Proposed Executive Order Entitled “Federal Regulation”

[The following memorandum, prepared by the Office o f Legal Counsel pursuant to its 

responsibility under Executive O rder No. 11,030 for approving all executive orders and 

presidential proclamations for form and legality, analyzes the provisions o f a proposed 

executive order imposing certain procedural and substantive requirements on executive 

agencies in connection with their rulemaking functions. It concludes that the order’s 

provisions for presidential oversight of the administrative process are generally within 

the President’s constitutional authority, and that they do not displace functions vested 

by law in particular agencies. It also concludes that the order’s requirement that 

agencies reconsider final rules w hich have not yet become effective may in certain 

circumstances trigger the notice and com m ent provisions of the Adm inistrative Procedure Act.]

February 13, 1981

MEMORANDUM

The attached proposed executive order was prepared by the Office 

of Management and Budget (OMB) in consultation with this Office, and 

has been forwarded for the consideration of this Department as to form 

and legality by the Office of Management and Budget with the 

approval of its Director. The proposed order is designed to reduce 

regulatory burdens, to provide for presidential oversight of the administrative process, and to ensure well reasoned regulations. The order sets 

forth a number of requirements that Executive Branch agencies must 

adhere to in exercising their statutory rulemaking authority. We conclude that the order is acceptable as to form and legality.*

The order has the following major provisions. Agencies must take 

action only if the potential benefits outweigh the social costs; attempt to 

maximize social benefits; choose the least costly alternative in selecting 

among regulatory objectives; and set priorities with the aim of maximizing net benefits. All of these requirements must be followed “to the 

extent permitted by law.” The order would require agencies to prepare 

for each “major rule” a Regulatory Impact Analysis (RIA) setting forth 

a description of the potential costs and benefits of the proposed rule, a 

determination of its potential net benefits, and a description of alternative approaches that might substantially achieve regulatory goals at a 

lower cost. Agencies would be required to determine that any proposed

• N o t e : Executive Order N o 12,291, entitled “ Federal Regulation,” was signed by the President on 

February 17, 1981, 3 C.F.R. 127 (1982 ed.). Ed.

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regulation is within statutory authority and that the factual conclusions 

upon which the rule is based are substantially supported by the record 

viewed as a whole. The Director of the Office of Management and 

Budget and the Presidential Task Force on Regulatory Relief would be 

given authority, inter alia, to designate proposed or existing rules as 

major rules, to prepare uniform standards for measuring costs and 

benefits, to consult with the agencies concerning preparation of RIAs, 

to state approval or disapproval of RIAs and rules on the administrative record, to require agencies to respond to these views (and to defer 

rulemaking while so consulting), and to establish schedules for review 

and possible revision of existing major rules. The order would require 

agencies to defer rules that are pending on the date of its issuance, 

including rules that have been issued as final rules but are not yet 

legally effective, and to reconsider them under the order. By its terms, 

the order would create no substantive or procedural rights enforceable 

by a party against the United States or its representatives, although the 

RIA would become part of the administrative record for judicial 

review of final rules.

I. Legal Authority: In General

The President’s authority to issue the proposed executive order derives from his constitutional power to “take Care that the Laws be 

faithfully executed.” U.S. Const., Art. II, § 3. It is well established that 

this provision authorizes the President, as head of the Executive 

Branch, to “supervise and guide” executive officers in “their construction of the statutes under which they act in order to secure that unitary 

and uniform execution of the laws which Article II of the Constitution 

evidently contemplated in vesting general executive power in the President alone.” Myers v. United States, 272 U.S. 52, 135 (1926).1

The supervisory authority recognized in Myers is based on the distinctive constitutional role of the President. The “take care” clause 

charges the President with the function of coordinating the execution 

of many statutes simultaneously: “Unlike an administrative commission 

confined to the enforcement of the statute under which it was created . . . the President is a constitutional officer charged with taking 

care that a ‘mass of legislation’ be executed,” Youngstown Sheet & Tube

Co. v. Sawyer, 343 U.S. 579, 702 (1952) (Vinson, C.J., dissenting). 

Moreover, because the President is the only elected official who has a 

national constituency, he is uniquely situated to design and execute a 

uniform method for undertaking regulatory initiatives that responds to

*In Buckley v Valeo, 424 U.S. 1, 140-41 (1976), the Supreme Court held that any “significant 

governmental duty exercised pursuant to a public law” must be performed by an “Officer of the 

United States,'1 appointed by the President or the Head of a Department pursuant to Article II, § 2, 

clause 2. We believe that this holding recognizes the importance of preserving the President’s 

supervisory powers over those exercising statutory duties, subject of course to the power of Congress 

to confine presidential supervision by appropriate legislation. See also n.7, infra.

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the will of the public as a whole.2 In fulfillment of the President’s 

constitutional responsibility, the proposed order promotes a coordinated 

system of regulation, ensuring a measure of uniformity in the interpretation and execution of a number of diverse statutes. If no such guidance 

were permitted, confusion and inconsistency could result as agencies 

interpreted open-ended statutes in differing ways.

Nevertheless, it is clear that the President’s exercise of supervisory 

powers must conform to legislation enacted by Congress.3 In issuing 

directives to govern the Executive Branch, the President may not, as a 

general proposition, require or permit agencies to transgress boundaries 

set by Congress. Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579 

(1952). It is with these basic precepts in mind that the proposed order 

must be approached.

We believe that an inquiry into congressional intent in enacting 

statutes delegating rulemaking authority will usually support the legality of presidential supervision of rulemaking by executive agencies. 

When Congress delegates legislative power to executive agencies, it is 

aware that those agencies perform their functions subject to presidential 

supervision on matters of both substance and procedure. This is not to 

say that Congress never intends in a specific case to restrict presidential 

supervision of an executive agency; but it should not be presumed to 

have done so whenever it delegates rulemaking power directly to a 

subordinate executive official rather than the President. Indeed, after 

Myers it is unclear to what extent Congress may insulate executive 

agencies from presidential supervision. Congress is also aware of the 

comparative insulation given to the independent regulatory agencies, 

and it has delegated rulemaking authority to such agencies when it has 

sought to minimize presidential interference. By contrast, the heads of 

non-independent agencies hold their positions at the pleasure of the 

President, who may remove them from office for any reason. It would 

be anomalous to attribute to Congress an intention to immunize from 

presidential supervision those who are, by force of Article II, subject to 

removal when their performance in exercising their statutory duties 

displeases the President.

Of course, the fact that the President has both constitutional and 

implied statutory authority to supervise decisionmaking by executive 

agencies does not delimit the extent of permissible supervision. It does 

suggest, however, that supervision is more readily justified when it does 

not purport wholly to displace, but only to guide and limit, discretion 

which Congress has allocated to a particular subordinate official. A 

wholesale displacement might be held inconsistent with the statute 

vesting authority in the relevant official. See Myers v. United States, 272

%See Bruff, Presidential Power and Administrative Rulemaking, 88 Yale L.J. 451, 461-62 (1979).

* In certain circumstances, statutes could invade or intrude impermissibly upon the President’s 

"inherent” powers, but that issue does not arise here.

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U.S. at 135: “O f course there may be duties so peculiarly and specifically committed to the discretion of a particular officer as to raise a 

question whether the President may overrule or revise the officer’s 

interpretation of his statutory duty in a particular instance.” This suggestion is based on the view that Congress may constitutionally conclude that some statutory responsibilities should be carried out by 

particular officers without the President’s revision, because such officers head agencies having the technical expertise, and institutional competence that Congress intended the ultimate decisionmaker to possess.4 

Under this analysis, of course, lesser incursions on administrative discretion are easier to support than greater ones. This Office has often taken 

the position that the President may consult with those having statutory 

decisionmaking responsibilities, and may require them to consider statutorily relevant matters that he deems appropriate, as long as the President does not divest the officer of ultimate statutory authority.5 Of 

course, the President has the authority to inform an appointee that he 

will be discharged if he fails to base his decisions on policies the 

President seeks to implement.6

The order would impose requirements that are both procedural and 

substantive in nature. Procedurally, it would direct agencies to prepare 

an RIA assessing the costs and benefits of major rules. We discern no 

plausible legal objection to this requirement, which like most procedural requisites is at most an indirect constraint on the exercise of 

statutory discretion. At least as a general rule, the President’s authority 

of “supervision] in his administrative control,” Myers v. United States,

272 U.S. at 135, permits him to require the agencies to follow procedures that are designed both to promote “unitary and uniform execution of the laws” and to aid the President in carrying out his constitutional duty to propose legislation. See U.S. Const., Art. II, § 3. We 

believe that a requirement that the agencies perform a cost-benefit 

analysis meets these criteria. Further, the President’s constitutional right 

to consult with officials in the Executive Branch permits him to require 

them to inform him of the costs and benefits of proposed action.7 In our 

view, a requirement that rulemaking authorities prepare an RIA is the 

least that Myers must mean with respect to the President’s authority to 

“supervise and guide” executive officials.

4 Cf. H. Friendly, The Federal Administrative Agencies: The Need for Better Definition of Standards 10-11 (1962) (discussing concept of ‘‘agency expertise” as reason for delegation of power to 

particular agencies). The Myers C ourt reaffirmed, however, that even such officers may be dismissed 

at the pleasure o f the President. 272 U.S. at 135.

* See generally, 1 Op. O.L.C. 75 (1977) {Proposals Regarding an Independent Attorney General)', 1 Op. 

O.L.C. 228 (1977) (Role of the Solicitor General).

•See note 4, supra.

7See U.S. Const., Art. II, § 2 (President may “require the Opinion, in writing, of the principal 

Officer in each of the executive Departments, upon any Subject relating to the Duties of their 

respective Offices”).

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Substantively, the order would require agencies to exercise their discretion, within statutory limits, in accordance with the principles of 

cost-benefit analysis. More complex legal questions are raised by this 

requirement. Some statutes may prohibit agencies from basing a regulatory decision on an assessment of the costs and benefits of the proposed 

action. See, e.g., EPA v. National Crushed Stone Ass’n, ‘449 U.S. 64 

(1980). The order, however, expressly recognizes this possibility by 

requiring agency adherence to principles of cost-benefit analysis only 

“to the extent permitted by law.” The issue is thus whether, when costbenefit analysis is a statutorily authorized basis for decision, the President may require executive agencies to be guided by principles of costbenefit analysis even when an agency, acting without presidential guidance, might choose not to do so. We believe that such a requirement is 

permissible. First, there can be little doubt that, when a statute does not 

expressly or implicitly preclude it, an agency may take into account the 

costs and benefits of proposed action. Such a calculus would simply 

represent a logical method of assessing whether regulatory action authorized by statute would be desirable and, if so, what form that action 

should take. In our view, federal courts reviewing such actions would 

be unlikely to conclude that an assessment of costs and benefits was an 

impermissible basis for regulatory decisions.

Second, the requirement would not exceed the President’s powers of 

“supervision.” It leaves a considerable amount of decisionmaking discretion to the agency. Under the proposed order, the agency head, and 

not the President, would be required to calculate potential costs and 

benefits and to determine whether the benefits justify the costs. The 

agency would thus retain considerable latitude in determining whether 

regulatory action is justified and what form such action should take. 

The limited requirements of the proposed order should not be regarded 

as inconsistent with a legislative decision to place the basic authority to 

implement a statute in a particular agency. Any other conclusion would 

create a possible collision with constitutional principles, recognized in 

Myers, with respect to the President’s authority as head of the Executive Branch.

We believe that the President would not exceed any limitations on 

his authority by authorizing the Task Force and the OMB Director to 

supervise agency rulemaking as the order would provide. The order 

does not empower the Director or the Task Force to displace the 

relevant agencies in discharging their statutory functions or in assessing 

and weighing the costs and benefits of proposed actions.8 The function

8 The Paperwork Reduction Act of 1980, Pub. L. No. 96-511, 94 Stat. 2812, provides some implied 

statutory support for the Order by giving OMB a direct role tn coordinating agency regulations that 

impose paperwork burdens on the public. With respect to non-independent agencies the Act gives the 

Director authority to disapprove “unreasonable” agency collection of information requests. 44 U.S.C. 

§ 3504<hX5)(C). TTie Act does not authorize him, however, to disapprove the accompanying rule itself 

insofar as the two are separable. See 44 U.S.C. § 3518(e); S. Rep No. 930, 96th Cong., 2d Sess. 56 

(1980)

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of the Task Force and the Director of the Office of Management and 

Budget would be supervisory in nature. It would include such tasks as 

the supplementation of factual data, the development and implementation of uniform systems of methodology, the identification of incorrect 

statements of fact, and the placement in the administrative record of a 

statement disapproving agency conclusions that do not appear to conform to the principles expressed in the President’s order. Procedurally, 

the Director and the Task Force would be authorized to require an 

agency to defer rulemaking while it responded to their views concerning proposed agency action. This power of consultation would not, 

however, include authority to reject an agency’s ultimate judgment, 

delegated to it by law, that potential benefits outweigh costs, that 

priorities under the statute compel a particular course of action, or that 

adequate information is available to justify regulation. As to these 

matters, the role of the D irector and the Task Force is advisory and 

consultative. The limited power of supervision embodied in the proposed order is, therefore, consistent with the President’s recognized 

powers to supervise the Executive Branch without displacing functions 

placed by law in particular agencies.

II. Suspension off Proposed and Final Regulations

The order requires executive agencies (1) to suspend the effective 

date of rules that have been issued as final rules, but have not become 

legally effective; and (2) to reconsider rules that are proposed but have 

not yet been made final. After suspension of final rules, agencies must 

reconsider all such rules in accordance with the order. These requirements are imposed only “to the extent permitted by law” and are thus 

inapplicable when a judicial or statutory deadline requires prompt 

action. Moreover, agencies must, in complying with these directives, 

adhere to the requirements of the Administrative Procedure Act 

(APA), 5 U.S.C. §§ 551-706, and all other laws.

For rules that have not yet been made final, the APA imposes no 

special procedural requirements. Agencies need not follow the notice 

and comment procedures of 5 U.S.C. § 553, for nothing in that provision requires an agency to allow a period for comment on a decision to 

delay final adoption o f a proposed rule. The agency’s decision may, 

however, be subject to judicial review, and the agency may have to 

furnish a reasoned explanation for that decision. See ASG Indus, v. 

Consumer Prod. Safety Com m ’n, 593 F.2d 1323, 1335 (D.C. Cir. 1979); 

Action for Children's Television v. FCC, 564 F.2d 458, 478-79 (D.C. Cir.

1977). The explanation here—that the agency needs time to prepare an 

RIA required by executive order—is, we believe, sufficient.

The second category of regulations covered by the executive order 

raises somewhat different legal issues. Under 5 U.S.C. § 553(b), notice 

and comment procedures must be followed for “rule making” unless

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“the agency for good cause finds (and incorporates the finding and a 

brief statement of reasons therefor in the rules issued) that notice and 

public procedure thereon are impracticable, unnecessary, or contrary to 

the public interest.” 5 U.S.C. § 553(b)(3)(B). Under 5 U.S.C. §551(5), 

the term “rule making” is defined as “agency process for formulating, 

amending, or repealing a rule.” The initial question, then, is whether an 

agency’s decision to “suspend” a final but not effective rule is “rule 

making” which triggers the procedural safeguards of § 553.

In a recent memorandum, this Office concluded that a 60-day suspension of the effective date of a final rule should not, in general, be 

regarded as rulemaking within the meaning of the APA.9 We based our 

conclusion on “the clear congressional intent to give agencies discretion 

to extend the effective date provision beyond 30 days” and the absence 

of statutory language or history suggesting “that a delay in effective 

date is the sort of agency action that Congress intended to include 

within the procedural requirements of § 553(b).” Nevertheless, we believe that a short-term suspension of the effectiveness of a final rule is 

not the equivalent of an indefinite suspension coupled with a process 

designed to review the basis for the rule, with a view to establishing a 

new rule. Although the former seems fairly characterized as a mere 

extension of an effective date under § 553(d), the latter should probably 

be characterized as “agency process for formulating, amending, or 

repealing a rule” for purposes pf § 553(b).

The difference between these two measures for purposes of § 553 

becomes clear upon examination of the sequence of events that is 

expected to take place under each of them. Under the President’s 

Memorandum of January 29, 1981, 46 Fed. Reg. 11227 (1981), “Postponement of Pending Regulations,” agencies are to defer the effective 

dates of final rules for 60 days in order to review them. The completion 

of that review will point to either of two dispositions. The rule might 

be allowed to take effect as published in final form, or it might be 

withdrawn for some proposed change. The first disposition would require no new procedures. The second disposition would surely contemplate an amendment or repeal of the earlier rule subject to § 553’s 

public procedures, but the earlier deferral of the rule’s effective date 

would remain just that.10

9 Memorandum Opinion of January 28, 1981, for Honorable David Stockman, Director, Office of 

Management and Budget, from Larry L. Simms, Acting Assistant Attorney General, Office of Legal 

Counsel. [Note: The January 28, 1981, memorandum opinion (Presidential Memorandum Delaying

Proposed and Pending Regulations) appears in this volume at p. 55, supra. Ed.]

10 Admittedly, one of the purposes of the 30-day effective date provision is to allow agencies to 

correct errors or oversights in final regulations. See Final Report o f the Attorney General's Committee on

Administrative Procedure, Administrative Procedure in Government Agencies, S Doc. No. 8, 77th C o n g , 

1st Sess., 114-15 (1941); Sannon v. United States, 460 F Supp. 458, 467 (S D Fla. 1978) This purpose, 

however, does not suggest that agencies may make corrections, let alone withdraw rules, during the 

period between a rule’s publication and its effective date without offering public procedures or 

showing good cause for dispensing with them. Proposed corrections—or even repeals—would of 

course be amendments for purposes of § 553(b)

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Under the proposed order, the situation is analogous to the second 

possible disposition under the President’s Memorandum. The order, by 

requiring careful cost-benefit analysis of rules through the RIA process, 

would contemplate notices of proposed rulemaking on the preliminary 

RIA and a reexamination of the rule at the appropriate time. The issue 

to be decided at the time the rule is suspended indefinitely for the 

order’s process to take place is whether the rule, which has already 

been promulgated in final form, should be allowed to have interim 

effect while it is under review by the agency. We believe that this 

decision is one of “formulating, amending, or repealing a rule” that 

requires either notice and comment procedures or good cause for dispensing with them under § 553(b). Admittedly, the difference between a 

short deferral of the effectiveness of a rule and an indefinite suspension 

for reexamination is in part one of degree. But there is also a difference 

in kind: once a decision to begin the process of amending a rule is 

made, there is no longer a plausible argument that a rule that was to 

take effect is merely to be delayed for a brief period.

Notice and comment procedures on the issue of the interim effectiveness of a rule that is due to undergo reexamination under the order 

should take the following form. The agency should defer the rule’s 

effective date for a period sufficient to allow a short time for notice and 

comment, an opportunity for the agency to consider the comments and 

decide the issue of interim effectiveness, and an interval before the rule 

takes effect sufficient to meet the purposes of § 553(d).

In deciding on the interim effectiveness of final rules subject to the 

order’s procedures, the final question is whether and under what circumstances agencies will have good cause to dispense with notice and 

comment procedures. Public procedures on interim effectiveness might 

be “unnecessary, impracticable, or contrary to the public interest,” 

where the question whether there should be any rule at all was fully 

ventilated in the rule’s comment process, or where it is clear that 

interim effect could impose substantial but short-term compliance costs. 

On the other hand, notice and comment might be needed where the 

rule’s proponents had advanced substantial arguments for its early effectiveness, and where compliance costs are not likely to be wasted.

Such arguments must, of course, be assessed on a case-by-case basis. 

If the available record indicates that the costs of the rule at issue are 

not substantial and that the failure to allow the rule to become effective 

may itself be controversial, the likelihood that a court will require 

notice and public comment increases. The procedural requirements of 

the APA will, therefore, vary with the size and immediacy of the 

burdens imposed by the rule and the need for public comment on a 

decision to withdraw a final but not effective rule.

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III. Regulatory Review by Agency Heads

Section 4 of the proposed order would require agency heads to make 

express determinations that regulations they issue are authorized by law 

and are supported by the materials in the rulemaking record. These 

requirements are meant to assure agency compliance with existing legal 

principles that rules must be authorized by law, and that they should be 

adequately supported by a factual basis. Accordingly, we find no legal 

difficulty with them. In particular, they do not purport to change 

generally applicable statutory standards for judicial review of agency 

action, see 5 U.S.C. § 706, and could not have such an effect. They also 

do not purport to alter any specially applicable standards, such as those 

concerning the evidentiary standard that must be met to uphold a given 

rule, appearing in statutes governing a particular agency.

On the other hand, the section would add the significantly new 

procedural requirements that agency heads expressly determine that the 

legal and factual requisites for a rule have been met. The first requirement reflects the principle, central to administrative law, that agency 

action must be guided by the “supremacy of law.” St. Joseph Stock

Yards Co. v. United States, 298 U.S. 38, 84 (1936) (Brandeis, J.). This 

principle protects against excess of power and abusive exercise of 

power by administrators. See Final Report o f the Attorney General's

Committee on Administrative Procedure, Administrative Procedure in Government Agencies, S. Doc. No. 8, 77th Cong., 1st Sess. 76 (1941). The 

requirement that agency heads determine that a rule has “substantial 

support” in the materials before the agency means that a rule’s necessary factual basis must be found to exist. This second requirement 

should not be confused with a “substantial evidence” standard of judicial review, which could be imposed only by statute. It embodies 

Recommendation 74-4 (subpart 3) of the Administrative Conference of 

the United States, 1 CFR § 305.74.4, which urges that for a rule to be 

considered rational, it should be adequately grounded in a factual basis. 

This requirement is consistent with the approach of courts that have 

carefully reviewed agency action under the “arbitrary” and “capricious” standard of the Administrative Procedure Act, 5 U.S.C. § 706 

(2)(A). See, e.g., Ethyl Corp. v. EPA, 541 F.2d 1 (D.C. Cir.) (en banc),

cert, denied, 426 U.S. 941 (1976).

IV. Judicial Review

The order states that it is not intended to create any rights or benefits 

enforceable by a party to litigation against the United States, its agencies, or any other person. At the same time, it provides that determinations of costs and benefits, and the RIA itself, are meant to form part of 

the agency record for purposes of judicial review. The effect of this 

provision is to preclude direct judicial review of an agency’s compli67
ance with the order. The provision makes clear the President’s intention 

not to create private rights, an intention that should be controlling here. 

See Independent Meat Packers Ass’n v. Butz, 526 F.2d 228 (8th Cir. 

1975), cert, denied, 424 U.S. 966 (1976) (no judicial enforcement of 

executive order requiring consideration of inflationary impact of regulations, in part because such order had not been issued pursuant to 

delegation from Congress); Legal Aid Soc'y o f Alameda County v. Brennan, 608 F.2d 1319 (9th Cir. 1979) (judicial review available of compliance with an executive order that had been ratified by Congress). Even 

without the provision, compliance with the order would probably be 

immunized from review because the order has not been promulgated 

pursuant to a specific grant of authority from Congress to the President 

and thus lacks the “force and effect of law” concerning private parties. 

See Independent Meat Packers Ass’n v. Butz, 526 F.2d 228; National

Renderers A ss’n v. EPA, 541 F.2d 1281, 1291-92 (8th Cir. 1976); Hiatt

Grain & Feed, Inc. v. Bergland, 446 F. Supp. 457, 501-02 (D. Kan.

1978). The bar on judicial review of agency compliance with the order 

does not, of course, prohibit a court from hearing a constitutional or 

statutory attack on the legality of the order itself or of agency action 

taken pursuant to its requirements.

Because the regulatory impact analysis that will be required by the 

order will become part of the agency record for judicial review, courts 

may consider the RIA in determining whether an agency’s action under 

review is consistent with the governing statutes. This, of course, is true 

of all matters appearing in the rulemaking record.

V. Conclusion

The proposed executive order is acceptable as to form and legality.

L a r r y L. S i m m s

Acting Assistant Attorney General

Office o f Legal Counsel

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