize the request for public nominations. 
OIRA's website will also this opportunity. A press release will be 
issued to increase public awareness of nomination opportunities. OIRA 
welcomes all good ideas, regardless of whether or not statutory change 
is required, though suggestions that do not entail legislative action 
may receive more near-term priority.

H. Formation of a Scientific Advisory Panel to OIRA

    At the suggestion of the OMB Director, OIRA is in the process of 
forming a scientific advisory panel that will suggest initiatives to 
OIRA, evaluate OIRA's ongoing activities, comment on national and 
international policy developments of interest to OIRA, and act as a 
resource and recruitment mechanism for OIRA staff. OIRA envisions that 
the panel will be comprised of academics with

[[Page 15023]]

specialized expertise in economics, administrative law, regulatory 
analysis, risk assessment, engineering, statistics, and health and 
medical science. The composition and formation of the panel will comply 
with the guidance on competent and credible peer review mechanisms 
espoused by the OIRA Administrator in his September 20, 2001, 
memorandum to the President's Management Council.
    OIRA envisions that the panel will meet twice each year in 
Washington, DC. Panel meetings will be open to the public. OIRA expects 
that the first meeting of this panel will occur this summer.

I. Agency Compliance With the Unfunded Mandates Reform Act

    In last year's report to Congress ``Making Sense of Regulation,'' 
OMB included its annual report to Congress on agency compliance with 
the Unfunded Mandates Reform Act in addition to OIRA's report on the 
costs and benefits of regulations. This was done because the two 
reports together address many of the same issues and both highlight the 
need for regulating in a responsible manner that both accounts for the 
costs and benefits of rules and takes into consideration the interests 
of our intergovernmental partners.
    OIRA intends to continue to publish these two reports together. We 
are currently working with the agencies to gather data on the extent of 
consultations with State, local, and tribal governments through 
September 2001. The results of this work will appear along with a 
discussion of any rules that imposed and unfunded mandate (defined in 
the Act as expenditures of $100 million or greater) between May 2001 
and October 2001 in the final report.
    However, as noted in last year's report, many of our 
intergovernmental partners feel that they are not being consulted 
sufficiently on those issues that matter most to them. The Office of 
Management and Budget is particularly interested in what State, local, 
and tribal governments perceive as failures in the consultation 
process. We invite public comment on the two questions listed below:
    1. In the examples of federal consultation described in last year's 
report (available at http://www.whitehouse.gov/omb/inforeg/
costbenefitreport.pdf), was the consultation sufficient? Was it 
conducted at a time in the decisionmaking process when it was 
meaningful? Were the views of States, local governments and tribes 
sufficiently solicited by the agencies?
    2. Are there instances other than those described in last year's 
report where consultation should have taken place between an agency and 
a State, local, or tribal government where it did not?
    Responses to these two questions will be very valuable as the 
Administration develops policies to further the rights of State, local 
and tribal governments under the Unfunded Mandates Reform Act.

J. Summary Statistics on the Bush Administration's Regulatory Record

    Basic statistics about regulatory transactions provide a crude 
indicator of the dynamics of regulatory activity at federal agencies 
and OIRA. In Table 15 in Appendix E, we provide a statistical 
comparison of regulatory transactions (total and by agency) for 
calendar years 1998, 1999, 2000, and 2001.
    These data indicate that out of the roughly 4,500 regulatory 
actions that occur on average each year, about 500 are judged to be 
significant and a far smaller number, about 70, are judged to be 
economically significant. Only ``significant'' actions are subject to 
OIRA review under E.O. 12866, and only the ``economically significant'' 
rules are required to be supported by a regulatory impact analysis. 
Ranked by the number of E.O. reviews at OIRA, the busiest 11 regulatory 
agencies over the last four years are, in order: HHS, USDA, EPA, DOT, 
DOI, DOC, HUD, OPM, VA, DOJ, ED. Three agencies--HHS, EPA, and USDA--
accounted for about 70 percent of the economically significant rules.

Chapter II: The Costs and Benefits of Federal Regulations

    Section 624 of the FY 2001 Treasury and General Government 
Appropriations Act, the ``Regulatory Right-to-Know Act,'' \8\ requires 
OMB to submit ``an accounting statement and associated report'' 
including:
---------------------------------------------------------------------------

    \8\ 31 U.S.C. 1105 note, Pub. L. 106-554, Sec. 1(a)(3) [Title 
VI, Sec. 624], Dec. 21, 2000, 114 Stat. 2763, 2763A-161. (See 
Appendix F).

    ``(1) An estimate of the total annual costs and benefits 
(including quantifiable and nonquantifiable effects) of Federal 
rules and paperwork, to the extent feasible:
    (A) In the aggregate;
    (B) by agency and agency program; and
    (C) by major rule;
    ``(2) an analysis of impacts of Federal regulation on State, 
local, and tribal government, small business, wages, and economic 
growth; and
    ``(3) recommendations for reform.\9\
---------------------------------------------------------------------------

    \9\ Recommendations for reform are discussed in Chapter IV.

    This report revises the estimates in last year's report by updating 
the estimates to the end of fiscal year 2001 (September 30, 2001). We 
make three types of revisions. First, we include the costs and benefits 
of the economically significant rules reviewed by OMB between April 1, 
1999 and September 30, 2001. Second, we revised our estimates and 
discussion of estimates based on studies and data that became available 
since the last report was written. Third, we updated our estimates to 
2001 dollars from the 1996 dollars used in the four previous reports.

Estimates of the Total Costs and Benefits of Regulations Reviewed by 
OMB \10\
---------------------------------------------------------------------------

    \10\ In our previous four reports, we presented detailed 
discussions about the difficulty of estimating and aggregating the 
costs and benefits of different regulations over long time periods 
and across many agencies. We do not repeat those discussions here. 
Our previous reports are on our website at http://
www.whitehouse.gov/omb/inforeg/regpol.html>.
---------------------------------------------------------------------------

    Table 5 presents estimates by agency of the costs and benefits of 
major rules reviewed by OMB over the period April 1, 1999 to September 
30, 2001.\11\ We reviewed 117 final major rules over that period. Of 
the 117 rules, 72 implemented federal budgetary programs, which caused 
income transfers from one group to another, and 45 imposed mandates on 
state and local entities or the private sector.\12\ Of the 45 social 
regulations, we are able to present estimates of both monetized costs 
and benefits for 19 rules.\13\ Seven agencies issued major regulations 
adding from $32 billion to $53 billion annual benefits and from $15 
billion to $18 billion annual costs over the 30 month period. About 80% 
of the benefits and 70% of the costs were from one agency, EPA. Table 6 
presents estimates for six and a half years by expanding the period 
covered by Table 5 back by four years to April 1, 1995.\14\ Before 
April 1, 1995, OMB did not systematically

[[Page 15024]]

estimate and sum the benefits of major rules.
---------------------------------------------------------------------------

    \11\ The list of major rules and their individual cost and 
benefit estimates and discussion of the assumptions and calculations 
used to derive the estimates are in Appendix D.
    \12\ Rules that transfer Federal dollars among parties are not 
included because transfers are not social costs or benefits. If 
included, they would add equal amounts to benefits and costs.
    \13\ We used agency estimates where available. If an agency 
quantified estimates but did not monetize, we used standard 
assumptions to monetize as explained in Appendix D.
    \14\ Table 6 is the sum of Table 5 in this report and Table 5 
from the 2000 report (OMB 2000) after converting to 2001 dollars and 
excluded three regulations to prevent double counting: emission 
standards for heavy duty engines and the NAAQS ozone and particulate 
matter rules. These calculations are explained in Appendix D. Two 
other rules reviewed by OMB are not included: OSHA's ergonomics rule 
that was overturned under the Congressional Review Act and FDA's 
tobacco rule that was overturned by the Supreme Court.

    Table 5.--Estimates of the Annual Costs and Benefits of Major Rules, April 1, 1999 to September 30, 2001
                                           [Millions of 2001 dollars]
----------------------------------------------------------------------------------------------------------------
                Agency                                 Costs                               Benefits
----------------------------------------------------------------------------------------------------------------
Agriculture...........................  814................................  1.
DOE...................................  1,520..............................  3,110.
HHS...................................  2,400..............................  5,792.
HUD...................................  150................................  190.
DOL...................................  78.................................  167.
DOT...................................  400 to 1,600.......................  140 to 2,000.
EPA...................................  10,742 to 12,302...................  23,738 to 43,491.
                                       -------------------------------------------------------------------------
    Total.............................  16,104 to 19,264...................  33,137 to 54,350.
----------------------------------------------------------------------------------------------------------------

    Table 6.--Estimates of the Annual Costs and Benefits of Major Rules, April 1, 1995 to September 30, 2001
                                           [Millions of 2001 dollars]
----------------------------------------------------------------------------------------------------------------
                Agency                                 Costs                               Benefits
----------------------------------------------------------------------------------------------------------------
Agriculture...........................  2,249 to 2,271.....................  2,938 to 5,989.
Ed....................................  362 to 610.........................  655 to 814.
DOE...................................  1,836..............................  3,991 to 4,059.
HHS...................................  2,988 to 3,067.....................  8,165 to 9,182.
HUD...................................  150................................  190.
DOL...................................  361................................  1,173 to 3,557.
DOT...................................  1,756 to 3,808.....................  2,400 to 4,312.
EPA...................................  41,523 to 42,326...................  29,140 to 66,092.
                                       -------------------------------------------------------------------------
    Total.............................  51,225 to 54,429...................  48,652 to 67,602.
----------------------------------------------------------------------------------------------------------------

    We provide revised estimates of the aggregate costs and benefits of 
social regulation (health, safety and environmental regulation) in the 
aggregate and by major program as of September 30, 2001, in Appendix 
C.\15\ We also include estimates of the aggregate costs of economic and 
process regulation in Appendix C.\16\ We include these aggregate 
estimates in the appendix rather than the text to emphasize the quality 
differences in the two sets of estimates. The estimates of the costs 
and benefits of Federal regulations over the period April 1, 1995 to 
March 31, 2001, are based on agency analyses subject to public notice 
and comments and OMB review under E.O. 12866. The estimates in the 
Appendix for earlier regulations are based on studies of varying 
quality. Some are first-rate studies published in peer reviewed 
journals. Others are non random surveys of questionable methodology. 
And some estimates are based on studies completed 20 years ago for 
regulations issued over 30 years ago, whose precise cost and benefit 
estimates today are unknown.
---------------------------------------------------------------------------

    \15\ We calculated these estimates by adding the estimates in 
Table 5 above to Table 4 of the 2000 OMB report and updating Table 
4's 1996 dollars to 2001 dollars using the CPI.
    \16\ Economic regulation restricts the price or quantity of a 
product or service that firms produce including whether firms can 
enter or exit specific industries.
---------------------------------------------------------------------------

    Also included in Appendix C is an analysis of impacts of Federal 
regulation on State, local, and tribal governments, small business, 
wages, and economic growth, as required by Section 624(a)(2) of the 
Act.

Estimates of Benefits and Costs of This Year's ``Major'' Rules

    In this section, we examine the benefits and costs of each ``major 
rule,'' as required by section 624(a)(1)(C). We have included in our 
review those final regulations on which OMB concluded review during the 
18-month period April 1, 2000, through September 30, 2001. We used an 
18 month period this year to transition to a fiscal year reporting 
period. The four previous reports used a ``regulatory year,'' ending on 
March 31st.
    The statutory language categorizing the rules we consider for this 
report differs from the definition of ``economically significant'' in 
Executive Order 12866 (section 3(f)(1)). It also differs from similar 
statutory definitions in the Unfunded Mandates Reform Act and subtitle 
E of the Small Business Regulatory Enforcement Fairness Act of 1996--
Congressional Review of Agency Rulemaking. Given these varying 
definitions, we interpreted section 624(a)(1)(C) broadly to include all 
final rules promulgated by an Executive branch agency that meet any one 
of the following three measures:
     Rules designated as ``economically significant'' under 
section 3(f)(1) of Executive Order 12866
     Rules designated as ``major'' under 5 U.S.C. 804(2) 
(Congressional Review Act)
     Rules designated as meeting the threshold under Title II 
of the Unfunded Mandates Reform Act (2 U.S.C. 1531-1538)
    We also include a discussion of major rules issued by independent 
regulatory agencies, although OMB does not review these rules under 
Executive Order 12866. This discussion is based on data provided by 
these agencies to the General Accounting Office (GAO) under the 
Congressional Review Act that met the criteria noted above. Of these 
rules, USDA submitted nineteen; the DOC, DOE, Social Security 
Administration, and Federal Emergency Management Administration, each 
submitted three; HHS twenty-two; DOL eight; Treasury, DOJ, 
Architectural and Transportation Barriers Compliance Board (ATBCB), 
DoD, the Office Federal Housing Enterprise Oversight, Veterans 
Administration, Office of Personnel Management each submitted one; DOI 
five; DOT four; EPA seven; SBA and

[[Page 15025]]

FAR two. One of these rules was a common rule issued by three agencies-
DOL, HHS and Treasury. These 86 rules represent less than 20 percent of 
the final rules reviewed by OMB during this period.

Social Regulation

    Of the 86 economically significant rules reviewed by OMB, 34 are 
regulations requiring substantial additional private expenditures and/
or providing new social benefits as described in Table 7. EPA submitted 
seven; DOI, DOL and HHS each submitted five; USDA, DOC, DOE each 
submitted three; DOT two; DOJ, Treasury and ATBCB each submitted one. 
Agency estimates and discussion are presented in a variety of ways, 
ranging from a mostly qualitative discussion, for example, the USDA's 
National Organic Program rule where all of the benefits and costs 
except for the recordkeeping component were discussed qualitatively, to 
a more complete benefit-cost analysis such as the EPA's heavy-duty 
engine and vehicle rule.

                                          Table 7.--Summary of Agency Estimates for Final Rules 4/1/00-9/30/01
                                                        [As of date of completion of OMB review]
--------------------------------------------------------------------------------------------------------------------------------------------------------
         Agency                         Rule                             Benefits                            Costs                   Other information
--------------------------------------------------------------------------------------------------------------------------------------------------------
USDA...................  Roadless Area Conservation.......  Estimated $219,000/year cost       Loss of $56.9 million (direct)     Monetized costs
                                                             savings from reduced road          and $164 million (total) per       include an estimated
                                                             maintenance activities.            year in the short term, with an    1,054 direct and
                                                                                                additional impact of $12.4         4,032 total jobs lost
                                                                                                million (direct) and $20.2         related to road
                                                                                                million (total) per year in the    construction, timber
                                                                                                long term.                         harvesting, and
                                                                                                                                   mining in the short
                                                                                                                                   term, with an
                                                                                                                                   additional 308 direct
                                                                                                                                   and 509 total jobs
                                                                                                                                   lost in the long
                                                                                                                                   term. [66 FR 3268--
                                                                                                                                   3269] Other costs
                                                                                                                                   include the
                                                                                                                                   following: ``about
                                                                                                                                   873 million tons of
                                                                                                                                   phosphate and 308--
                                                                                                                                   1,371 million tons of
                                                                                                                                   coal would likely be
                                                                                                                                   unavailable for
                                                                                                                                   development. About
                                                                                                                                   11.3 trillion cubic
                                                                                                                                   feet of undiscovered
                                                                                                                                   gas and 550 million
                                                                                                                                   barrels of
                                                                                                                                   undiscovered oil
                                                                                                                                   resources may be
                                                                                                                                   unavailable.'' [66 FR
                                                                                                                                   3269] A variety of
                                                                                                                                   other nonquantified
                                                                                                                                   benefits were
                                                                                                                                   mentioned in the
                                                                                                                                   preamble to the final
                                                                                                                                   rule.
USDA...................  National Organic Program.........  Not estimated....................  $13 million/yr for recordkeeping;  Because basic market
                                                                                                others not estimated.              data on the prices
                                                                                                                                   and quantities of
                                                                                                                                   organic goods and the
                                                                                                                                   costs of organic
                                                                                                                                   production are
                                                                                                                                   limited, it is not
                                                                                                                                   possible to provide
                                                                                                                                   quantitative
                                                                                                                                   estimates of all
                                                                                                                                   benefits and costs of
                                                                                                                                   the final rule.
                                                                                                                                   Consequently, the
                                                                                                                                   analysis does not
                                                                                                                                   estimate the
                                                                                                                                   magnitude or the
                                                                                                                                   direction (positive
                                                                                                                                   or negative) of net
                                                                                                                                   benefits.'' [65 FR
                                                                                                                                   80663]
USDA...................  Retained Water in Raw Meat and     Not estimated....................  $110 million.....................  ``Consumers will
                          Poultry Products.                                                                                        benefit from the
                                                                                                                                   additional
                                                                                                                                   information on
                                                                                                                                   retained water that
                                                                                                                                   will be provided as a
                                                                                                                                   result of the
                                                                                                                                   labeling requirement.
                                                                                                                                   The information on
                                                                                                                                   retained water should
                                                                                                                                   contribute to a
                                                                                                                                   sounder basis for
                                                                                                                                   purchasing decisions.
                                                                                                                                   Consumers are
                                                                                                                                   currently not being
                                                                                                                                   informed about the
                                                                                                                                   amount of retained
                                                                                                                                   water. Consumers will
                                                                                                                                   benefit from having
                                                                                                                                   improved knowledge of
                                                                                                                                   product quantity in
                                                                                                                                   terms of meat or
                                                                                                                                   poultry meat
                                                                                                                                   content.'' [66 FR
                                                                                                                                   1768]
DOC....................  Annual Framework Adjustment        Not estimated....................  Not estimated.
                          (framework 14) for the Atlantic
                          sea scallop fishery management
                          plan for 2001.
DOC....................  Closure of Critical Habitat        Not estimated....................  Up to $88 million................  ``NMFS estimates that
                          Pursuant to a Court Order.                                                                               the potential
                                                                                                                                   economic losses in
                                                                                                                                   closing critical
                                                                                                                                   habitat to pollock
                                                                                                                                   trawling from June
                                                                                                                                   through December 2000
                                                                                                                                   could be as high as
                                                                                                                                   $88 million. Industry
                                                                                                                                   has estimated that if
                                                                                                                                   the injunction
                                                                                                                                   remains in place
                                                                                                                                   through the A/B
                                                                                                                                   seasons, loses could
                                                                                                                                   be as high as $250
                                                                                                                                   million.'' [65 FR
                                                                                                                                   49769]
DOC....................  Steller Sea Lion Protection        Not estimated....................  Not estimated....................  ``NMFS issues an
                          Measures for the Groundfish                                                                              emergency interim
                          Fisheries Off Alaska.                                                                                    rule to implement
                                                                                                                                   Steller sea lion
                                                                                                                                   protection measures
                                                                                                                                   to avoid the
                                                                                                                                   likelihood that the
                                                                                                                                   groundfish fisheries
                                                                                                                                   off Alaska will
                                                                                                                                   jeopardize the
                                                                                                                                   continued existence
                                                                                                                                   of the western
                                                                                                                                   population of Steller
                                                                                                                                   sea lions or
                                                                                                                                   adversely modify its
                                                                                                                                   critical habitat.
                                                                                                                                   These management
                                                                                                                                   measures will
                                                                                                                                   disperse fishing
                                                                                                                                   effort over time and
                                                                                                                                   area and provide
                                                                                                                                   protection from
                                                                                                                                   fisheries competition
                                                                                                                                   for prey in waters
                                                                                                                                   adjacent to rookeries
                                                                                                                                   and important
                                                                                                                                   haulouts''.[66 FR
                                                                                                                                   7276]
DOE....................  Energy Conservation Standards for  $3.51 billion (present value) in   $.9 billion (present value) for    DOE projects a
                          Fluorescent Lamp Ballasts.         energy savings between 2005 and    purchases between 2005 and 2030.   cumulative reduction
                                                             2030.                                                                 in nitrogen oxide
                                                                                                                                   emissions of 59.6
                                                                                                                                   thousand metric tons
                                                                                                                                   (undiscounted) over
                                                                                                                                   the period 2005-2030
                                                                                                                                   and a cumulative
                                                                                                                                   reduction in carbon
                                                                                                                                   dioxide equivalent
                                                                                                                                   emissions of 19
                                                                                                                                   million metric tons
                                                                                                                                   (undiscounted) over
                                                                                                                                   the period 2005-2020.
DOE....................  Energy Conservation Standards for  $8.6 billion (present value) in    $6.4 billion (present value) for   DOE projects a
                          Water Heaters.                     energy savings between 2004 and    purchases between 2004 and 2030.   cumulative reduction
                                                             2030.                                                                 in nitrogen oxide
                                                                                                                                   emissions of 90
                                                                                                                                   thousands metric tons
                                                                                                                                   discounted over the
                                                                                                                                   period 2004-2030 and
                                                                                                                                   a cumulative
                                                                                                                                   reduction in carbon
                                                                                                                                   dioxide equivalent
                                                                                                                                   emissions of 50
                                                                                                                                   million metric tons
                                                                                                                                   discounted over the
                                                                                                                                   period 2004-2020.
DOE....................  Energy Conservation Standards for  $27.2 billion (present value) in   $11.9 billion (present value) for  DOE projects a
                          Clothes Washers.                   energy and water savings between   purchases between 2004 and 2030.   cumulative reduction
                                                             2004 and 2030.                                                        in nitrogen oxide
                                                                                                                                   emissions of 70.8
                                                                                                                                   thousand metric tons
                                                                                                                                   discounted over the
                                                                                                                                   period 2004-2030 and
                                                                                                                                   a cumulative
                                                                                                                                   reduction in carbon
                                                                                                                                   dioxide equivalent
                                                                                                                                   emissions of 24.1
                                                                                                                                   million metric tons
                                                                                                                                   discounted over the
                                                                                                                                   period 2004-2020.
HHS....................  Health Insurance Reform:           $36.9 billion over 10 years......  $7 billion over 10 years.........  ``The costs of
                          Standards for Electronic                                                                                 implementing the
                          Transactions.                                                                                            standards specified
                                                                                                                                   in the statute are
                                                                                                                                   primarily one-time or
                                                                                                                                   short-term costs
                                                                                                                                   related to
                                                                                                                                   conversion. These
                                                                                                                                   costs include system
                                                                                                                                   conversion/upgrade
                                                                                                                                   costs, start-up costs
                                                                                                                                   of automation,
                                                                                                                                   training costs, and
                                                                                                                                   costs associated with
                                                                                                                                   implementation
                                                                                                                                   problems. These costs
                                                                                                                                   will be incurred
                                                                                                                                   during the first
                                                                                                                                   three years of
                                                                                                                                   implementation * * *
                                                                                                                                   The benefits of EDI
                                                                                                                                   include reduction in
                                                                                                                                   manual data entry,
                                                                                                                                   elimination of postal
                                                                                                                                   service delays,
                                                                                                                                   elimination of the
                                                                                                                                   costs associated with
                                                                                                                                   the use of paper
                                                                                                                                   forms, and the
                                                                                                                                   enhanced ability of
                                                                                                                                   participants in the
                                                                                                                                   market to interact
                                                                                                                                   with each other.''
                                                                                                                                   [65 FR 50351]
                                                                                                                                  The discounted present
                                                                                                                                   value of the savings
                                                                                                                                   is $19.1 billion over
                                                                                                                                   ten years.
                                                                                                                                   Furthermore, the
                                                                                                                                   updated impact
                                                                                                                                   analysis still
                                                                                                                                   produces a
                                                                                                                                   conservative estimate
                                                                                                                                   of the impact of
                                                                                                                                   administrative
                                                                                                                                   simplification. For
                                                                                                                                   example, the new
                                                                                                                                   impact analysis
                                                                                                                                   assumes that over the
                                                                                                                                   ten-year post-
                                                                                                                                   implementation
                                                                                                                                   period, only 11.2% of
                                                                                                                                   the growth in
                                                                                                                                   electronic claims
                                                                                                                                   will be attributable
                                                                                                                                   to HIPAA.'' [65 FR
                                                                                                                                   50355]
HHS....................  Safe and Santiary Processing and   $151 monthly/yr..................  $44 million to $55 million in the  ``The quantified
                          Importing of Juice.                                                   first year and $23 million/yr      benefits (discounted
                                                                                                thereafter.                        annually over an
                                                                                                                                   infinite time horizon
                                                                                                                                   at 7 percent) are
                                                                                                                                   expected to be about
                                                                                                                                   $2 billion ($151
                                                                                                                                   million/7 percent)
                                                                                                                                   and the quantified
                                                                                                                                   costs (discounted
                                                                                                                                   annually over an
                                                                                                                                   infinite time horizon
                                                                                                                                   at 7 percent) are
                                                                                                                                   expected to be about
                                                                                                                                   $400 million.'' [66
                                                                                                                                   FR 6190]

[[Page 15026]]

HHS....................  Standards for Privacy of           Net present value savings of $19   Net present value costs of $11.8   The Rule shows a net
                          Individually Identifiable Health   billion.                           billion.                           savings of $29.9
                          Information.                                                                                             billion over 10 years
                                                                                                                                   (2002-2011), or a net
                                                                                                                                   present value savings
                                                                                                                                   of $19 billion. This
                                                                                                                                   estimate does not
                                                                                                                                   include the growth in
                                                                                                                                   ``e-health'' and ``e-
                                                                                                                                   commerce'' that may
                                                                                                                                   be spurred by the
                                                                                                                                   adoption of uniform
                                                                                                                                   codes and standards.
                                                                                                                                   This final Privacy
                                                                                                                                   Rule is estimated to
                                                                                                                                   produce net costs of
                                                                                                                                   $18.0 billion, with
                                                                                                                                   net present value
                                                                                                                                   costs of $11.8
                                                                                                                                   billion (2003
                                                                                                                                   dollars) over ten
                                                                                                                                   years (2003-2012).
                                                                                                                                   This estimate is
                                                                                                                                   based on some costs
                                                                                                                                   already having been
                                                                                                                                   incurred due to the
                                                                                                                                   requirements of the
                                                                                                                                   Transactions Rule,
                                                                                                                                   which included an
                                                                                                                                   estimate of a net
                                                                                                                                   savings to the health
                                                                                                                                   care system of $29.9
                                                                                                                                   billion over 10 years
                                                                                                                                   (2002 dollars) and a
                                                                                                                                   net present value of
                                                                                                                                   $19.1 billion. The
                                                                                                                                   Department expects
                                                                                                                                   that the savings and
                                                                                                                                   costs generated by
                                                                                                                                   all administrative
                                                                                                                                   simplification
                                                                                                                                   standards should
                                                                                                                                   result in a net
                                                                                                                                   savings to the health
                                                                                                                                   care system. [65 FR
                                                                                                                                   82761]
HHS....................  Labeling of Shell Eggs...........  $261 million/yr..................  $56 million in the first year.     ``Although there were
                                                                                                $10 million/yr. thereafter.        no comments directly
                                                                                                                                   on the estimated
                                                                                                                                   benefits, several
                                                                                                                                   comments argued that
                                                                                                                                   FDA used too high a
                                                                                                                                   baseline number of SE
                                                                                                                                   illnesses. In
                                                                                                                                   addition, some
                                                                                                                                   comments cited new
                                                                                                                                   data from CDC on SE.
                                                                                                                                   In the economic
                                                                                                                                   analysis in the
                                                                                                                                   proposal, FDA used
                                                                                                                                   the results of the
                                                                                                                                   USDA SE risk
                                                                                                                                   assessment for one
                                                                                                                                   estimate of the
                                                                                                                                   baseline risk and the
                                                                                                                                   CDC Salmonella
                                                                                                                                   surveillance data for
                                                                                                                                   another estimate of
                                                                                                                                   the baseline.'' [65
                                                                                                                                   FR 76105]
                                                                                                                                  ``The agency estimated
                                                                                                                                   the median benefits
                                                                                                                                   attributable to
                                                                                                                                   labeling alone to be
                                                                                                                                   $261 million using
                                                                                                                                   the USDA SE risk
                                                                                                                                   assessment baseline
                                                                                                                                   and $103 million
                                                                                                                                   using the CDC
                                                                                                                                   surveillance
                                                                                                                                   baseline.'' [65 FR
                                                                                                                                   76106]
HHS/DOL/Treasury.......  Nondiscrimination in Health        Not estimated....................  A one time cost of $19 million     ``The premium and
                          Coverage in the Group Market.                                         the first year for affected        claims cost incurred
                                                                                                businesses, plus $10.2 million     by group health plans
                                                                                                annually for government            to provide coverage
                                                                                                enforcement.                       under HIPAA's
                                                                                                                                   statutory
                                                                                                                                   nondiscrimination
                                                                                                                                   provisions to
                                                                                                                                   individuals
                                                                                                                                   previously denied
                                                                                                                                   coverage or offered
                                                                                                                                   restricted coverage
                                                                                                                                   based on health
                                                                                                                                   factors are offset by
                                                                                                                                   the commensurate or
                                                                                                                                   greater benefits
                                                                                                                                   realized by the newly
                                                                                                                                   eligible participants
                                                                                                                                   on whose behalf the
                                                                                                                                   premiums or claims
                                                                                                                                   are paid.'' [66 FR
                                                                                                                                   1389]
DOI....................  Early-Season Migratory Bird        $50 million to $192 million/yr...  Not estimated....................  The analysis was based
                          Hunting Regulations 2000-2001.                                                                           on the 1996 National
                                                                                                                                   Hunting and Fishing
                                                                                                                                   Survey and the U.S.
                                                                                                                                   Department of
                                                                                                                                   Commerce's County
                                                                                                                                   Business Patterns,
                                                                                                                                   from which it was
                                                                                                                                   estimated that
                                                                                                                                   migratory bird
                                                                                                                                   hunters would spend
                                                                                                                                   between $429 million
                                                                                                                                   and $1,084 million at
                                                                                                                                   small businesses [66
                                                                                                                                   FR 49485]. The listed
                                                                                                                                   benefits represent
                                                                                                                                   estimated consumer
                                                                                                                                   surplus.
DOI....................  Late Season Migratory Game Bird    $50 million to $192 million/yr...  Not estimated....................  The analysis was based
                          Hunting regulations 2000-2001.                                                                           on the 1996 National
                                                                                                                                   Hunting and Fishing
                                                                                                                                   Survey and the U.S.
                                                                                                                                   Department of
                                                                                                                                   Commerce's County
                                                                                                                                   Business Patterns,
                                                                                                                                   from which it was
                                                                                                                                   estimated that
                                                                                                                                   migratory bird
                                                                                                                                   hunters would spend
                                                                                                                                   between $429 million
                                                                                                                                   and $1,084 million at
                                                                                                                                   small businesses [66
                                                                                                                                   FR 49485]. The listed
                                                                                                                                   benefits represent
                                                                                                                                   estimated consumer
                                                                                                                                   surplus.
DOI....................  Early-Season Migratory Bird        $50million to $192 million/yr....  Not estimated....................  The analysis was based
                          Hunting Regulations 2001-2002.                                                                           on the 1996 National
                                                                                                                                   Hunting and Fishing
                                                                                                                                   Survey and the U.S.
                                                                                                                                   Department of
                                                                                                                                   Commerce's County
                                                                                                                                   Business Patterns,
                                                                                                                                   from which it was
                                                                                                                                   estimated that
                                                                                                                                   migratory bird
                                                                                                                                   hunters would spend
                                                                                                                                   between $429 million
                                                                                                                                   and 1,084 million at
                                                                                                                                   small businesses [66
                                                                                                                                   FR 49485]. The listed
                                                                                                                                   benefits represent
                                                                                                                                   estimated consumer
                                                                                                                                   surplus.
DOI....................  Late season Migratory Game Bird    $50 million to $192 million/yr...  Not estimated....................  The analysis was based
                          Hunting regulations 2001-2002.                                                                           on the 1996 National
                                                                                                                                   Hunting and Fishing
                                                                                                                                   Survey and the U.S.
                                                                                                                                   Department of
                                                                                                                                   Commerce's County
                                                                                                                                   Business Patterns,
                                                                                                                                   from which it was
                                                                                                                                   estimated that
                                                                                                                                   migratory bird
                                                                                                                                   hunters would spend
                                                                                                                                   between $429 million
                                                                                                                                   and $1,084 million at
                                                                                                                                   small businesses [66
                                                                                                                                   FR 49485]. The listed
                                                                                                                                   benefits represent
                                                                                                                                   estimated consumer
                                                                                                                                   surplus.
DOI....................  Mining Claims under the General    Not estimated....................  Enforcement and administrative     ``* * * these values
                          Mining Law; Surface Management.                                       costs of $15.6 million annually    may overstate actual
                                                                                                ($1999); foregone production       losses because a
                                                                                                between 0 and $133 million per     number of factors
                                                                                                year.                              will act to mitigate
                                                                                                                                   any production losses
                                                                                                                                   and because they are
                                                                                                                                   calculated using a
                                                                                                                                   base of total U.S.
                                                                                                                                   gold production, not
                                                                                                                                   production
                                                                                                                                   originating from
                                                                                                                                   public lands. Simply
                                                                                                                                   adjusting for
                                                                                                                                   production
                                                                                                                                   originating on public
                                                                                                                                   lands could reduce
                                                                                                                                   the value of forgone
                                                                                                                                   production by half.''
                                                                                                                                   [65 FR 70101]
DOJ....................  Adjustment of Status to That       Not estimated....................  $178 million in 2001, $99.2        ``This rule adds the
                          Person Admitted for Permanent                                         million in 2002, and 91.9          new sunset date of
                          Residence.                                                            million in 2003.                   April 30, 2001, for
                                                                                                                                   the filing of
                                                                                                                                   qualifying petitions
                                                                                                                                   or applications that
                                                                                                                                   enable the applicant
                                                                                                                                   to apply to adjust
                                                                                                                                   status using section
                                                                                                                                   245(i) of the Act,
                                                                                                                                   clarifies the effect
                                                                                                                                   of the new sunset
                                                                                                                                   date on eligibility,
                                                                                                                                   and discusses motions
                                                                                                                                   to reopen.'' [66 FR
                                                                                                                                   16383]
DOL....................  Ergonomics Program...............  $9.1 billion/yr. (1996 dollars)..  $4.5 billion/yr (1996 dollars)...  ``The cost analysis
                                                                                                                                   does not account for
                                                                                                                                   any changes in the
                                                                                                                                   economy over time, or
                                                                                                                                   for possible
                                                                                                                                   adjustments in the
                                                                                                                                   demand and supply of
                                                                                                                                   goods, changes in
                                                                                                                                   production methods,
                                                                                                                                   investment effects,
                                                                                                                                   or macroeconomic
                                                                                                                                   effects of the
                                                                                                                                   standard.'' [65 FR
                                                                                                                                   68773]
DOL....................  Occupational Injury and Illness    Not Estimated....................  $38.6 million....................  Qualitative benefits
                          Recording and Reporting                                                                                  of the rule include:
                          Requirements.                                                                                            (1) Enhanced ability
                                                                                                                                   of employers and
                                                                                                                                   employees to prevent
                                                                                                                                   injuries and
                                                                                                                                   illnesses, and (2)
                                                                                                                                   Increased utility of
                                                                                                                                   and data to OSHA.
DOL....................  Safety Standards for Steel         22 fatalities and 1,142 injuries   $78.4 million/year...............  OSHA estimates that,
                          Erection.                          per year.                                                             of the 35 annual
                                                                                                                                   steel erection
                                                                                                                                   fatalities, 8
                                                                                                                                   fatalities will be
                                                                                                                                   averted by full
                                                                                                                                   compliance with the
                                                                                                                                   existing standard and
                                                                                                                                   that an additional 22
                                                                                                                                   fatalities will be
                                                                                                                                   averted by compliance
                                                                                                                                   with the final
                                                                                                                                   standard.
                                                                                                                                   Additionally, of the
                                                                                                                                   2,279 lost-workday
                                                                                                                                   steel erection
                                                                                                                                   injuries occurring
                                                                                                                                   annually, OSHA
                                                                                                                                   estimates that 1,142
                                                                                                                                   injuries will be
                                                                                                                                   averted by full
                                                                                                                                   compliance with the
                                                                                                                                   existing and final
                                                                                                                                   standards [66 FR
                                                                                                                                   5199] OSHA projects
                                                                                                                                   that full compliance
                                                                                                                                   with the final
                                                                                                                                   standard will, after
                                                                                                                                   deducting costs
                                                                                                                                   incurred to achieve
                                                                                                                                   compliance with the
                                                                                                                                   existing standard,
                                                                                                                                   result in net (or
                                                                                                                                   incremental)
                                                                                                                                   annualized costs of
                                                                                                                                   $78.4 million for
                                                                                                                                   affected
                                                                                                                                   establishments. [66
                                                                                                                                   FR 5251]

[[Page 15027]]

DOL....................  Amendments to Summary Plan         Not estimated....................  $47 million in 2001, $208 million  ``The regulation will
                          Description Regulations.                                              in 2002, $24 million/yr.           ensure that
                                                                                                thereafter.                        participants have
                                                                                                                                   better access to more
                                                                                                                                   complete information
                                                                                                                                   about their benefit
                                                                                                                                   plans. Such
                                                                                                                                   information is
                                                                                                                                   important to
                                                                                                                                   participants' ability
                                                                                                                                   to understand and
                                                                                                                                   secure their rights
                                                                                                                                   under their plans at
                                                                                                                                   critical decision
                                                                                                                                   points, such as when
                                                                                                                                   illness arises, when
                                                                                                                                   they must decide
                                                                                                                                   whether to
                                                                                                                                   participate in a
                                                                                                                                   plan, or when they
                                                                                                                                   must determine which
                                                                                                                                   benefit package
                                                                                                                                   option might be most
                                                                                                                                   suitable to
                                                                                                                                   individual or family
                                                                                                                                   needs.''
                                                                                                                                  ``Improved information
                                                                                                                                   is expected to
                                                                                                                                   promote efficiency by
                                                                                                                                   fostering competition
                                                                                                                                   based on
                                                                                                                                   considerations beyond
                                                                                                                                   pricing alone, and by
                                                                                                                                   encouraging providers
                                                                                                                                   to enhance quality
                                                                                                                                   and reduce costs for
                                                                                                                                   value-conscious
                                                                                                                                   consumers. Complete
                                                                                                                                   disclosure will limit
                                                                                                                                   competitive
                                                                                                                                   disadvantages that
                                                                                                                                   arise when, for
                                                                                                                                   example, incomplete
                                                                                                                                   or inaccurate
                                                                                                                                   information on
                                                                                                                                   different benefit
                                                                                                                                   option packages is
                                                                                                                                   used for decision
                                                                                                                                   making purposes.
                                                                                                                                   Information
                                                                                                                                   disclosure also
                                                                                                                                   promotes
                                                                                                                                   accountability by
                                                                                                                                   ensuring adherence to
                                                                                                                                   standards.
                                                                                                                                  Equally importantly,
                                                                                                                                   information
                                                                                                                                   disclosure under the
                                                                                                                                   SPD regulation, if
                                                                                                                                   combined with
                                                                                                                                   additional
                                                                                                                                   disclosures
                                                                                                                                   pertaining to plan
                                                                                                                                   and provider
                                                                                                                                   performance, and with
                                                                                                                                   other health system
                                                                                                                                   reforms that promote
                                                                                                                                   efficient,
                                                                                                                                   competitive choices
                                                                                                                                   in the health care
                                                                                                                                   market, could yield
                                                                                                                                   even greater
                                                                                                                                   benefits.'' [65 FR
                                                                                                                                   70234]
DOT....................  Light Truck Average Fuel Economy   Not estimated....................  Not estimated.
                          Standard, Model Year 2003.
DOT....................  Advanced Airbags.................  -233 to 215 fatalities and 1,966   $400 million to $2 billion/yr....  Benefit estimates are
                                                             to 2,388 nonfatal injuries                                            undiscounted.
                                                             prevented and $.2 billion to
                                                             $1.3 billion in reduced property
                                                             damage/yr..
ATBCB..................  Electronic Information Technology  Not estimated....................  $177-1,068 million/yr. in $2000.   The federal proportion
                          Accessibility Standards.                                                                                 of the costs will
                                                                                                                                   range from $85
                                                                                                                                   million to $691
                                                                                                                                   million.
EPA....................  Identification of Dangerous        $45 billion to 176 billion         $70 billion (present value over    ``The upper benefit
                          Levels of Lead.                    (present value over 50 years).     50 years).                         estimate is obtained
                                                                                                                                   using the IEUBK model
                                                                                                                                   while the lower
                                                                                                                                   benefit estimate is
                                                                                                                                   obtained using the
                                                                                                                                   empirical model.''
                                                                                                                                   [66 FR 1235] EPA
                                                                                                                                   calculated present
                                                                                                                                   values using a 3
                                                                                                                                   percent discount
                                                                                                                                   rate.
EPA....................  Lead and Lead Compounds: Lowering  Not Estimated....................  $80 million in first year; $40     Benefits include more
                          of Reporting Thresholds;                                              million in subsequent years.       information about
                          Community Right-to-Know Toxic                                                                            environmental
                          Chemical Release Reporting.                                                                              releases of lead and
                                                                                                                                   lead compounds and
                                                                                                                                   promotion of
                                                                                                                                   pollution prevention.
EPA....................  Revisions to the Water Quality     Not estimated....................  $23 million/yr ($2000) annualized  EPA believes that
                          Planning and Management                                               over 10 yrs.                       these regulations
                          Regulation.                                                                                              will benefit human
                                                                                                                                   health and the
                                                                                                                                   environment by
                                                                                                                                   establishing clear
                                                                                                                                   goals for
                                                                                                                                   identification of
                                                                                                                                   impaired waterbodies
                                                                                                                                   and establishment of
                                                                                                                                   TMDLs and
                                                                                                                                   establishing
                                                                                                                                   priorities for clean-
                                                                                                                                   up. [65 FR 43586]
EPA....................  Arsenic and Clarifications to      $140-198 million/yr..............  $206 million/yr..................  ``EPA was not able to
                          Compliance and New Source                                                                                quantify many of the
                          Contaminants Monitoring.                                                                                 health effects
                                                                                                                                   potentially
                                                                                                                                   associated with
                                                                                                                                   arsenic due to data
                                                                                                                                   limitations. These
                                                                                                                                   health effects
                                                                                                                                   include other cancers
                                                                                                                                   such as skin and
                                                                                                                                   prostate cancer and
                                                                                                                                   non-cancer endpoints
                                                                                                                                   such as
                                                                                                                                   cardiovascular,
                                                                                                                                   pulmonary, and
                                                                                                                                   neurological
                                                                                                                                   impacts.'' [66 FR
                                                                                                                                   7012] The benefit
                                                                                                                                   estimates do not
                                                                                                                                   account for
                                                                                                                                   significant time lags
                                                                                                                                   between reduced
                                                                                                                                   exposure and reduced
                                                                                                                                   incidence of disease.
EPA....................  Control of emissions of air        Reduced emissions of 2.5 million   $479 million/yr.
                          pollution from 2004 and later      tons/year nitrogen oxides,
                          model year highway heavy-duty      167,000 tons/year nonmethane
                          engines; revision of light-duty    hydrocarbons, 11160 tons/year
                          truck definition.                  air toxics (benzene,
                                                             formaldehyde, acetaldehyde, 1,3-
                                                             butadiene).
EPA....................  Heavy-Duty Engine and Vehicle      $70.4 billion in 2030 (1999$)....  $4.3 billion in 2030 (1999$).....  Benefit and cost
                          Standards.                                                                                               estimates are
                                                                                                                                   annualized to the
                                                                                                                                   year 2030.
EPA....................  National emission Standards for    $280 million to $370 million/yr    $240 million in capital costs and  ``Implementation is
                          Hazardous Air Pollutants for       ($1999).                           then $30 million annually          expected to reduce
                          Chemical Recovery Combustion                                          ($1999).                           emissions of HAP, PM,
                          Sources.                                                                                                 VOC, CO, and SO2,
                                                                                                                                   while it is expected
                                                                                                                                   to slightly increase
                                                                                                                                   emissions of NOX.
                                                                                                                                   Such pollutants can
                                                                                                                                   potentially cause
                                                                                                                                   adverse health
                                                                                                                                   effects and can have
                                                                                                                                   welfare effects, such
                                                                                                                                   as impaired
                                                                                                                                   visibility and
                                                                                                                                   reduced crop yields.
                                                                                                                                   (In the benefits
                                                                                                                                   analysis, we have not
                                                                                                                                   conducted detailed
                                                                                                                                   air quality modeling
                                                                                                                                   to evaluate the
                                                                                                                                   magnitude and extent
                                                                                                                                   of the potential
                                                                                                                                   impacts from
                                                                                                                                   individual pulp and
                                                                                                                                   paper facilities.
                                                                                                                                   Nevertheless, to the
                                                                                                                                   extent that emissions
                                                                                                                                   from these facilities
                                                                                                                                   cause adverse
                                                                                                                                   effects, this final
                                                                                                                                   rule would mitigate
                                                                                                                                   such impacts''. [66
                                                                                                                                   FR 3189])
========================
     TRANSFER RULES
========================

Agricultural Disaster
 and Market Assistance
2000 Crop Agricultural
 Disaster and Market
 Assistance
Market Assistance for
 Cottonseed, Tobacco,
 and Wool and Mohair
Bioenergy Program
Farm Storage Facility
 Loan Program
Wool, Mohair, and Apple
 Market Loss Assistance
 Programs
Dairy, Honey, and
 Cranberry Market Loss
 Assistance and Sugar
 Programs
Livestock Assistance,
 American Indian
 Livestock Feed,
 Pasture Recovery, and
 Dairy Price Support
 Programs
2000 Crop Disaster
 Program
Catastrophic Risk
 Protection Endorsement
Food Stamp Program:
 Recipient Claim
 Establishment and
 Collection Standards
National School Lunch
 and School Breakfast
 Program: Additional
 menu Planning
 Approaches
Requirements for and
 Evaluation of WIC
 Program Bid
 Solicitations for
 Infant Formula Rebate
 Contracts
Non-Discretionary
 Provisions of the
 Personal
 Responsibility and
 Work Opportunity
 Reconciliation Act of
 1996
Non-Citizen Eligibility
 and Certification
 Provisions of Public
 Law 104-193
Food Stamp Program:
 Personal
 Responsibility
 Provisions of the
 Personal
 Responsibility and
 Work Opportunity
 Reconciliation Act of
 1996

Dept. of Defense

Tricare: Civilian
 Health and Medical
 Program of the
 Uniformed Services
 (CHAMPUS), NDAA for FY
 2001 and Pharmacy
 Benefits Program
Dept. of Health and
 Human Services (HHS)

[[Page 15028]]

Medicare Program:
 Medicare + Choice
Prospective Payment
 System for Home Health
 Agencies
Prospective Payment
 System and
 Consolidated Billing
 for Skilled Nursing
 Facilities
Medicare Program:
 Hospital Inpatient
 Payments and Rates and
 Costs of Graduate
 Medical Education
 (1999)
Medicare Program:
 Changes to the
 Hospital Inpatient
 Prospective Payment
 Systems and Fiscal
 Year 2001 Rates
Medicare Program:
 Revisions to Payment
 Policies Under the
 Physician Fee Schedule
 for Calendar Year 2001
Medicare Program:
 Expanded Coverage for
 Outpatient Diabetes
Prospective Payment
 System for Hospital
 Outpatient Services
Revision to Medicaid
 Upper Payment Limit
 Requirements for
 Inpatient Hospital
 Services
Medicaid Program:
 Medicaid Managed Care
Medicaid Program:
 Change in Application
 of Federal Financial
 Participation Limits
Medicare Program:
 Inpatient Payments and
 Rates and Costs fo
 Graduate Medical
 Education (2000)
Medicare Program:
 Prospective Payment
 System and
 Consolidated Billing
 for Skilled Nursing
 Facilities--Update
Medicare Program:
 Prospective Payment
 System for Inpatient
 Rehabilitation
 Hospital Services
Medicare Program:
 Changes to the
 Hospital Inpatient
 Prospective Payment
 Systems and Rates and
 Costs fo Graduate
 Medical Education for
 Fiscal Year 2002
Modification of the
 Medicaid Upper Payment
 Limit Transition
 Period for Hospitals,
 Nursing Facilities,
 and Clinic Services
State Child Health;
 Implementing
 Regulations for the
 State Children's
 Health Insurance
 Programs

Social Security
 Administration

Supplemental Security
 Income: Determining
 Disability for a Child
 Under Age 18
Revised Medical
 Criteria for
 Determination of
 Disability,
 Musculoskeletal System
 and Related Criteria
Collection of the Title
 XVI Cross-Program
 Recovery

The Office of Federal
 Housing Enterprise
 Oversight

Risk-based Capital

Department of Labor

Government Contractors,
 Affirmative Action
 Requirements
Claims for Compensation
 Under the Energy
 Employees Occupational
 Illness Compensation
 Program Act
Procedures for
 Predetermination of
 Wage Rates; Labor
 Standards Provisions
 Applicable to
 Contracts Covering
 Federally Financed and
 Assisted Construction
 and to Certain
 Nonconstruction
 Contracts
 (``Helpers'')
Birth and Adoption
 Unemployment
 Compensation

Dept. of Transportation

Safety Incentive Grants
 for the Use of
 Seatbelts
Amendment of
 Regulations Governing
 Railroad
 Rehabilitation and
 Improvement Financing
 Program

Veterans Administration

Disease Associated with
 Exposure to Certain
 Herbicide Agents: Type
 2 diabetes

Federal Emergency
 Management
 Administration

Supplemental Property
 Acquisition and
 Elevation Assistance
Disaster Assistance:
 Cerro Grande Fire
 Assistance
Supplemental Property
 Acquisition and
 Elevation Assistance

Small Business
 Administration

Small Business Size
 Standards: General
 Building Contractors,
 etc.
New Market Venture
 Capital Program

Office of Personnel
 Management

Health Insurance
 Premium Conversion

Federal Acquisition
 Regulation (FAR)

Electronic Commerce in
 Federal Procurement:
 FAR case 1997-304
Electronic Commerce and
 Information Technology
 Accessibility: FAR
 case 1999-607

Securities and Exchange
 Commission (SEC)

Disclosure of Mutual
 Fund After-Tax Returns
Privacy of Consumer
 Financial Information
 (Regulation S-P)
Selective Disclosure
 and Insider Trading
Unlisted Trading
 Privileges
Disclosure of Order
 Execution and Routing
 Practices
Revision of the
 Commission's Auditor
 Independence
 Requirements

Federal Trade
 Commission (FTC)

Privacy of Consumer
 Financial Information

Federal Communications
 Commission (FCC)

Promotion of
 Competitive Networks
 in Local
 Telecommunications
 Markets
Competitive Bidding
 Procedures
Installment Payment
 Financing for Personal
 Communications
 Services (PCS)
 Licensees
Assessment and
 Collection of
 Regulatory Fees for
 Fiscal Year 2000
Narrowband Personal
 Communications
 Services; Competitive
 Bidding
24 Ghz Service;
 Licensing and
 Operation
Extending Wireless
 Telecommunications
 Services to Tribal
 Lands
Assessment and
 Collection of
 Regulatory Fees for
 Fiscal Year 2001

Nuclear Regulatory
 Commission

Revision of Fee
 Schedules; 100% Fee
 Recovery
Emergency Core Cooling
 System Evaluation
 Models
Revision of Fee
 Schedules; Fee
 Recovery for FY 2001

Federal Reserve System

Privacy of Consumer
 Financial Information
--------------------------------------------------------------------------------------------------------------------------------------------------------

1. Benefits Analysis
    Agencies monetized at least some benefit estimates for 19 of the 34 
rules including: (1) EPA's estimate of $70.4 billion in 2030 primarily 
from reduced PM exposure from diesel fuel; (2) DOE's present value 
estimate of $8.6 billion from 2004 through 2030 in energy savings from 
water heater energy conservation; and (3) DOI's estimate of $50 million 
to $192 million per year in benefits from its migratory bird hunting

[[Page 15029]]

regulations. In one case, the agency provides some of the benefit 
estimates in monetized and quantified for, but discusses other benefits 
qualitatively. Namely, USDA estimated that the Roadless Area 
Conservation rule will save $219,000 per year from reduced road 
maintenance but did not quantify the benefits associated with projected 
increases in air and water quality and biodiversity. In three cases, 
the agencies did not monetize all of the quantified benefits. For 
example, DOE quantified and monetized the energy saving benefits from 
its three energy conservation standards, but did not monetize the 
projected reductions in nitrogen oxide emissions. In 14 cases, agencies 
did not report any quantified or monetized benefit estimates.
2. Cost Analysis
    For 26 of the 34 rules, agencies provided monetized cost estimates. 
These include such items as HHS's estimate of $56 million in the first 
year and $10 million annually thereafter as the cost of labeling shell 
eggs. For the remaining seven rules, DOI's four migratory bird hunting 
rules, DOC's two emergency fishery management rules, and DOT's light 
truck fuel economy rule, the agencies did not estimate costs
3. Net Monetized Benefits
    Twelve of the 34 rules provided at least some monetized estimates 
of both benefits and costs. Of these, the estimated monetized benefits 
of nine of the rules unambiguously exceed the estimated monetized 
costs. The magnitude of the net benefits vary from less than $100 
million per year to $66 billion per year. Two rules have negative net 
monetized benefits with variation ranging from approximately $10 
million per year to $70 million per year. One rule yielded an estimate 
that included the possibility of positive or negative net benefits. EPA 
estimated that the expected benefits from identifying dangerous levels 
of lead range from $45 billion to $176 billion over 50 years depending 
on the underlying model, resulting in the net benefit estimates ranging 
from -$25 billion to $106 billion.
    The presentation of the monetized benefits and costs varied. Five 
rules presented both benefits and costs in present value terms, whereas 
two rules used annualized forms. Four rules presented the estimated 
benefits in annualized forms and the costs in annual form. This 
distinction is important since annualized form smooths the projected 
streams of benefits and costs evenly over a period of time while the 
annual form does not. The annual form allows the reader to glean 
information on not only how much benefits and costs are likely to 
accrue but when.
4. Rules Without Quantified Effects
    Three of the rules in Table 7 are classified as economically 
significant even though the agency did not provide any quantified 
estimates their effects.
    DOC--Steller Sea Lion Protection Measures for the Groundfish 
Fisheries Off Alaska: Based upon publicly available information, OMB 
determined that rules covering these species were major.
    DOC--Annual Framework Adjustment (framework 14) for the Atlantic 
Sea Scallop Fishery Management Plan for 2001: Based upon publicly 
available information, OMB determined that rules covering these species 
were major.
    DOT--Light Truck CAFE: For each model year, DOT must establish a 
corporate average fuel economy (CAFE) standard for light trucks, 
including sport-utility vehicles and minivans. (DOT also sets a 
separate standard for passenger cars, but is not required to revisit 
the standard each year.) For the past five years, however, 
appropriations language has prohibited NHTSA from spending any funds to 
change the standards. In effect, it has frozen the light truck standard 
at its existing level of 20.7 miles per gallon (mpg) and has prohibited 
NHTSA from analyzing effects at either that or alternative levels. 
Although DOT did not estimate the benefits and costs of the standards, 
the agency's experience in previous years indicates that they may be 
substantial. Over 5 million new light trucks are subject to these 
standards each year, and the 20.7 mpg standard is binding on several 
manufacturers. In view of these likely, substantial effects, we 
designated the rule as economically significant even though 
consideration of the effects was prohibited by law.

Transfer Regulations

    Of the 86 rules listed in Table 7, 53 implement Federal budgetary 
programs. The budget outlays associated with these rules are 
``transfers'' to program beneficiaries. Of the 53, 16 are USDA rules in 
which 10 are crop assistance and disaster aids for farmers and 6 are 
food stamp program rules. HHS promulgated 17 rules implementing 
Medicare and Medicaid policy. The Social Security Administration and 
Federal Emergency Management Agency each promulgated three rules. DOL 
promulgated four rules including two on compensation programs on 
occupational illness and paid leave for birth and adoption. DOT, SBA 
and FAR each finalized two rules, one of which promotes safety 
incentive grants for seatbelt use. DoD, the Office of Federal Housing 
Enterprise Oversight, Veterans Administration, and the Office of 
Personnel Management each finalized one rule.

Major Rules for Independent Agencies

    The congressional review provisions of the Small Business 
Regulatory Enforcement Fairness Act (SBREFA) require the General 
Accounting Office (GAO) to submit reports on major rules to the 
committees of jurisdiction, including rules issued by agencies not 
subject to Executive Order 12866 (the ``independent'' agencies). We 
reviewed the information on the costs and benefits of major rules 
contained in GAO reports for the period of April 1, 2000 to September 
30, 2001.
    GAO reported that five independent agencies issued nineteen major 
rules during this period. Two agencies did not conduct benefit-cost 
analyses. Three agencies considered benefits and costs of the rules. 
OIRA lists the agencies and the type of information provided by them 
(as summarized by GAO) in Table 8. Securities and Exchange Commission 
and Federal Trade Commission consistently considered benefits and costs 
in their rulemaking processes while Federal Communications Commission 
did not prepare benefit-cost analyses.
    In comparison to the agencies subject to E.O. 12866, the 
independent agencies provided relatively little quantitative 
information on the costs and benefits of the major rules. As Table 8 
indicates, eight of the 19 rules included some discussion of benefits 
and costs. Six of the 19 regulations had monetized cost information; 
three regulations monetized benefits. However, it is difficult to 
discern whether the rigor and the extent of the analyses conducted by 
the independent agencies are similar to those agencies subject to the 
Executive Order.

Chapter III: Regulatory Governance Abroad

    As a special feature, this year's Annual Report to Congress on the 
Costs and Benefits of Regulation includes information on regulatory 
governance developments in other developed countries. The information 
is drawn from reports from the Organisation for Economic Co-operation 
and Development (OECD), Asian Pacific Economic Cooperation, (APEC) and 
the European Commission (EC) and supplemented by insights drawn from

[[Page 15030]]

OIRA discussions with OECD, APEC, and EC officials.

                     Table 8.--Rules for Independent Agencies (April, 2000-September, 2001)
----------------------------------------------------------------------------------------------------------------
                                                      Information on
            Agency                     Rule         costs or benefits     Monetized costs     Monetized benefits
----------------------------------------------------------------------------------------------------------------
Federal Communications          Narrowband         No.................  No.................  No.
 Commission.                     personal
                                 communications
                                 services.
Federal Communications          Assessment and     No.................  No.................  No.
 Commission.                     collection of
                                 regulatory fees
                                 for fiscal year
                                 2000.
Federal Communications          Extending          No.................  No.................  No.
 Commission.                     wireless
                                 telecommunicatio
                                 ns services to
                                 tribal lands.
Federal Communications          Installment        No.................  No.................  No.
 Commission.                     payment
                                 financing for
                                 personal
                                 communications
                                 services (PCS)
                                 licensees.
Federal Communications          Competitive        No.................  No.................  No.
 Commission.                     bidding
                                 procedures.
Federal Communications          24 Ghz Service;    No.................  No.................  No.
 Commission.                     Licensing and
                                 operation.
Federal Communications          Promotion of       No.................  No.................  No.
 Commission.                     competitive
                                 networks in
                                 local
                                 telecommunicatio
                                 ns markets.
Federal Communications          Assessment and     No.................  No.................  No.
 Commission.                     collection of
                                 regulatory fees
                                 for fiscal year
                                 2001.
Federal Reserve System........  Privacy of         No.................  No.................  No.
                                 consumer
                                 financial
                                 information.
Federal Trade Commission......  Privacy of         Yes................  No.................  No.
                                 consumer
                                 financial
                                 information.
Nuclear Regulatory Commission.  Emergency core     Yes................  Yes................  Yes.
                                 cooling system
                                 evaluation
                                 models.
Nuclear Regulatory Commission.  Revision of fee    No.................  No.................  No.
                                 schedules; 100%
                                 fee recovery, FY
                                 2000.
Nuclear Regulatory Commission.  Revision of fee    No.................  No.................  No.
                                 schedules; Fee
                                 recovery for FY
                                 2001.
Securities and Exchange         Privacy of         Yes................  Yes................  No.
 Commission.                     consumer
                                 financial
                                 information.
Securities and Exchange         Selective          Yes................  Yes................  No.
 Commission.                     disclosure and
                                 insider trading.
Securities and Exchange         Unlisted trading   Yes................  No.................  No.
 Commission.                     privileges.
Securities and Exchange         Disclosure of      Yes................  Yes................  Yes.
 Commission.                     order execution
                                 and routing
                                 practices.
Securities and Exchange         Revision of the    Yes................  Yes................  Yes.
 Commission.                     commission's
                                 auditor
                                 independence
                                 requirements.
Securities and Exchange         Disclosure of      Yes................  Yes................  No.
 Commission.                     mutual fund
                                 after-tax
                                 returns.
----------------------------------------------------------------------------------------------------------------

OECD Activities

    The OECD consists of 30 democracies with advanced, market 
economies, in Western Europe, North America, Australia, New Zealand, 
Japan, and Korea. As an integral part of its mission, OECD's Public 
Management program (PUMA) assists governments with the ``tools'' and 
``rules'' of good governance to build and strengthen effective, 
efficient and transparent government structures.
    The OECD countries have developed, through OECD's PUMA activities, 
a systematic approach to evaluating the quality of national regulatory 
management programs. In its 1997 report, OECD reported that the number 
of countries with such programs has grown from three or four in 1980 to 
almost all 30 OECD countries today. The international public debate 
about regulatory improvement has been transformed from a discussion 
about whether regulatory reform programs should be adopted to a debate 
about what specific measures should be implemented to improve 
regulatory performance.
    In 1995 the OECD published the first internationally accepted set 
of principles on ensuring regulatory quality: the Recommendation of the 
Council of the OECD on Improving the Quality of Government Regulation. 
We have reproduced these principles in Box 1. OECD reports that 
experience in member countries reveals that an effective regulatory 
management system requires three basic components: a regulatory policy 
adopted at the highest political level; explicit and measurable 
standards for regulatory quality; and a continuing regulatory 
management capacity. Countries vary in how well they provide these 
components, which OECD considers as mutually reinforcing in their 
impact on the quality of regulatory governance.
BILLING CODE 3110-01-P

[[Page 15031]]

[GRAPHIC] [TIFF OMITTED] TN28MR02.000

BILLING CODE 3110-01-C

[[Page 15032]]

    In light of these OECD principles, the Secretariat of the OECD has 
been sponsoring, since 1998, detailed reviews of the regulatory 
governance programs in member countries. Sixteen country reviews have 
been completed from 1998 to 2001 and several more are now underway. 
OECD also commissioned a regulatory survey of member countries in 2000, 
convened a meeting of senior risk management officials from governments 
in October 2001, and sponsored an international meeting in December 
2001.
    Taken as a whole, the country-specific reviews, the 2000 OECD 
survey and recent international meetings reveal that the most common 
feature of regulatory management programs is that affected parties be 
consulted prior to regulation. A requirement for regulatory impact 
analysis prior to regulation has also been adopted in a majority of 
OECD countries. About half have some general requirement that 
regulatory alternatives be considered. Formal evaluation requirements 
for existing rules are less widespread. Some countries (e.g., Japan and 
Korea) have focused on the need to reduce overregulation while in other 
countries (e.g., the United States) the recent focus has been on 
improving regulatory quality through better analysis of benefits, costs 
and alternatives.

APEC Activities

    The Asia-Pacific Economic forum was established by President George 
H.W. Bush in 1989. It is the primary international organization for 
promoting open trade and international cooperation among the 21 Pacific 
Rim countries. In addition to the seven OECD Pacific Rim countries, 
APEC includes Russia, China, Hong Kong, Chinese Taipei, Singapore, and 
Chile, among others. The APEC economies account for almost 50 percent 
of world trade. APEC is promoting increased transparency, openness and 
predictability based on the rule of law for both trade and regulation. 
It seeks to eliminate impediments to trade and investment by 
encouraging member economies to reduce barriers, adopt transparent, 
market-oriented policies and address such issues as outdated 
telecommunications regulatory practices. APEC requires its member 
countries to post on its web site individual action plans (IAPs) that 
set out how they plan to meet the APEC goals and to update them each 
year. One of the IAPs is a deregulation initiative based on the USG's 
and other countries' experiences. The main focus of the deregulation 
initiative is to promote information sharing and dialogue, and increase 
the transparency of existing regulatory regimes and regulatory reform 
processes. OIRA has been helping USTR and the State Department promote 
this effort by highlighting our open, transparent, and analytically 
based regulatory development and oversight program.

EC Activities

    The European Union has been criticized on the grounds that its 
approach to governance is too disconnected from the concerns of 
ordinary residents of the member states. To address these concerns, the 
European Commission prepared in early 2001 a white paper entitled 
``European Governance,'' which describes major areas of concern and 
promising directions for reform of governance in the EU. Public 
consultation on the contents of the white paper is scheduled to extend 
until March 2002, with conclusions drawn by the EC prior to the next 
Intergovernmental Conference, where European governance will be 
debated.
    The white paper addressed broad concerns about good governance and 
the need for increased openness, participation, accountability, 
effectiveness and coherence. These five principles are designed to 
reinforce the overriding principles of proportionality and 
subsidiarity. Before launching an initiative, applying these principles 
means checking systematically to determine (a) if public action is 
really necessary; (b) if the European level is the most appropriate 
one; and (c) if the measures chosen are proportionate to the 
objectives.
    Concern about regulatory policy--both the EC's and the member 
states roles--is featured in the white paper. As the executive arm of 
the European Union, the EC was granted the exclusive power to propose 
or initiate legislation and policy for Europe. The European Parliament 
(elected representatives of the people) and the European Council 
(comprised of representative ministers from member states) can modify 
EC proposals but do not have the power to initiate proposals. The EC 
has the initiating role in both ``regulations,'' which become law 
throughout Europe after Council and Parliament approval, and 
``directives'', which must be ``transposed'' (i.e., tailored and 
implemented) by the Member States before they are legally enforceable.
    The white paper calls for attention to ``improving the quality, 
effectiveness and simplicity of regulatory acts''. The mechanisms cited 
include formal regulatory analysis, consideration of various policy 
instruments, choice of the right type of instrument, consideration of 
``co-regulation'' involving cooperation among regulated entities, more 
cooperation among member states on practices and targets, evaluation 
and feedback once rules are established, discouraging over complicated 
proposals, and faster legislative processes. The white paper, 
recognizing the extent of existing regulation but the absence of 
credible regulatory agencies in some areas, calls for both a 
comprehensive program of simplification of existing regulations as well 
as the creation of some new independent regulatory agencies (e.g., in 
airline and food safety where public confidence in Europe is low). The 
white paper also notes that a stronger regulatory system in Europe will 
allow the EU to be a more effective advocate of regulatory management 
in international settings.
    Soon after the Commission adopted the white paper in July 2001, a 
more specific ``communication'' was issued by the EC on ``Simplifying 
and Improving the Regulatory Environment.'' This document calls for at 
least a 25 percent reduction in the overall volume of European 
regulation (measured as the number of printed pages of laws) and the 
withdrawal of 100 or so pending yet outmoded proposals from before 
1999. With regard to new actions, the communication calls for 
enhancement of consultation, especially electronic, on-line 
consultation, and impact analysis. The latter, defined as ``pre-
assessments'' of draft proposals to determine which proposals merit 
detailed impact analysis, including assessments covering economic, 
social and environmental consequences.
    A far more detailed report on ``better regulation'' was prepared by 
an authoritative group chaired by the distinguished Frenchman Dieudonne 
Mandelkern. Known as the Mandelkern Report. As published in November 
2001, this report emphasized the economic significance of regulatory 
policy, suggesting that regulatory expenditures comprise perhaps 2 
percent to 5 percent of the European gross domestic product. The report 
rejects unthinking deregulation but recognizes that better regulation 
is necessary to enhance public confidence in government and assure that 
the public-welfare benefits of regulatory policy are attained in the 
future.
    The Mandelkern Report provides a detailed action plan on the themes 
of impact assessment, consultation, simplification, institutional 
structures to promote better regulation, alternatives to regulation, 
public access to the texts

[[Page 15033]]

of regulations and ``transposition'' (or the tailoring and 
implementation of EC directives by the member states of Europe). Annex 
A of the Mandelkern Report draws from the recent OECD regulatory work 
to define the crucial steps in achieving better regulation.
    Late in 2001 the Economic and Social Committee of the European 
Parliament issued an ``Opinion'' on regulatory simplification by a vote 
of 62 votes in favor, 5 votes against and 5 abstentions. The Committee 
concluded as follows:

--The over-regulation of business is primarily a national problem but 
it also has a European dimension that needs to be addressed;
--There is a manifest need for a fundamental overhaul of the regulatory 
framework within the European Union, accompanied by a streamlining and 
simplification of the existing body of legislation;
--This regulatory review must focus not just on the future but also on 
the existing body of legislation and must be oriented not only towards 
simplification and improved methods but towards quantitative 
reductions;
--The regulatory environment should establish a level playing field for 
businesses operating throughout Europe, which means a reduction in the 
variability in the requirements on businesses established by the member 
states;
--A regulatory review body should be set up to review existing 
legislation and set out the guidelines for introducing new legislation. 
It should also conduct ex-post evaluations of the effects of 
legislation. This body should comprise representatives of the 
Commission, the national agencies and business.

    The stage is obviously set for a vigorous public debate about which 
steps should actually be taken to accomplish better regulation 
throughout the European Union. It is too early to assess what actions 
will be taken, but the next steps taken by the European Commission may 
be critical in determining whether meaningful regulatory improvements 
will occur. Even if the EC does take concrete steps, supportive steps 
will also be required by the other EU institutions as well as the 
member states.

Chapter IV. Recommendations for Reform

    In addition to estimates of the costs and benefits of Federal rules 
and paperwork, the Regulatory Right-to-Know Act also requires OMB to 
submit ``recommendations for reform.'' Below we highlight for comment 
two reform initiatives. First, we repeat our solicitation of public 
comments on regulations or regulatory programs in need of reform. 
Second, we invite a review of agency practice regarding guidance 
documents.

Review of Regulations and Regulatory Programs

    Efforts to improve regulation should not be prospective only. 
Agencies also should look back and review existing rules to streamline 
and modernize those that are outdated, duplicative, ineffective, or 
unnecessary. With the passage of time, outmoded agency decisions need 
review and revision.
    OMB is calling for public nominations of regulatory reforms to 
specific existing regulations that, if adopted, would increase overall 
net benefits to the public, considering both qualitative and 
quantitative factors. These reforms might include (1) extending or 
expanding existing regulatory programs; (2) simplifying or modifying 
existing rules or (3) rescinding outmoded or unnecessary rules.
    The Administration recognizes that agencies should be particularly 
sensitive to the burden of their rules on small business. The 
Regulatory Right-to-Know Act directs that analysis of the impacts of 
Federal rules should give special consideration to small business 
impacts. As Congress stated in the findings for the Small Business 
Regulatory Enforcement Fairness Act of 1996, ``small businesses bear a 
disproportionate share of regulatory costs and burdens.'' A recent 
empirical study sponsored by the Small Business Administration Office 
of Advocacy supports this finding. The study shows that the average 
regulatory costs per employee were about 60 percent higher for small 
businesses than for large businesses: the average regulatory cost was 
about $7,000 for firms with less than 20 employees compared to about 
$4,500 for firms with over 500 employees.\17\ This is a significant 
finding since small firms accounted for about three-quarters of the 
employment growth and 90 percent of the new business growth in the 
1990s.\18\ Small business ownership is a critical vehicle for all 
Americans--and increasingly for women and minorities--to achieve 
greater economic opportunity.\19\ Accordingly, OMB requests comments on 
needed reforms of regulations unnecessarily impacting small businesses 
and identification of specific regulations and paperwork requirements 
that impose especially large burdens on small businesses and other 
small entities without an adequate benefit justification. OMB also 
requests comments from the small business community on problematic 
guidance documents discussed in the following section. OMB will 
coordinate with the Office of Advocacy of the Small Business 
Administration on this initiative.
---------------------------------------------------------------------------

    \17\ See W. Mark Crain & Thomas D. Hopkins, ``The Impact of 
Regulatory Costs for Small Firms,'' a report for the U.S. Small 
Business Administration, Office of Advocacy, RFP No. SBAHQ-00-R-0027 
(2001).
    \18\ Small Business Economic Indicators 2000 (SBA, Office of 
Advocacy 2001).
    \19\ The number of women-owned businesses increased by 16 
percent between 1992 and 1997 (Women in Business, 2001: SBA, Office 
of Advocacy, October 2001) while the while the percent of minority-
owned businesses increased from 6.8 percent in 1982 to 14.6 percent 
in 1997 (Minorities in Business, 2001: SBA,Office of Advocacy, 
November 2001) .
---------------------------------------------------------------------------

    While broad reviews of existing regulations have been required 
since 1981 under Executive Orders 12291, 12498, and 12866, they have 
met with limited success. Clearly, achieving broad agency review of 
existing rules is much easier said than done. In the first annual 
report on Executive Order 12866 released in November 1994, OIRA 
Administrator Sally Katzen noted that bureaucratic incentives make such 
review a difficult undertaking. While the ``lookback'' process had 
begun under E.O. 12866, she said, ``it had proven more difficult to 
institute than we had anticipated.* * * [A]gencies are focused on 
meeting obligations for new rules, often under statutory or court 
deadlines, at a time when staff and budgets are being reduced; under 
these circumstances, it is hard to muster resources for the generally 
thankless task of rethinking and rewriting current regulatory 
programs'' (p. 36). Past efforts at broad reviews of existing 
regulations, including reviews under Executive Order 12866 and the 
National Performance Review, were largely unsuccessful.\20\ Beyond 
bureaucratic disincentives, resource constraints, and the complexity of 
the task, reviewing old rules may be hampered by unfounded fears that 
any attempt to modernize or streamline old rules is a veiled attempt to 
``rollback'' needed safeguards. The difficulties and concerns 
surrounding this task do not mean it should be abandoned; they do 
counsel that an across-the-board review of all existing rules could be 
a poor use

[[Page 15034]]

of OMB and agency resources, and that a review of old rules should be 
done carefully and openly . Accordingly, OMB has established a modest 
process to review and improve old rules based on a public comment 
process.
---------------------------------------------------------------------------

    \20\ See, e.g., General Accounting Office, Regulatory Reform: 
Agencies' Efforts to Eliminate and Revise Rules Yield Mixed Results 
(Oct. 1997); Statement of L. Nye Stevens, Director, Federal 
Management and Workforce Issues, General Government Division, 
General Accounting Office, before the Senate Committee on 
Governmental Affairs, February 24, 1998.
---------------------------------------------------------------------------

    With respect to improving existing rules or eliminating outmoded 
ones, OIRA would like to receive comments that are as specific as 
possible. In addition to supplying documentation and supporting 
materials (including citations to published studies), OIRA would 
appreciate use of the following format to summarize the suggestions:

           Format for Suggested Regulatory Reform Improvements
------------------------------------------------------------------------
        Name of regulation
------------------------------------------------------------------------
Regulating Agency.................  (Include any subagency).
Citation..........................  (Code of Federal Regulations).
Authority.........................  (Statute).
Description of Problem............  (Harmful impact and on whom).
Proposed Solution.................  (Both the fix and the procedure to
                                     fix it).
Estimate of Economic Impacts......  (Quantified benefits and costs if
                                     possible. Qualitative descriptions
                                     if needed).
------------------------------------------------------------------------

    In selecting which rules or regulatory programs to propose for 
review, commenters should consider the extent to which (1) the rule or 
program could be revised to be more efficient or effective; (2) the 
agency has discretion under the statute authorizing the rule to modify 
the rule or program; and (3) the rule or program is important relative 
to other rules or programs being considered for review.

Review of Problematic Agency Guidance

    As the scope and complexity of regulation and the problems it 
addresses have grown, so too has the need for government agencies to 
inform the public and provide direction to their staffs. To meet these 
challenges, agencies have relied increasingly on issuing guidance 
documents. The use of guidance documents is widespread, and often for 
good reasons. Agencies may properly provide guidance to interpret 
existing law, through an interpretative rule, or to clarify how the 
agency will treat or enforce a governing legal norm, through a policy 
statement. In some cases, Congress has directly expressed the need for 
guidance, such as the small business compliance guides mandated by 
Section 212 of the Small Business Regulatory Enforcement Fairness 
Act.\21\ Guidance documents, used properly, can channel the discretion 
of agency employees, increase efficiency by simplifying and expediting 
agency enforcement efforts, and enhance fairness by providing the 
public clear notice of the line between permissible and impermissible 
conduct while ensuring equal treatment of similarly situated parties.
---------------------------------------------------------------------------

    \21\ 5 U.S.C. 601 note, Title II of Pub. L. 104-121, Mar. 29, 
1996.
---------------------------------------------------------------------------

    Experience has shown, however, that guidance documents also may be 
used improperly. Problematic guidance documents have received 
increasing scrutiny by the courts, the Congress and scholars.\22\ While 
recognizing the enormous value of agency guidance in general, in this 
section OMB requests public comment on problematic agency guidance 
documents.
---------------------------------------------------------------------------

    \22\ E.g., United States v. Mead, 533 U.S. 218 (2001); 
Appalachian Power Company v. Environmental Protection Agency, 208 
F.3d 1015 (D.C. Cir. 2000); ``Non-Binding Legal Effect of Agency 
Guidance Documents,'' H. Rep. 106-1009 (106th Cong., 2d Sess. 2000); 
H.R. 3521, the ``Congressional Accountability for Regulatory 
Information Act of 2000,'' Section 4; Robert A. Anthony 
``Interpretative Rules, Policy Statements, Guidances, Manuals and 
the Like--Should Federal Agencies Use Them to Bind the Public?,'' 41 
Duke L.J. 1311 (1992); Richard J. Pierce, Jr., ``Seven Ways to 
Deossify Agency Rulemaking,'' 47 Admin. L. Rev. 59 (1995); Peter L. 
Strauss, ``Comment, the Rulemaking Continuum,'' 41 Duke L.J. 1463 
(1992); Administrative Conference of the United States, Rec. 92-2, 1 
CFR 305.92-2 (1992); Carnegie Commission, Risk and the Environment: 
Improving Regulatory Decisionmaking (1993).
---------------------------------------------------------------------------

    To promulgate regulations, an agency must ordinarily comply with 
the notice-and-comment procedures specified in the Administrative 
Procedure Act (APA), 5 U.S.C. 553. Section 553 requires that agencies 
must, in many cases, publish a notice of proposed rulemaking in the 
Federal Register. 5 U.S.C. 553(b). When notice is given, agencies also 
generally give interested persons an opportunity to comment on the 
proposal in writing. Agencies also may invite the public to present 
their views in person. 5 U.S.C. 553(c). Unless otherwise required by 
statute, notice and opportunity for comment are not required when an 
agency issues rules of agency organization, procedure, or practice; or 
where the agency finds for good cause that notice and public procedure 
thereon are impracticable, unnecessary, or contrary to the public 
interest. 5 U.S.C. 553(b)(A)-(B).
    Generally speaking, guidance (as opposed to regulations) is issued 
without notice and comment in order to clarify or explain an agency 
interpretation of a statute or regulation. These guidance documents may 
have many formats and names, including guidance documents, manuals, 
interpretive memoranda, staff instructions, policy statements, 
circulars, bulletins, and so on.
    Beyond being exempt from notice-and-comment procedures, guidance 
documents may not normally be subject to judicial review or the kind of 
careful OMB and interagency review required by Executive Order 12866, 
as amended. Finally, some guidance documents may not be subjected to 
the rigorous expert peer review conducted on some complex legislative 
rulemakings. Because it is procedurally easier to issue guidance 
documents, there may be an incentive for regulators to issue guidance 
documents rather than conduct notice and comment rulemakings. As the 
D.C. Circuit recently observed in Appalachian Power:

    The phenomenon we see in this case is familiar. Congress passes 
a broadly worded statute. The agency follows with regulations 
containing broad language, open-ended phrases, ambiguous standards 
and the like. Then as years pass, the agency issues circulars or 
guidance or memoranda, explaining, interpreting, defining and often 
expanding the commands in regulations. One guidance document may 
yield another and then another and so on. Several words in a 
regulation may spawn hundreds of pages of text as the agency offers 
more and more detail regarding what its regulations demand of 
regulated entities. Law is made, without notice and comment, without 
public participation, and without publication in the Federal 
Register or the Code of Federal Regulations.
208 F.2d at 1019. Through guidance documents, agencies sometimes have 
issued or extended their ``real rules,'' i.e., interpretative rules and 
policy statements, quickly and inexpensively--particularly with the use 
of the Internet--and without following procedures prescribed under 
statutes or Executive orders.

[[Page 15035]]

    The failure to comply with the APA's notice-and-comment 
requirements or observe other procedural review mechanisms can 
undermine the lawfulness, quality, fairness, and political 
accountability of agency policymaking. The misuse of agency guidance 
also can impose significant costs on or limit the freedom of regulated 
parties without affording an opportunity for public participation.
    Problematic guidance may take a variety of forms. An agency 
publication that is characterized as some kind of ``guidance'' document 
or ``policy statement'' may directly or indirectly seek to alter rights 
or impose obligations and costs not fairly discernible from the 
underlying statute or legislative rule that the document purports to 
interpret or implement. Such documents are occasionally treated by the 
agency as having legally binding effect on private parties. When that 
occurs, substantial question can arise regarding the propriety of the 
guidance itself--specifically whether it should be considered a 
regulation subject to APA procedures. Some guidance documents also may 
be founded on complex technical or scientific analyses or conclusions, 
which would be improved not only by public comment but also by expert, 
independent peer review. Finally, problematic guidance might be 
improved by interagency review.
    The benefits of these procedural safeguards are well established. 
Notice-and-comment procedures can benefit agency policymaking in 
several ways. Potentially affected parties may improve the quality of a 
rule by supplying helpful information or alerting the agency to 
unintended consequences of a proposal. Notice-and-comment procedures 
also increase fairness by allowing potentially affected parties to 
participate in the decisionmaking process, and enhance political 
accountability by providing the public and its elected representatives 
advance notice of its policy decisions and an opportunity to shape 
them. As the Supreme Court recently confirmed in the Mead decision, the 
rule of law supports the use of regulations over guidance to bind the 
public, and guidance will receive less deference by the courts than 
properly implemented agency rules. Legislative rulemaking may also 
increase efficiency by allowing an agency to resolve recurring issues 
of legislative fact once instead of addressing such issues repeatedly 
on a case-by-case basis. Moreover, independent and expert peer review 
of highly technical or scientific agency guidance can enhance its 
objectivity and reliability and lead to better-informed decisionmaking. 
Finally, interagency review can ensure that agency action is consistent 
with Administration policy and is beneficial from a broader, societal 
perspective.
    Under its obligation to promote recommendations for reforming the 
regulatory process and agency rules under the ``Regulatory Right-to-
Know Act'' as well as its general duties to manage the efficiency and 
integrity of the regulatory process, OMB requests public comment on 
problematic Federal agency guidance. Specifically, OMB seeks public 
comment on the nature and extent of problematic guidance documents in 
agency policymaking, the adverse impacts, the benefits of proper 
guidance documents, criteria to identify problematic guidance, current 
examples of problematic guidance documents, and suggestions on how 
problematic guidance can be curtailed without undermining the typically 
appropriate use of guidance by Federal agencies.
    OMB asks commenters to identify examples of problematic agency 
``guidance'' documents of national or international significance. 
Commenters should submit to OMB a copy of the problematic guidance, 
with any relevant portions identified. They also should submit 
recommendations for remedying the problem, such as reissuance through 
notice and comment rulemaking, peer review, interagency review or 
rescission. Where guidance elaborates on an existing legislative rule 
or statute, OMB requests that commenters provide a copy of the relevant 
rule or statute and a concise explanation of how the guidance alters 
rights or imposes costs and obligations on the public that are not 
fairly discernible from the text of the statute or legislative rule, as 
well as, to the extent feasible, an estimate of such costs. In such 
cases, commenters also should explain whether the agency has provided 
reasonably sufficient detail in the legislative rule before resorting 
to guidance, considering the importance of the relevant issues, 
competing demands on the agency, available resources, and the need for 
resolution of the issues. In addition to supplying documentation and 
supporting materials (including citations to published studies), OIRA 
would appreciate use of the following format to summarize the 
suggestions.

           Format for Suggested Guidance Document Improvements
------------------------------------------------------------------------
     Name of guidance document
------------------------------------------------------------------------
Regulating Agency.................  (Include any subagency).
Citation..........................  (E.g. Federal Register).
Authority.........................  (Statute or Legislative Rule).
Description of Problem............  (Harmful impact and on whom).
Proposed Solution.................  (Both the fix and the procedure to
                                     fix it).
Estimate of Economic Impacts......  (Quantified benefits and costs if
                                     possible. Qualitative descriptions
                                     if needed).
------------------------------------------------------------------------

Appendix A. Update of Impact of the Card Memorandum

    On January 20, 2001, the President's Chief of Staff issued a 
directive to agency heads to take steps to ensure that policy 
officials in the incoming Administration had the opportunity to 
review any new or pending regulations. This followed similar 
practices adopted at the beginning of previous administrations.
    In last year's annual report to Congress, we provided a summary 
of actions taken by agencies pursuant to rules identified by the 
directive, and by a subsequent OMB memorandum to agencies. These 
actions, subject to certain exceptions, included withdrawing 
unpublished regulations from the Federal Register and from OMB's 
Office of Information and Regulatory Affairs, and delaying the 
effective date of final rules published in the Federal Register but 
not yet in effect. As noted in last year's annual report, by the end 
of May 2001, agencies had conducted reviews and taken appropriate 
action on most of the regulations subject to the directive and to 
subsequent OMB guidance. The final disposition of many of these 
rules, however, had not been decided.
    The directives issued by Chief of Staff Card and OMB Director 
Mitchell E. Daniels, Jr. to Federal agencies to review and, if 
necessary and appropriate, withdraw unpublished regulations and 
delay the effective date of certain published regulations allowed 
newly appointed political officials to ensure that regulations 
published and implemented after January 20, 2001, reflected the 
priorities and policies of the Bush Administration. Given the 
deliberative (and often lengthy) nature of the rulemaking process, 
some of the regulations subject to the reviews and procedures 
required by the directives remain under active consideration by 
agencies.

[[Page 15036]]

    Agency heads also had to review published final rules that had 
not yet become effective to decide which ones should go into effect 
as scheduled and which ones should be delayed to allow for the 
proper policy review. According to a recent General Accounting 
Office (GAO) report, a total of 371 published final rules were 
potentially subject to the directives' requirements that effective 
dates be delayed by agencies.\23\ GAO found that, as of January 20, 
2002, agencies had allowed 281 of these 371 rules to go into effect 
without delay. Agencies decided to delay the effective dates of the 
remaining 90 regulations. Table 9 lays out an agency-by-agency 
accounting of these rules. GAO's review of the 90 rules delayed by 
agencies determined that 75 went into effect after one or more 
delays. GAO reported that 13 of the delayed regulations were 
modified, withdrawn, and/or replaced by agencies. Other delayed 
rules were the subject of pending litigation including some of the 
15 rules that remained delayed as of January 20, 2002.\24\
---------------------------------------------------------------------------

    \23\ General Accounting Office, ``Delay of Effective Dates of 
Final Rules Subject to the Administration's January 20, 2001, 
Memorandum'' (GAO-02-370R) [forthcoming].
    \24\ General Accounting Office, ibid., p. x. GAO's report 
provides a detailed discussion of specific actions taken by agencies 
on regulations delayed pursuant to the Card Memorandum.

         Table 9.--Number of Regulations Delayed and Not Delayed
------------------------------------------------------------------------
        Department/Agency            Delayed    Not delayed     Total
------------------------------------------------------------------------
Agriculture......................           10            6           16
Commerce.........................            2           12           14
Education........................            3           10           13
Energy...........................            8            6           14
Health and Human Services........           16           13           29
Housing and Urban Development....            4            1            5
Interior.........................            6            2            8
Justice..........................            4            4            8
Labor............................            5            3            8
Transportation...................           15          117          132
Treasury.........................            0           12           12
Environmental Protection Agency..            8           52           60
Independents and Other...........            9           43           52
                                  --------------------------------------
    Total........................           90          281         371
------------------------------------------------------------------------
Source: General Accounting Office, ``Delay of Effective Dates of Final
  Rules Subject to the Administration's January 20, 2001, Memorandum''
  (GAO-02-370R) [forthcoming].

    Following the issuance of the directives, OMB instructed 
agencies to withdraw from OMB review regulations that they had 
submitted prior to January 20th. Except for those rules that met the 
exemptions provided for by the Card Memorandum, agencies formally 
withdrew 130 regulations. By the end of 2001, OMB subsequently 
cleared 61 after they were reviewed and resubmitted to OMB. Table 10 
presents the numbers of regulations that agencies withdrew from OMB 
and those that agencies then submitted to OMB for Executive Order 
12866 review and approval.

Table 10.--Number of Regulations Withdrawn From and Subsequently Cleared
                                 by OMB
------------------------------------------------------------------------
                                    Withdrawn  (as of   Cleared  (as of
         Department/Agency               5/18/01)          12/31/01)
------------------------------------------------------------------------
Agriculture.......................                 13                  7
Commerce..........................                  5                  3
Defense...........................                  2                  1
Education.........................                  1                  0
Health and Human Services.........                 13                  5
Housing and Urban Development.....                 11                  5
Interior..........................                  3                  0
Justice...........................                 13                  7
Labor.............................                  2                  0
Transportation....................                 12                  5
Veterans Affairs..................                 18                 12
Environmental Protection Agency...                 21                 10
Office of Personnel Management....                  6                  3
Small Business Administration.....                  3                  1
Social Security Administration....                  2                  1
Other.............................                  5                  1
                                   -------------------------------------
    Total.........................                130                61
------------------------------------------------------------------------
Source: General Services Administration, Regulatory Information Service
  Center.

Appendix B. Proposals for Reform of Regulations

    In the draft version of last year's annual report, OMB asked for 
suggestions from the public about specific regulations that should 
be modified or rescinded in order to increase net benefits to the 
public. We received suggestions regarding 71 regulations from 33 
commenters involving 17 agencies. In an initial review of the 
comments, OIRA placed the suggestions into three categories: high 
priority, medium priority, and low priority.
    Twenty-three agency actions were rated Category 1, those 
suggestions OIRA agreed

[[Page 15037]]

were ``high priority review'' candidates. Since the publication of 
last year's report, OIRA has discussed these regulations with the 
agencies to better understand where they fit with agency priorities. 
As detailed below, agencies have already taken action on a number of 
these suggestions. On others, agencies have agreed to consider the 
need for reform and will be evaluating specific actions. Finally for 
some, agencies have convinced us that reform is unnecessary. A 
status report on the high priority reviews is provided below.
    USDA: Forest Service Planning Rules and Roadless Area 
Conservation Regulations (2 rules)--On May 10, 2001, a federal judge 
issued an injunction blocking implementation of the roadless rule 
and a portion of the forest planning rule. In July, the Forest 
Service issued an advanced notice soliciting comments on possible 
changes to the roadless rule in light of the court action. Further 
action awaits the Forest Service's consideration of comments.
    Department of Education: Regulations Related to Financial Aid.--
These regulations are the subject of annual regulatory negotiations. 
For this year the Department has made clear its commitment to 
streamlining the regulations consistent with statutory requirements.
    Department of Energy: Central Air Conditioning and Heat Pump 
Energy Conservation Standards--On January 3, 2002, DOE submitted a 
revision to this rule to OMB for review. OMB completed review on 
February 1, 2002.
    Department of Health and Human Services: Standards for Privacy 
of Individually Identifiable Health Information--HHS has issued 
guidance clarifying the requirements of this rule and has publicly 
committed to making regulatory changes to certain aspects of the 
rule.
    Department of Health and Human Services: Food Labeling: Trans 
Fatty Acids in Nutrition Labeling, Nutrient Content and Health 
Claims--OIRA Administrator John D. Graham sent a prompt letter to 
FDA on September 18, 2001 urging the agency to finalize this 
rulemaking. Secretary Thompson responded on November 26, 2001, 
agreeing that finalization was a high priority. FDA is currently 
awaiting the results of a National Academy of Science's study on 
this subject prior to proceeding with the final rule.
    Department of the Interior: Amendments to National Park Service 
Snowmobile Regulations--The snowmobile industry filed a lawsuit 
against this rule, and this Administration reached a settlement with 
the plaintiffs on June 29, 2001 to revise the January 22, 2001 final 
rule. Public comments are now being solicited on several 
alternatives.
    Department of the Interior: Regulations Governing Hardrock 
Mining Operations--DOI completed a revision of these regulations on 
October 31, 2001.
    Department of Labor: Procedures for Certification of Employment-
Based Immigration and Guest Worker Applications--On November 21, 
2001, DOL submitted a proposed regulation on this subject to OMB for 
review. We completed review on February 19, 2002.
    Department of Labor: Proposal Governing ``Helpers'' on Davis-
Bacon Act Projects--DOL has decided that changes in the Davis-Bacon 
regulations are not appropriate at this time.
    Department of Labor: Overtime Compensation Regulations Under the 
Fair Labor Standards Act--DOL is considering whether revisions to 
these regulation would be appropriate.
    Department of Labor: Recordkeeping and Notification Requirements 
Under the Family and Medical Leave Act--DOL is considering whether 
revisions to these regulations would be appropriate.
    Department of Labor: Equal Opportunity Survey--DOL is 
considering whether modifications to the survey would be 
appropriate.
    Department of Transportation: Hours of Service of Drivers--DOT 
is considering revisions to these regulations which were proposed in 
2000. Any final rule will reflect public comments in response to the 
notice of proposed rulemaking.
    Equal Employment Opportunity Commission: Uniform Guidelines for 
Employee Selection Procedures--EEOC has requested and received an 
extension of clearance of these guidelines under the Paperwork 
Reduction Act to allow further consideration of changes.
    Environmental Protection Agency: ``Mixture and Derived From'' 
Rule--EPA is considering whether revisions to these regulations 
would be appropriate.
    Environmental Protection Agency: Proposed Changes to the Total 
Maximum Daily Load Program--EPA is considering whether revisions to 
these regulations would be appropriate.
    Environmental Protection Agency: Drinking Water Regulations: 
Cost Benefit Analyses--OIRA will address these issues in its 
forthcoming analytical guidance project.
    Environmental Protection Agency: Economic Incentive Program 
Guidance--EPA issued guidance in January 2001, and the States are 
now using the guidance in developing economic incentive programs. 
OIRA will consider further review of the guidance after the States 
have further experience with the current guidelines.
    Environmental Protection Agency: New Source Review--EPA is 
considering whether revisions to these regulations and guidance 
documents are appropriate.
    Environmental Protection Agency: Concentrated Animal Feeding 
Operations Effluent Guidelines--This rule was proposed in December 
2000. EPA is currently examining comments and will consider all of 
these comments and those raised in the last report in producing a 
final rule.
    Environmental Protection Agency: Arsenic in Drinking Water--EPA 
has decided not to modify this final rule.
    Environmental Protection Agency: Notice of Substantial Risk: 
TSCA--EPA is considering several options to address the issues 
raised in its last report.

Appendix C. Estimates of the Aggregate Costs and Benefits of Regulation

    Since there are so many different types of Federal regulation, 
it is useful to break rules down into categories. Three main 
categories of regulations are widely used: social, economic and 
process. The discussions in earlier reports provide examples for 
each of these categories.

A. Social Regulation

    Table 11 presents the estimate of the total annual costs and 
benefits of social regulation (health, safety, and the environmental 
regulation) in the aggregate and by major program as of September 
30, 2001. We calculated it by adding the estimates from table 1 in 
Chapter II to Table 4 from the 2000 OMB report, updated to 2001 
dollars.

                            Table 11.--Estimates of Total Annual Monetized Costs and Monetized Benefits of Social Regulations
                                                        [Billions of 2001 dollars as of 2001, Q3]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                          Environmental          Transportation              Labor                  Other                  Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs..............................  $120 to 203...........  $17 to 22.............  $20 to 22............  $24 to 30............  $181 to 277.
Benefits...........................  $120 to 1,783.........  $95 to 126............  $32 to 34............  $61 to 66............  $308 to 2,009.
Net Benefits a.....................  $-83 to 1,663.........  $73 to 109............  $10 to 14............  $31 to 42............  $31 to 1,828.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Table 6, Ch.II and Table 4 from (OMB 2000) as adjusted per fn. 6 updated to 2001 dollars.
a Lower estimate calculated by subtracting high cost from low benefit. Higher estimate calculated by subtracting low cost from high benefit.
Note: The dollar figures in this table do not reflect benefits that were quantified but not monetized. They also do not reflect benefits and costs
  (including indirect costs) that were not quantified.

B. Economic Regulation

    Economic regulation restricts the price or quantity of a product 
or service that firms produce, including whether firms can enter or 
exit specific industries. In previous reports, OIRA presented an 
estimate that the efficiency costs of economic regulation amounted 
to $80 billion (updated to 2001 dollars). In a 1999 comprehensive 
report on regulatory reform in the United States by a panel of 
experts from around the world, the OECD estimated that additional 
reforms in

[[Page 15038]]

the transportation, energy and telecommunications sectors would lead 
to an increase in GDP of 1 percent (OECD, 1999). One percent of the 
2001 GDP of $10.15 trillion is about $100 billion. This estimate 
does not include the costs of international trade protection, which 
Hopkins included in his estimate of the cost of economic regulation.
    According to a recent study, the potential consumer gains from 
removing trade barriers existing in 1990 would be about 1.3 percent 
of GDP (Council of Economic Advisers 1998) or about $130 billion for 
the 2001, assuming trade barriers have not changed.\25\ These 
estimates taken together suggest that Hopkins' 1992 estimate may be 
too low. Crain and Hopkins (2001) in a report for the Small Business 
Administration recently estimated the efficiency costs of economic 
regulation at $150 billion (updated to 2001 dollars).\26\ Crain and 
Hopkins state that they reestimated the earlier Hopkins estimate 
based on OMB's 2000 report which also discussed the CEA (1998) 
estimate cited above. Economic theory predicts that regulation that 
restricts competitive prices and establishes entry barriers produces 
no social benefits except in the case of natural monopoly, a 
phenomenon becoming rare in a world of rapid technological progress.
---------------------------------------------------------------------------

    \25\ The CEA report also went on to state that studies of this 
type only capture static costs, fail to capture value of foregone 
varieties of products, quality improvements, and productivity 
enhancements that would take place in the absence of trade barriers, 
and thus understate the benefits from trade (CEA 1998, p. 238). The 
Michigan Model of World Production and Trade, a computational 
general equilibrium model that takes into account some of these 
considerations, predicts that the elimination of all global trade 
restrictions (not just U.S.) would increase U.S. GDP by 5.92 
percent. (Brown, Deardorff, and Stern, 2001).
    \26\ Crain and Hopkins also include an alternative estimate of 
the cost of economic regulation of $435 billion by including 
transfer costs, which are equal shifts of income from one group of 
citizens to another. Since transfers are not net costs to society 
(one person's loss is another's gain), transfers should not be added 
to our other cost estimates. Nevertheless, transfers may affect 
economic incentives and produce indirect costs to society.
---------------------------------------------------------------------------

C. Process Regulation

    The main burden of process regulation consist of the paperwork 
costs imposed on the public. Section 624(a)(1)(A) of the FY 2001 
Treasury and General Government Appropriations Act (the Act), also 
known as the ``Regulatory Right to Know Act,'' calls on OMB to 
examine the costs and benefits of paperwork. OMB has worked in the 
past with IRS on this issue. Currently, IRS is developing a new 
model that will estimate the amount of burden incurred by wage and 
investment taxpayers as a result of complying with the tax system. 
IRS has undertaken this study to improve understanding of taxpayer 
burdens, to enable us to measure both current and future levels of 
burden, and to help isolate the burden of particular tax provisions, 
regulations, or procedures. To help provide input into reporting of 
monetized burdens, the IRS paperwork burden study included the 
development of a white paper, ``Revealed and Stated Preference 
Estimation of the Value of Time Spent for Tax Compliance'' (Cameron 
2000).
    In the annual Information Collection Budgets, OIRA calculates 
paperwork burden imposed on the public, using information that 
agencies give us with their information collection requests. Table 
12 presents estimates of paperwork burden in terms of the hours the 
public devotes annually to gathering and providing information for 
the Federal government. At a future point, OIRA hopes to be able to 
provide information on the dollar cost of paperwork burden imposed 
by Federal agencies. At present, it is not feasible to estimate the 
value of annual societal benefits of the information the government 
collects from the public.
    Table 12 shows total burden hours by agency of the paperwork 
approved by OMB under the Paperwork Reduction Act as of September 
30, 2001. The total burden of 7,651 million hours is made up of 
6,416 million hours for the Treasury Department (84 percent) and 
1,235 million hours for the rest of the Federal government. Using 
the estimate of average value of time from our previous four reports 
($30 in 2001 dollars) per hour for individuals and entities that 
provide information to the government, we derive a cost estimate of 
public paperwork of $230 billion. Note, however, that (1) this is a 
rough average and should not be applied to individual agencies or 
agency collections: and (2) this estimate should not be added to our 
estimates of the costs of regulation because it would result in some 
double counting. Our estimates of regulatory costs already include 
some paperwork costs. Many paperwork costs arise from regulations, 
often for enforcement and disclosure purposes. One way to eliminate 
this overlap is to focus on tax compliance costs by using the burden 
estimate for the Treasury Department. This produces an estimate of 
$190 billion. The basis for our complex tax system is presumably 
related to considerations of equity and fairness. The changes in the 
distribution of income that our tax system produces are transfers 
and not counted as social benefits.

 Table 12.--Summary of Active Information Collections Approved Under the
                Paperwork Reduction Act as of 09/30/2001
                           [Millions of hours]
------------------------------------------------------------------------
                                                              Total hour
                     Department/Agency                          burden
------------------------------------------------------------------------
Agriculture................................................        86.72
Commerce...................................................        10.29
Defense....................................................        92.05
Education..................................................        40.50
Energy.....................................................         3.84
Health and Human Services..................................       186.61
Housing and Urban Development..............................        12.05
Interior...................................................         7.55
Justice....................................................        40.52
Labor......................................................       186.10
State......................................................        16.57
Transportation.............................................        80.33
Treasury...................................................     6,415.84
Veterans Affairs...........................................         5.30
EPA........................................................       130.78
FAR........................................................        23.74
FCC........................................................        40.10
FDIC.......................................................        10.53
FEMA.......................................................         5.50
FERC.......................................................         3.95
FTC........................................................        72.59
NASA.......................................................         6.87
NSF........................................................         4.72
NRC........................................................         8.17
SEC........................................................       144.28
SBA........................................................         1.93
SSA........................................................        24.26
                                                            ------------
    Government Total.......................................     7,651.42
------------------------------------------------------------------------

    Table 13 presents an estimate of the total annual costs and 
benefits of Federal rules and paperwork to the extent feasible in 
the aggregate, as required by Section 624 (a)(1)(A) of the Act.

Table 13.--Total Annual Cost and Benefits of Regulations as of September
                                30, 2001
                       [Billions of 2001 dollars]
------------------------------------------------------------------------
       Type of regulation                Costs             Benefits
------------------------------------------------------------------------
Social..........................  181 to 277........  308 to 2,009.
Economic (efficiency Loss)......  150...............  0.
Process.........................  190...............  0 .
Total...........................  521 to 617........  308 to 2,009.
Economic (transfer).............  337...............  337
------------------------------------------------------------------------
Source: Table 11 and text.

[[Page 15039]]

    Sec. 638 (a)(2) of the Act calls on OMB to present an analysis 
of the impacts of Federal regulation on State, local, and tribal 
governments, small business, wages, and economic growth.

Impact on State, Local, and Tribal Government

    Over the past five years, five rules have imposed costs of more 
than $100 million on State, local, and Tribal governments (and thus 
have been classified as public sector mandates under the Unfunded 
Mandates Act of 1995).\27\ All five of these rules were issued by 
the Environmental Protection Agency. These rules are described in 
greater detail below.
---------------------------------------------------------------------------

    \27\ EPA's proposed rules setting air quality standards for 
ozone and particulate matter may ultimately lead to expenditures by 
State, local or tribal governments of $100 million or more. However, 
Title II of the Unfunded Mandates Reform Act provides that agency 
statements on compliance with Section 202 must be conducted ``unless 
otherwise prohibited by law.'' The conference report to this 
legislation indicates that this language means that the section 
``does not require the preparation of any estimate or analysis if 
the agency is prohibited by law from considering the estimate or 
analysis in adopting the rule.'' EPA has stated, and the courts have 
affirmed, that under the Clean Air Act, the air quality standards 
are health-based and EPA is not to consider costs.
---------------------------------------------------------------------------

     EPA's Rule on Standards of Performance for Municipal 
Waste Combustors and Emissions Guidelines (1995): This rule set 
standards of performance for new municipal waste combustor (MWC) 
units and emission guidelines for existing MWCs under sections 111 
and 129 of the Clean Air Act [42 U.S.C. 7411, 42 U.S.C. 7429]. The 
standards and guidelines apply to MWC units at plants with aggregate 
capacities to combust greater than 35 megagrams per day (Mg/day) 
(approximately 40 tons per day) of municipal solid waste (MSW). The 
standards require sources to achieve the maximum degree of reduction 
in emissions of air pollutants that the Administrator determined is 
achievable, taking into consideration the cost of achieving such 
emission reduction, and any non-air quality health and environmental 
impacts and energy requirements.
    EPA estimated the national total annualized cost for the 
emissions standards and guidelines to be $320 million per year (in 
constant 1990 dollars) over existing regulations. EPA estimated the 
cost of the emissions standards for new sources to be $43 million 
per year. EPA estimated the cost of the emissions guidelines for 
existing sources to be $277 million per year. The annual emissions 
reductions achieved through this regulatory actions include, for 
example, 21,000 Mg. of SO2; 2,800 Mg. of particulate matter (PM); 
19,200 Mg of NOX; 54 Mg. of mercury; and 41 Kg. of dioxin/furans.
     EPA's Standards of Performance for New Stationary 
Sources and Guidelines for Control of Existing Sources: Municipal 
Solid Waste Landfills (1996): This rule set performance standards 
for new municipal solid waste landfills and emission guidelines for 
existing municipal solid waste landfills to implement section 111 of 
the Clean Air Act. The rule addressed non-methane organic compounds 
(NMOC) and methane emissions. NMOC include volatile organic 
compounds (VOC), hazardous air pollutants (HAPs), and odorous 
compounds. Of the landfills required to install controls, about 30 
percent of the existing landfills and 20 percent of the new 
landfills are privately owned. The remainder are publicly owned. The 
total nationwide annualized costs for collection and control of air 
emissions from new and existing MSW landfills are estimated to be 
$94 million per year annualized over five years, and $110 million 
per year annualized over 15 years.
     National Primary Drinking Water Regulations: 
Disinfectants and Disinfection Byproducts (1998): This rule 
promulgates health-based maximum contaminant level goals (MCLGs) and 
enforceable maximum contaminant levels (MCLs) for about a dozen 
disinfectants and byproducts that result from the interaction of 
these disinfectants with organic compounds in drinking water. The 
rule will require additional treatment at about 14,000 of the 
estimated 75,000 water systems nationwide affected by this rule. The 
costs of the rule are estimated at $700 million annually. The 
quantified benefits estimates range from zero to 9,300 avoided 
bladder cancer cases annually, with an estimated monetized value of 
$0 to $4 billion. Possible reductions in rectal and colon cancer and 
adverse reproductive and developmental effects were not quantified.
     National Primary Drinking Water Regulations: Interim 
Enhanced Surface Water Treatment (1998): This rule establishes new 
treatment and monitoring requirements (primarily related to 
filtration) for drinking water systems that use surface water as 
their source and serve more than 10,000 people. The purpose of the 
rule is to enhance protection against potentially harmful microbial 
contaminants. EPA estimated that the rule will impose total annual 
costs of $300 million per year. The rule is expected to require 
treatment changes at about half of the 1,400 large surface water 
systems, at an annual cost of $190 million. Monitoring requirements 
add $96 million per year in additional costs. All systems will also 
have to perform enhanced monitoring of filter performance. The 
estimated benefits include mean reductions of from 110,000 to 
338,000 cases of cryptosporidiosis annually, with an estimated 
monetized value of $0.5 to $1.5 billion, and possible reductions in 
the incidence of other waterborne diseases.
     National Pollutant Discharge Elimination System--
Regulations for Revision of the Water Pollution Control Program 
Addressing Storm Water Discharges (1999): This rule would expand the 
existing National Pollutant Discharge Elimination System program for 
storm water to cover smaller municipal storm sewer systems and 
construction sites that disturb one to five acres. The rule allows 
for the exclusion of certain of these sources from the program based 
on a demonstration of the lack of impact on water quality. EPA 
estimates that the total cost of the rule on Federal and State 
levels of government, and on the private sector, is $803.1 million 
annually. EPA considered alternatives to the rule, including the 
option of not regulating, but found that the rule was the option 
that was, ``most cost effective or least burdensome, but also 
protective of the water quality.''
    While these five EPA rules were the only ones over the past five 
years to require expenditures by State, local and Tribal governments 
exceeding $100 million, they were not the only rules with impacts on 
other levels of governments. For example, 15 percent, 10 percent, 
and 6 percent of rules listed in the April 2000 Unified Regulatory 
Agenda cited some impact on State, local or Tribal governments, 
respectively. In general, OMB works with the agencies to ensure that 
the selection of the regulatory option for all final rules complies 
fully with the Unfunded Mandates Reform Act. For proposed rules, OMB 
works with the agencies to ensure that they also solicited comment 
on alternatives that would reduce costs to all regulated parties, 
including State, local and Tribal governments.
    Agencies have also significantly increased their consultation 
with State, local, and Tribal governments on all regulatory actions 
that impact them. For example, EPA and the Department of Health and 
Human Services have engaged in particularly extensive consultation 
efforts over a wide variety of programs, on both formal unfunded 
mandates as defined by the Unfunded Mandates Reform Act and other 
rules with intergovernmental impacts. Agencies have also made real 
progress in improving their internal systems to manage consultations 
better. This has helped them analyze specific rules in ways that 
reduce costs and increase flexibility for all levels of government 
and for the private sector, while implementing important national 
priorities.
    This Administration will bring more uniformity to the 
consultation process to help both agencies and intergovernmental 
partners know when, how and with whom to communicate. States and 
localities should have a clear point of contact in each agency, and 
agencies must understand that ``consultation'' means more than 
making a telephone call the day before a rulemaking action is 
published in the Federal Register. Finally, this Administration 
intends to enforce the Unfunded Mandates Reform Act to ensure that 
agencies are complying with both the letter and the spirit of the 
law. If an agency is unsure whether a rule contains a significant 
mandate, it should err on the side of caution and prepare an impact 
statement prior to issuing the regulation.
    Clearly, more still needs to be done to ensure that this 
consultation takes place in all instances where it is needed and 
early in the federal decisionmaking process. Toward that end, the 
President established an Interagency Working Group on Federalism. 
Devolving authority and responsibility to State and local 
governments, and to the people, is a central tenet of the 
President's management of the Executive Branch. This working group 
is striving to turn this principle into policy.
    In Chapter I above we ask for comments from the public for 
suggestions to help improve the consultation process. We intend to 
include a discussion of those comments in the final report. We also 
intend to include in our final report a full discussion of agency

[[Page 15040]]

compliance with the Unfunded Mandates Reform Act.

Impact on Small Business

    The Administration explicitly recognizes the need to be 
sensitive to the impact of regulations and paperwork on small 
business with Executive Order 12866, ``Regulatory Planning and 
Review.'' The Executive Order calls on the agencies to tailor their 
regulations by business size in order to impose the least burden on 
society, consistent with obtaining the regulatory objectives. It 
also calls for the development of short forms and other streamlined 
regulatory approaches for small businesses and other entities. 
Moreover, in the findings section of the Small Business Regulatory 
Enforcement Fairness Act of 1996 (SBREFA), Congress stated that ``. 
. . small businesses bear a disproportionate share of regulatory 
costs and burdens.'' This is largely attributable to fixed costs--
costs that all firms must bear regardless of size. Each firm has to 
determine whether a regulation applies, how to comply, and whether 
it is in compliance. As firms increase in size, fixed costs are 
spread over a larger revenue and employee base resulting in lower 
unit costs.
    This observation is supported by empirical information from a 
study sponsored by the Office of Advocacy of the Small Business 
Administration (Crain and Hopkins 2001). That study found that 
regulatory costs per employee decline as firm size--as measured by 
the number of employees per firm--increases. Crain and Hopkins 
(2001) estimate that the total cost of regulation (environmental, 
workplace, economic, and tax compliance regulation) was 60 percent 
greater per employee for firms with under 20 employees compared to 
firms with over 500 employees. \28\
---------------------------------------------------------------------------

    \28\ The average per employee regulatory costs were $6,975 for 
firms with under 20 employees compared to $4,463 for firms with over 
500 employees. These findings are based on their overall estimate of 
the cost of Federal regulation for 2000 of $843 billion. (See Crain 
and Hopkins, ``The Impact of Regulatory Costs for Small Firms'' SBA, 
Office of Advocacy, 2001).
---------------------------------------------------------------------------

    These results do not indicate, however, the extent to which 
reducing regulatory requirements on small firms would affect net 
benefits. That depends upon the differences between relative 
benefits per dollar of cost by firm size, not on differences in 
costs per employee. If benefits per dollar of cost are smaller for 
small firms than large firms, then decreasing requirements for small 
firms while increasing them for large firms should increase net 
benefits. The reverse may be true in some cases.

Impact on Wages

    The impact of Federal regulations on wages depends upon how 
``wages'' are defined and on the types of regulations involved. If 
we define ``wages'' narrowly as workers' take-home pay, social 
regulation usually decreases average wage rates, while economic 
regulation often increases them, especially for specific groups of 
workers. If we define ``wages'' more broadly as the real value or 
utility of workers' income, the directions of the effects of the two 
types of regulation can be reversed.

1. Social Regulation

    By broad measures of welfare, social regulation, regulation 
directed at improving health, safety, and the environment is 
intended to create benefits for workers and consumers that outweigh 
the costs. Compliance costs, however, must be paid for by some 
combination of workers, business owners, and/or consumers through 
adjustments in wages, profits, and/or prices. This effect is most 
clearly recognized for occupational health and safety standards. As 
one leading text book in labor economics suggests: ``Thus, whether 
in the form of smaller wage increases, more difficult working 
conditions, or inability to obtain or retain one's first choice in a 
job, the costs of compliance with health standards will fall on 
employees.''\29\
---------------------------------------------------------------------------

    \29\ From Ehrenberg and Smith's Modern Labor Economics, p. 279.
---------------------------------------------------------------------------

    Viewed in terms of overall welfare, the regulatory benefits of 
improved health, safety, and environmental improvements for workers 
can outweigh their costs assuming the regulation produces net 
benefits. In the occupational health standards case, where the 
benefits of regulation accrue mostly to workers, workers are likely 
to be better off if health benefits exceed compliance costs. \30\ 
Although wages may reflect the cost of compliance with health and 
safety rules, the job safety and other benefits of such regulation 
can compensate for the monetary loss. Workers as consumers 
benefitting from safer products and a cleaner environment may also 
come out ahead if regulation produces significant net benefits for 
society.
---------------------------------------------------------------------------

    \30\ Based on a cost benefit analysis of OSHA's 1972 Asbestos 
regulation by Settle (1975), which found large net benefits, 
Ehrenberg and Smith cite this regulation as a case where workers' 
wages were reduced, but they were made better off because of 
improved health (p. 281).
---------------------------------------------------------------------------

2. Economic Regulation

    For economic regulation, designed to set prices or conditions of 
entry for specific sectors, these effects may at times be reversed 
to some degree. Economic regulation can result in increases in 
income narrowly defined for workers in the regulated industries, but 
decreases in broader measures of income based on utility or overall 
welfare, especially for workers in general. Economic regulation is 
often used to protect industries and their workers from competition. 
Examples include the airline and trucking industries in the 1970s 
and trade protection, today. These wage gains come at a cost in 
inefficiency from reduced competition, however, which consumers must 
bear. Moreover, growth in real wages, which are limited generally by 
productivity increases, will not grow as fast without the 
stimulation of outside competition. \31\
---------------------------------------------------------------------------

    \31\ Winston (1998) estimates that real operating costs declined 
between 25 and 75 percent in the sectors that were deregulated over 
the last 20 years--transportation, energy, and telecommunications.
---------------------------------------------------------------------------

    These statements are generalizations for the impact of 
regulation in the aggregate or by broad categories. Specific 
regulations can increase or decrease the overall level of benefits 
accruing to workers depending upon the actual circumstances and 
whether net benefits are produced.

Economic Growth

    The conventional measurement of GDP does not take into account 
the market value of improvements in health, safety, and the 
environment. It does incorporate the direct compliance costs of 
social regulation. Accordingly, conventional measurement of GDP can 
suggest that regulation reduces economic growth. \32\ In fact, 
sensible regulation and economic growth are not inconsistent once 
all benefits are taken into account. By the same token, inefficient 
regulation reduces true economic growth.
---------------------------------------------------------------------------

    \32\ Social regulation reduces measured growth by diverting 
resources from the production of goods and services that are counted 
in GDP to the production or enhancement of ``goods and services'' 
such as longevity, health, and environmental quality that generally 
are not counted in GDP.
---------------------------------------------------------------------------

    The OECD (1999) estimates that the economic deregulation that 
occurred in the U.S. over the last 20 years permanently increased 
GDP by 2 percent. The OECD also estimates that further deregulation 
of the transportation, energy, and telecommunication sectors would 
increase U.S. GDP by another 1 percent. Jaffe, Peterson, Portney, 
and Stavins (1995) summarize their findings after surveying the 
evidence of the effects of environmental regulation on economic 
growth as follows: ``Empirical analysis of the productivity effects 
have found modest adverse impacts of environmental regulation.'' 
Based on the studies that tried to explain the decline in 
productivity that occurred in the US during the 1970s, they placed 
the range attributable to environmental regulation from 8 percent to 
16 percent (p. 151).
    As indicated above, conventionally measured GDP growth does not 
take into account the market value of the improvements in health, 
safety, and the environment that social regulation has brought us. 
If even our lower range estimate of the benefits of social 
regulation ($266 billion) were added to GDP, then the more 
comprehensive measure of GDP, one that includes the value of 
nonmarket goods and services provided by regulation, would be about 
3 percent greater.\33\ Focusing on the effect of social regulation 
on economic growth is misleading if it does not take into account 
the full benefits of regulation.
---------------------------------------------------------------------------

    \33\ Including the value of increasing life expectancy in the 
GDP accounts to come up with a more comprehensive measure of the 
full output of the economy is not as far fetched as it sounds. It 
was first proposed and estimated in 1973 by D. Usher in ``An 
Imputation to the Measure of Economic Growth for Changes in Life 
Expectancy'' NBER Conference on Research in Income and Wealth.
---------------------------------------------------------------------------

    More important than knowing the impact of regulation in general 
on growth is the impact of specific regulations and alternative 
regulatory designs on economic growth. As Jaffe et al put it: ``Any 
discussion of the productivity impacts of environmental protection 
efforts should recognize that not all environmental regulations are 
created equal in terms of their costs or their benefits.'' (p 152).

[[Page 15041]]

    In this regard, market-based or economic-incentive regulations 
will tend to be more cost-effective than those requiring specific 
technologies or engineering solutions. Under market-based 
regulation, profit-maximizing firms have strong incentives to find 
the cheapest way to produce the social benefits called for by 
regulation. How you regulate can go a long way toward reducing any 
negative impacts on economic growth and increasing the overall long 
run benefits to society.

Appendix D. Explanation of Calculations for Costs and Benefits Tables

    Chapter II presents estimates of the annual costs and benefits 
of major regulations reviewed by OMB between April 1, 1995 and 
September 30, 2001, for which we had quantified costs and benefits. 
The explanation for the calculations of the major rules reviewed by 
OMB between April 1, 1995 and March 31, 1999, is in Chapter IV of 
our 2000 report (OMB 2000). Table 14 presents OIRA's estimates of 
the benefits and costs of the 19 individual rules reviewed between 
April 1, 1999 and September 30, 2001 which were included in Table 5. 
As mentioned in Chapter II, we adjusted these estimates to update 
the estimates to 2001 dollars and removed three EPA regulations to 
prevent double counting. First, we decided to exclude the benefit 
and cost estimates for the Ozone and fine Particulate Matter NAAQS. 
EPA has adopted a number of key rules in the ensuing five years--for 
example, the NOX SIP Call, the Regional Haze rule, the 
Tier II rule setting stringent emission limits for light duty 
vehicles, and the Heavy Diesel Engine rules setting stringent 
emission limits for on-highway diesel engines. These rules can 
achieve emission reductions and impose costs that were also included 
in the EPA benefit and cost estimates developed for the 
O3 and PM NAAQS rules. Second, EPA issued a 1998 rule 
limiting Heavy Duty Diesel Engine emissions beginning in 2004 and 
``reaffirmed'' the 1998 rule in a final rule issued last year. OIRA 
has used the benefit and cost estimates from EPA's 2001 rulemaking 
because we believe it provides a better estimate of the likely 
emission reductions and costs of these emission standards.
    In assembling estimates of benefits and costs, OIRA has:
    (1) Applied a uniform format for the presentation of benefit and 
cost estimates in order to make agency estimates more closely 
comparable with each other (for example, providing the benefit and 
cost streams over time and annualizing benefit and cost estimates); 
and
    (2) monetized quantitative estimates where the agency has not 
done so (for example, converting some projections of tons of 
pollutant per year to dollars).
    Adopting a format that presents agency estimates so that they 
are more closely comparable also allows, at least for purposes of 
illustration, the aggregation of benefit and cost estimates across 
rules. While OIRA has attempted to be faithful to the respective 
agency approaches, the reader should be cautioned that agencies have 
used different methodologies and valuations in quantifying and 
monetizing effects.

Valuation Estimates for Regulatory Effects \34\
---------------------------------------------------------------------------

    \34\ The following discussion updates the monetization approach 
used in previous reports and draws on examples from this and 
previous years.
---------------------------------------------------------------------------

    Agencies continue to take different approaches in monetizing 
benefits for rules that affect small risks of premature death. As a 
general matter, we have deferred to the individual agencies' 
judgment in this area. In cases where the agency both quantified and 
monetized fatality risks, we have made no adjustments to the 
agency's estimate. In cases where the agency provided only a 
quantified estimate of fatality risk, but did not monetize it, we 
have monetized these estimates in order to convert these effects 
into a common unit. For example, in the case of HHS's organ donor 
rule, the agency estimated, but did not monetize, statistical life-
years saved (although it has discussed its use of $116,500 per life-
year in other contexts). OIRA valued those life-years at $116,500 
each. For NHTSA's child restraint rule, OIRA used NHTSA's approach 
to valuing life saving benefits.
    In cases where agencies have not adopted estimates of the value 
of reducing these risks, OIRA used estimates supported by the 
relevant academic literature.\35\ OIRA did not attempt to quantify 
or monetize fatality risk reductions in cases where the agency did 
not at least quantify them. As a practical matter, the aggregate 
benefit and cost estimates are relatively insensitive to the values 
we have assigned for these rules because the aggregate benefit 
estimates are dominated by EPA's rules.
---------------------------------------------------------------------------

    \35\ As a result of OSHA's interpretation of the Supreme Court's 
decision in the ``Cotton Dust'' case, American Textile Manufacturers 
Institute v. Donovan, 452 U.S. 491 (1981), OSHA does not conduct 
cost-benefit analysis or assign monetary values to human lives and 
suffering.
---------------------------------------------------------------------------

    The following is a brief discussion of OIRA's valuation 
estimates for other types of effects that agencies identified and 
quantified, but did not monetize.
     Injury. For the child restraint rule, the Department of 
Transportation approach of converting injuries to ``equivalent 
fatalities'' was adopted. These ratios are based on DOT's estimates 
of the value individuals place on reducing the risk of injury of 
varying severity relative to that of reducing risk of death. For the 
OSHA industrial truck operator rule, OIRA did not monetize injury 
benefits beyond OSHA's estimate of the direct cost of lost workday 
injuries. For the OSHA safety standards for steel erection, OIRA 
monetized injury benefits using a value of $50,000 per injury 
averted.
     Change in Gasoline Fuel Consumption. We valued reduced 
gasoline consumption at $.80 per gallon pre-tax.
     Reduction in Barrels of Crude Oil Spilled. OIRA valued 
each barrel prevented from being spilled at $2,000. This is double 
the sum of the most likely estimates of environmental damages plus 
cleanup costs contained in a recently published journal article 
(Brown and Savage, 1996).
     Change in Emissions of Air Pollutants. Estimates of the 
benefits per ton for reductions in hydrocarbon, nitrogen oxide 
(NOX), sulfur dioxide (SO2), and fine 
particulate matter (PM) were derived from EPA's pulp and paper 
cluster rule (October, 1997). These estimates were obtained from the 
RIA prepared for EPA's July, 1997 rules revising the primary NAAQS 
for ozone and fine PM. In this area, as in others, the academic 
literature offers a number of methodologies and underlying studies 
to quantify the benefits. There remain considerable uncertainties 
with each of these approaches. In particular, the derivation and 
application of per-ton coefficients to value reductions in these 
pollutants requires significant simplifying assumptions. This is 
particularly true with respect to the relationship between changes 
in emitted precursors pollutants and changes in the ambient 
pollutant concentrations which yield actual benefits. As a result of 
these simplifying assumptions, the monetary benefit estimates 
obtained by multiplying tons reduced by benefit estimates per-ton, 
which we derive from analyses of other rules, should be considered 
highly uncertain. For each of these pollutants, the following values 
(all in 1996$) were used for changes in emissions: \36\
---------------------------------------------------------------------------

    \36\ Where applicable, the lower (higher) end of the value 
ranges in all of the tables throughout this report reflect the lower 
(higher) values in these ranges.

Hydrocarbons: $519 to $2,360/ton;
Nitrogen Oxides: $519 to $2,360/ton;
Particulate Matter: $11,539/ton; and
Sulfur Dioxide: $3,768 to $11,539/ton.

    The NOX benefit estimate is based on benefit transfer 
values ranging from $519 to $2,360 per ton derived from a 1997 
benefit analysis of VOC emission reductions, as noted above. This 
analysis required two key assumptions: (1) That NOX 
reductions have no effect on particulate matter concentrations; and 
(2) that NOX and VOC reductions contribute 
proportionately to ozone reductions. While reductions in VOC and 
NOX emissions both lead to reductions in ambient 
concentrations of ozone, reductions in NOX emissions also 
lead to reductions in particulate matter. In addition, reductions in 
NOX may have a disproportionate impact on reductions in 
ozone. For these reasons, estimates of benefits based on the VOC 
transfer coefficients should be viewed with caution. All else equal, 
they are likely to underestimate actual NOX -related 
benefits.
    Analysis of other recent EPA rules yield a range of estimates 
for the NOX benefits per ton. Each of these analyses is 
arguably methodologically superior to the 1997 benefit analysis. For 
example, the OTAG SIP and the Section 126 rules limiting 
NOX emissions from electric utilities yielded estimates 
of $960 to $2500 per ton and $1350 to $2100 per ton in 2007, 
respectively, and the recent Tier 2 rule limiting NOX 
emissions from cars and light trucks yielded estimates of $4500 to 
$7900 per ton in 2030. Finally, a recent EPA memo on the benefits of 
the NSR program provided an estimate based on previous EPA analyses 
that the average mortality-related benefits estimate is around $1300 
per ton of NOX reduced. The

[[Page 15042]]

corresponding benefits estimate for SO2 reductions is 
$7300 per ton. In these studies, the mortality-related benefits 
generally accounted for over 90 percent of monetary benefits. 
Currently, we recognize that there are potential problems and 
significant uncertainties that are inherent in any benefits analysis 
based on $/ton benefit transfer techniques. The extent of these 
problems and the degree of uncertainty depends on the divergence 
between the policy situation being studied and the basic scenario 
providing the benefits transfer estimate.
    Several factors may be responsible for uncertainty and 
variability in the benefits transfer values. These factors include 
sources of emissions, meteorology, transport of emissions, initial 
pollutant concentrations, population density, and population 
demographics, such as proportion of elderly and children and 
baseline incidence rates for health effects. In order to minimize 
the uncertainty associated with benefits transfer, benefit transfer 
values should be taken from situations that are similar to the rule 
being evaluated. For example, where possible, benefit transfer 
values for individual pollutants should be based on primary benefits 
analyses for rules where the pollutant of interest, e.g. 
NOX, is the primary pollutant controlled by the rule.
    These additional issues are particularly relevant for the 
NOX benefits transfer conducted for this report. 
Alternative benefits transfer analyses are available, as outlined 
above, including a benefits transfer estimate offered by EPA based 
on its recent analysis of the Tier 2 rule and the EPA staff estimate 
recently included in the New Source Review docket. Relative to the 
1997 VOC rule, the benefits transfer based on these alternative 
analyses are (a) more focused on NOX emissions, (b) based 
on more up-to-date data and methods, and (c) focused on sources more 
similar in character to the sources being evaluated in this report. 
The EPA staff estimate for the NSR docket is within the $520 to 
$2,360 per ton estimate used in this report.
    In order to make agency estimates more consistent, we developed 
benefit and cost time streams for each of the rules. Where agency 
analyses provide annual or annualized estimates of benefits and 
costs, we used these estimates in developing streams of benefits and 
costs over time. Where the agency estimate only provided annual 
benefits and costs for specific years, we used a linear 
interpolation to represent benefits and costs in the intervening 
years.\37\ For the Tier 2 rule and the Heavy Duty Diesel Engine 
rules, EPA only developed benefit estimates for a single year (2030) 
because of the difficulty of doing the air quality modeling 
necessary to support development of benefits estimates over multiple 
years. However, EPA did develop estimates of the expected emission 
reductions for intermediate years. We used these emission reduction 
estimates to scale the 2030 benefit estimate to provide a benefit 
stream over the relevant time period. For the Regional Haze rule, 
EPA provided only an estimate of benefits and costs in 2015. To 
develop benefit and cost streams, we used a linear extrapolation of 
benefits and costs beginning in 2009 and scaling up to the reported 
2015 estimates.
---------------------------------------------------------------------------

    \37\ In other words, if hypothetically we had costs of $200 
million in 2000 and $400 million in 2020, we would assume costs 
would be $250 million in 2005, $300 million in 2010, and so forth.
---------------------------------------------------------------------------

    Agency estimates of benefits and costs cover widely varying time 
periods. While HHS analyzed the effects of providing transplant-
related data from 1999 through 2004, other agencies generally 
examined the effects of their regulations over longer time periods. 
HHS used a 10-year period for its over-the counter drug labeling 
rule; DOL also used a 10-year period for its truck operator training 
rule. EPA's analyses on disinfection and enhanced water treatment 
rules evaluated the effects over a twenty-year period. The 
differences in the time frames used for the various rules evaluated 
generally reflect the specific characteristics of individual rules 
such as expected capital depreciation periods or time to full 
realization of benefits.
    In order for comparisons or aggregation to be meaningful, 
benefit and cost estimates should correctly account for all 
substantial effects of regulatory actions, including potentially 
offsetting effects, which may or may not be reflected in the 
available data. We have not made any changes to agency monetized 
estimates. To the extent that agencies have adopted different 
monetized values for effects--for example, different values for a 
statistical life or different discounting methods--these differences 
remain embedded in the tables. Any comparison or aggregation across 
rules should also consider a number of factors which our 
presentation does not address. For example, these analyses may adopt 
different baselines in terms of the regulations and controls already 
in place. In addition, the analyses for these rules may well treat 
uncertainty in different ways. In some cases, agencies may have 
developed alternative estimates reflecting upper- and lower-bound 
estimates. In other cases, the agencies may offer a midpoint 
estimate of benefits and costs. In still other cases the agency 
estimates may reflect only upper-bound estimates of the likely 
benefits and costs.
    While we have relied in many instances on agency practices in 
monetizing costs and benefits, we believe that it may be critical in 
the coming year to take a more precise look at the variety of agency 
practices in use. Accordingly, our citation of or reliance on agency 
data in this report should not be taken as an OIRA endorsement of 
all of the varied methodologies used to derive benefit and cost 
estimates.

        Table 14.--Estimate of Benefits and Costs of 19 Major Rules, April 1, 1999 to September 30, 2001
                                      [Annualized 2001 dollars in millions]
----------------------------------------------------------------------------------------------------------------
          Regulation              Agency         Benefits            Costs                  Explanation
----------------------------------------------------------------------------------------------------------------
1999-2000:
    Lead-Based Paint Hazards.  HUD                        190                150  Both costs and benefits come
                                                                                   from Table 4 of the 2001
                                                                                   report. The present value
                                                                                   estimates are amortized over
                                                                                   five years.
    Storm Water Discharges     EPA                  700-1,700          900-1,100  From Table 4 of 2001 report.
     Phase II.
    Tier 2 Motor Vehicle       EPA               7,300-13,400              4,000  EPA provided a monetized
     Emission Standards.                                                           benefit estimate only for the
                                                                                   year 2030. EPA also estimated
                                                                                   reductions for various
                                                                                   individual years between 2004
                                                                                   and 2030. We assumed that the
                                                                                   monetized benefits were
                                                                                   directly correlated with
                                                                                   emission reductions. We
                                                                                   developed an annualized
                                                                                   stream of emission reductions
                                                                                   by interpolating between
                                                                                   years for which EPA provided
                                                                                   estimates. We then prorated
                                                                                   the monetized benefits
                                                                                   annually in proportion to the
                                                                                   annual emission reductions.
                                                                                   Finally, we annualized the
                                                                                   resulting stream of monetized
                                                                                   benefits. We used EPA's
                                                                                   annual cost estimates to
                                                                                   develop the annualized cost
                                                                                   estimates.

[[Page 15043]]

    Regional Haze............  EPA                  300-7,000          300-1,600  EPA provided a monetized
                                                                                   benefit and cost range of
                                                                                   estimates only for the year
                                                                                   2015. EPA also estimated
                                                                                   emission reductions targeted
                                                                                   for improving visibility for
                                                                                   various individual years
                                                                                   between 2010 and 2105, We
                                                                                   assumed that the monetized
                                                                                   benefits were directly
                                                                                   correlated with emission
                                                                                   reductions. We developed an
                                                                                   annualized stream of emission
                                                                                   reductions by assuming a
                                                                                   linear improvement in haze
                                                                                   from 2010 to 2015. We than
                                                                                   prorated the monetized
                                                                                   benefits annually in
                                                                                   proportion to the annual
                                                                                   emission reductions. Finally,
                                                                                   we annualized the resulting
                                                                                   stream of monetized benefits.
                                                                                   We used EPA's annual cost
                                                                                   estimates to develop the
                                                                                   annualized cost estimates.
    Handheld Engines.........  EPA                    250-860            190-250  For benefits, we valued EPA's
                                                                                   annualized emission
                                                                                   reductions at $1,000--$2500
                                                                                   per ton. Costs and benefits
                                                                                   are taken directly from table
                                                                                   4: Summary of Agency
                                                                                   Estimates for Final Rules 4/1/
                                                                                   99-3/31/00, converted to
                                                                                   2001$.
                                           --------------------------------------
        Total................                    8,740-23,150        5,540-7,100
2000-2001:
    Roadless Area              USDA                     0.219                184  Both costs and benefits come
     Conservation.                                                                 from Table 7: summary of
                                                                                   Agency Estimates for Final
                                                                                   Rules, 4/1/00-9/30/01. The
                                                                                   benefits are taken as given.
                                                                                   Costs aggregate the total
                                                                                   short-term and long term per
                                                                                   year costs provided.
    Energy Conservation        DOE                        280                 70  Benefits and costs are
     Standards for                                                                 estimated by amortizing the
     Fluorescent Lamp                                                              estimated present value of
     Ballasts.                                                                     $3.51 billion in benefits and
                                                                                   $.9 billion in costs over the
                                                                                   next 30 years.
    Energy Conservation        DOE                        680                510  Benefits and costs are
     Standards for Water                                                           estimated by amortizing the
     Heaters.                                                                      estimated present value of
                                                                                   $8.6 billion in benefits and
                                                                                   $6.4 billion in costs over
                                                                                   the next 30 years.
    Energy Conservation        DOE                      2,150                940  Benefits and costs are
     Standards for Clothes                                                         estimated by amortizing the
     Washers.                                                                      estimated present value of
                                                                                   $27.2 billion in benefits and
                                                                                   $11.9 billion in costs over
                                                                                   the next 30 years.
    Health Insurance Reform:   HHS                      2,720                700  Benefits are estimated by
     Standards for Electric                                                        annualizing the $19.1 billion
     Transactions.                                                                 present value of benefits
                                                                                   estimated to accrue in the
                                                                                   next 10 years. Costs are
                                                                                   estimated by assuming that
                                                                                   the estimated $7 billion of
                                                                                   costs occur evenly over the
                                                                                   next 10 years.
    Safe and Sanitary          HHS                        150                 30  Benefits above are identical
     Processing and Importing                                                      to what is listed in Table 7;
     of Juice.                                                                     the costs are estimated as
                                                                                   $23 million per year with an
                                                                                   up-front costs of $44-$55
                                                                                   million in the first year.
                                                                                   The first year costs are
                                                                                   amortized over the next 30
                                                                                   years.
    Standards for Privacy of   HHS                      2,700              1,680  Amortized the net present
     Individually                                                                  value of benefits and costs
     Identifiable Health                                                           of $19 billion and $11.8
     Information.                                                                  billion respectively.
    Labeling of Shell Eggs...  HHS                        261                 15  Benefits above are identical
                                                                                   to what is listed in Table 7;
                                                                                   the costs are estimated as
                                                                                   $10 million per year with an
                                                                                   up-front costs of $56 million
                                                                                   in the first year. The first
                                                                                   year costs are amortized over
                                                                                   the next 30 years.
    Safety Standards for       DOL                        167                 78  Benefits are estimated at 22
     Steel Erection.                                                               fatalities averted and 1,142
                                                                                   injuries averted per year.
                                                                                   Each fatality averted is
                                                                                   valued at $5 million, and
                                                                                   each injury averted is valued
                                                                                   at $50,000. Costs are what
                                                                                   was estimated by the agency.
    Advanced Airbags.........  DOT                  140-1,600           400-2000  Based on methodology in
                                                                                   NHTSA's ``The Economic Cost
                                                                                   of Motor Vehicle Crashes,
                                                                                   1994.''
    Identification of          EPA                1,750-6,840              2,700  Calculated by amortizing the
     Dangerous Levels of                                                           estimated present value of
     Lead.                                                                         benefits of $45-$176 billion
                                                                                   as well as the estimated
                                                                                   present value of benefits of
                                                                                   $70 billion using a discount
                                                                                   rate of 3%, a rate explicitly
                                                                                   specified the EPA in this
                                                                                   rule.
    Arsenic and                EPA                    140-198                206  Both costs and benefits taken
     Clarifications.                                                               directly from Table 7.

[[Page 15044]]

    National Emission          EPA                    293-393                 32  Both costs and benefits taken
     Standards for Hazardous                                                       directly from Table 7.
     Air Pollutants for
     Chemical Recovery.
    Heavy-Duty Engine and      EPA                     13,000              2,400  We estimated the present value
     Vehicle Standards.                                                            of the stream of costs and
                                                                                   benefits generated until
                                                                                   2030, deflated the present
                                                                                   value to 2001$'s, and then
                                                                                   annualized the streams.
                                           --------------------------------------
        Total................                   24,435-31,139      9,965-11,565
----------------------------------------------------------------------------------------------------------------
Note: Assumptions: 7% discount rate unless another rate explicitly identified by the agency. For DOL: $5 million
  VSL assumed for deaths averted when not already quantified. Injuries averted valued at 50,000 both of the
  above from Viscusi. All values converted to 2001 dollars. All costs and benefits stated on a yearly basis.

Appendix E.

                              Table 15.--Regulations Reviewed by Agency, 1998--2001
----------------------------------------------------------------------------------------------------------------
                                                    Total         2001         2000         1999         1998
----------------------------------------------------------------------------------------------------------------
USDA:
    S..........................................          225           53           56           69           47
    ES.........................................           46            8           24           10            4
HHS:
    S..........................................          334           66           89           88           91
    ES.........................................          101           28           26           22           25
EPA:
    S..........................................          201           52           51           42           56
    ES.........................................           56            9           18           15           14
DOT:
    S..........................................          129           48           29           26           26
    ES.........................................           38           14            7            8            9
DOC:
    S..........................................          139           20           47           46           26
    ES.........................................           11            2            4            4            1
DOI:
    S..........................................          142           32           63           28           19
    ES.........................................           16            3            6            4            3
ED:
    S..........................................           58            9           29           23            6
    ES.........................................            1            0            0            1            0
HUD:
    S..........................................          126           35           29           36           26
    ES.........................................            6            0            2            3            1
VA:
    S..........................................          113           68           12           20           13
    ES.........................................            5            4            1            0            0
DOJ:
    S..........................................          108           39           29           13           27
    ES.........................................            4            2            0            1            1
OPM:
    S..........................................          121           32           37           28           24
    ES.........................................            0            0            0            0            0
                                                ----------------------------------------------------------------
Sum:
    S..........................................        1,696          445          471          419          361
    ES.........................................          284           70           88           68          58
----------------------------------------------------------------------------------------------------------------
*Data are all for years beginning 2/1 and extending through 1/31 the next year.
S = Significant rulemaking.
ES = Economically significant rulemaking.

Appendix F. The ``Regulatory Right-to-Know Act'' \38\
---------------------------------------------------------------------------

    \38\ Section 624 of the Treasury and General Government 
Appropriations Act, 2001, 31 U.S.C. 1105 note, Pub. L. 106-554, sec. 
1(a)(3) [Title VI, sec. 624], Dec. 21, 2000, 114 Stat. 2763, 2763A-
161.

    SEC. 624. (a) IN GENERAL.--For calendar year 2002 and each year 
thereafter, the Director of the Office of Management and Budget 
shall prepare and submit to Congress, with the budget submitted 
under section 1105 of title 31, United States Code, an accounting 
statement and associated report containing--
    (1) an estimate of the total annual costs and benefits 
(including quantifiable and nonquantifiable effects) of Federal 
rules and paperwork, to the extent feasible--
    (A) in the aggregate;
    (B) by agency and agency program; and
    (C) by major rule;
    (2) an analysis of impacts of Federal regulation on State, 
local, and tribal government, small business, wages, and economic 
growth; and
    (3) recommendations for reform.
    (b) NOTICE.--The Director of the Office of Management and Budget 
shall provide public notice and an opportunity to comment on the 
statement and report under subsection (a)

[[Page 15045]]

before the statement and report are submitted to Congress.
    (c) GUIDELINES.--To implement this section, the Director of the 
Office of Management and Budget shall issue guidelines to agencies 
to standardize--
    (1) measures of costs and benefits; and
    (2) the format of accounting statements.
    (d) PEER REVIEW.--The Director of the Office of Management and 
Budget shall provide for independent and external peer review of the 
guidelines and each accounting statement and associated report under 
this section. Such peer review shall not be subject to the Federal 
Advisory Committee Act (5 U.S.C. App.).
[FR Doc. 02-7257 Filed 3-27-02; 8:45 am]
BILLING CODE 3110-01-P