When Congress enacts a statute, it often delegates rulemaking authority to federal agencies to implement the statute. When issuing regulations, agencies are required to follow certain procedures. The first and arguably most significant requirements of the rulemaking process were established by the Administrative Procedure Act (APA) of 1946. The APA set up the basic framework for rulemaking: agencies are required to publish a notice of rulemaking in the Federal Registe r , take comments on the proposed rule, and publish a final rule in the Federal Register . Since the passage of the APA, additional procedures have been established in various statutes, executive orders, and guidance documents. Potential additional changes to the rulemaking process have been discussed and proposed, including many proposals in the 112 th Congress. This report discusses one potential change to the rulemaking process that has been discussed over the past three decades and proposed in legislation in the 112 th Congress: extension of the requirements of Executive Order (E.O.) 12866 to the independent regulatory agencies, also known as independent regulatory commissions (hereafter referred to as IRCs). E.O. 12866 contains two major requirements: First, it requires that agencies complete cost-benefit analysis (CBA) of "economically significant" rules, considering the potential costs, benefits, and feasible alternatives to proposed and final rules. Second, the order requires centralized review of "significant" rules in the Office of Management and Budget's (OMB's) Office of Information and Regulatory Affairs (OIRA). Historically, the IRCs have been exempted from requirements for CBA and centralized review. Senator Rob Portman introduced a bill in the 112 th Congress, S. 3468 , which would authorize the President to extend to the IRCs, through the issuance of an executive order, E.O. 12866's requirements for CBA and OIRA review. If the requirements of E.O. 12866 were extended to the IRCs, there could be significant implications for those agencies. Proponents of extending the requirements argue that subjecting the IRCs to CBA requirements and OIRA review could improve the quality of regulations issued by those agencies. On the other hand, extending CBA requirements and OIRA review to the IRCs could grant OIRA (and by extension, the President) the potential authority to influence or delay rulemaking proceedings, and such a requirement could potentially decrease the independence of the IRCs. This report begins with a brief overview of E.O. 12866 and the IRCs. The report then provides a detailed discussion of the two major requirements of the order and analyzes the potential changes to the order that have been proposed in the 112 th Congress. President William Clinton issued E.O. 12866 in 1993. The executive order, which still remains in place today, replaced E.O. 12291, which was issued by President Ronald Reagan in 1981. E.O. 12291 had similar requirements for agencies to conduct CBA and send their rules to OIRA for review, but its requirement for centralized review applied to all rules, not just "significant" rules. The parts of E.O. 12866 that require agencies to complete CBA and to submit their rules to OIRA for review do not currently apply to statutorily designated "independent regulatory agencies," nor did they under President Reagan's order. The details of these two requirements are discussed more below (see sections entitled " Cost-Benefit Analysis Requirements Under Executive Order 12866 " and " OIRA Review of Regulations Under Executive Order 12866 "). The exemption of IRCs from various requirements provides them with an element of independence from presidential control. E.O. 12866 uses the definition of an independent regulatory agency established in 1980 by the Paperwork Reduction Act (PRA; 44 U.S.C. §3502(5)). The independent regulatory agencies listed are as follows: The Board of Governors of the Federal Reserve System, the Commodity Futures Trading Commission, the Consumer Product Safety Commission, the Federal Communications Commission, the Federal Deposit Insurance Corporation, the Federal Energy Regulatory Commission, the Federal Housing Finance Agency, the Federal Maritime Commission, the Federal Trade Commission, the Interstate Commerce Commission, the Mine Enforcement Safety and Health Review Commission, the National Labor Relations Board, the Nuclear Regulatory Commission, the Occupational Safety and Health Review Commission, the Postal Regulatory Commission, the Securities and Exchange Commission, the Bureau of Consumer Financial Protection, the Office of Financial Research, Office of the Comptroller of the Currency, and any other similar agency designated by statute as a Federal independent regulatory agency or commission. The current exemption for the IRCs from presidential review of agency rulemaking is one of the indicia of agency independence. Other elements of independence that provide various degrees of insulation from presidential intrusion into the budgetary, regulatory, and litigation processes are (1) "for cause" removal protections for the agency heads; (2) structural designs; (3) exemptions from OMB clearance requirements for legislative proposals, testimony, and comments; (4) authority to bypass OMB when submitting the agency's budget, or to submit the agency's budget to OMB and Congress concurrently; and (5) independent litigation authority. The remainder of this report discusses the two main requirements of E.O. 12866 in greater detail and analyzes the possible implications of extending those requirements to the IRCs. The primary cross-cutting requirement for agencies to consider costs and benefits when issuing rules is found in E.O. 12866, which requires agencies to assess costs and benefits for "significant" rules, both at the proposed rule and final rule stage. "Significant" rules are defined in the executive order as follows: Any regulatory action that is likely to result in a rule that may (1) have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities; (2) create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive order. Rules falling into the first category of this definition are considered "economically significant" rules. When issuing "economically significant" rules, Section 6(a) of E.O. 12866 requires agencies to perform a much more detailed CBA, assessing the costs, benefits, and "reasonably feasible alternatives" to the planned rule. Other provisions of E.O. 12866 also make reference to the consideration of costs and benefits during the rulemaking process for all rules, not just "significant" rules. Section 1(b)(5) requires an agency to "design its regulations in the most cost-effective manner to achieve the regulatory objective" and to "consider incentives for innovation, consistency, predictability, the costs of enforcement and compliance (to the government, regulated entities, and the public), flexibility, distributive impacts, and equity." Section 1(b)(6) requires agencies to "assess both the costs and the benefits of the intended regulation and, recognizing that some costs and benefits are difficult to quantify, propose or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify its costs." Finally, Section 1(b)(11) requires agencies to "tailor [their] regulations to impose the least burden on society," while "obtaining the regulatory objectives, taking into account, among other things, and to the extent practicable, the costs of cumulative regulations." In September 2003, OMB finalized Circular A-4 on "Regulatory Analysis," which refined and replaced an earlier OMB guidance document providing good-guidance practices to agencies for conducting their CBAs. The circular states that it was "designed to assist analysts in the regulatory agencies by defining good regulatory analysis ... and standardizing the way benefits and costs of Federal regulatory actions are measured and reported." The document provides some specific information that agencies should generally include in their analyses, such as the statutory or judicial directives that authorize the action; the underlying problem or market failure prompting the regulation; consideration of a "reasonable number" of regulatory alternatives; and both a cost-benefit analysis and a cost-effectiveness analysis. Circular A-4 remains the current OMB guidance for agencies preparing CBAs. In January 2011, President Barack Obama issued E.O. 13563 to supplement and re-emphasize the general requirements of E.O. 12866. E.O. 13563, like E.O. 12866, stressed the importance of cost-benefit considerations in the rulemaking process. Specifically, Section 1(b)(2) of E.O. 13563 encouraged agencies to "tailor [their] regulations to impose the least burden on society, consistent with obtaining regulatory objectives, taking into account, among other things, and to the extent practicable, the costs of cumulative regulations"; and to "select, in choosing among alternative regulatory approaches, those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity)." E.O. 13563 also instituted a retrospective review of regulations, under which agencies were required to "consider how best to promote retrospective analysis of rules that may be outmoded, ineffective, insufficient, or excessively burdensome, and to modify, streamline, expand, or repeal them in accordance with what has been learned." E.O. 13563 used the same definition of "agency" as E.O. 12866, thereby excluding the IRCs. However, on July 14, 2011, President Obama issued E.O. 13579, entitled "Regulation and Independent Regulatory Agencies." In that order, President Obama encouraged the IRCs to voluntarily comply with the provisions of E.O. 13563, including the retrospective reviews of regulations as well as other general considerations, including "economic growth, innovation, competitiveness, and job creation." The IRCs are exempt from many of the analytical requirements and guidance documents that are applicable to executive agencies, including E.O. 12866, E.O. 13563, and OMB Circular A-4. However, the IRCs may be required to conduct CBA or other regulatory analyses under cross-cutting statutes, such as the Regulatory Flexibility Act of 1980 (RFA), or under the underlying statutes that provide them with rulemaking authority. In addition, the IRCs may conduct CBA or similar analyses as part of their internal rulemaking process, even if they are not statutorily or otherwise required to do so. The following section summarizes select statutory provisions that require the IRCs to analyze the potential effects of their rules. This section covers nine IRCs: the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Consumer Financial Protection Bureau (CFPB), the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve, the Nuclear Regulatory Commission (NRC), the National Labor Relations Board (NLRB), and the Consumer Product Safety Commission (CPSC). The following statutes contain analytical requirements that apply to all agencies of the federal government, including the IRCs: the National Environmental Policy Act (NEPA) of 1969 requires federal agencies to provide a detailed environmental impact statement for all major federal actions that will significantly affect the quality of the human environment; the RFA requires all federal agencies to assess the impact of their proposed regulations on "small entities" (e.g., small businesses, small governmental jurisdictions, and certain small not-for-profit organizations) and conduct a "regulatory flexibility analysis" at the time certain proposed and final rules are issued; and the PRA requires all federal agencies to assess and minimize the paperwork burden for individuals, small businesses, and others resulting from the collection of information (from 10 or more nonfederal persons) by or for the federal government. Additionally, the IRCs may be subject to analytical requirements contained within the underlying statutes that provide them with rulemaking authority. This section provides select examples of statutory agency-specific requirements. Securities and Exchange Commission. The Securities Exchange Act of 1934 (15 U.S.C. §§78a et seq .), the National Securities Markets Improvement Act of 1996 ( P.L. 104-290 ; 11 Stat. 3416), and the Investment Company Act of 1940 (15 U.S.C. §§80a-1 et seq .) each provide the SEC with authority to promulgate rules, and each has provisions requiring the SEC to consider whether a proposed regulatory action will "promote efficiency, competition, and capital formation." The Securities Exchange Act states that The Commission and the Secretary of the Treasury, in making rules and regulations pursuant to any provisions of this chapter, shall consider among other matters the impact any such rule or regulation would have on competition. The Commission and the Secretary of the Treasury shall not adopt any such rule or regulation which would impose a burden on competition not necessary or appropriate in furtherance of the purposes of this chapter. The Commission and the Secretary of the Treasury shall include in the statement of basis and purpose incorporated in any rule or regulation adopted under this chapter, the reasons for the Commission's or the Secretary's determination that any burden on competition imposed by such rule or regulation is necessary or appropriate in furtherance of the purposes of this chapter. The National Securities Markets Improvement Act of 1996 requires the SEC to consider whether an action "will promote efficiency, competition, and capital formation" whenever it is "engaged in rulemaking and is required to consider or determine whether an action is necessary or appropriate in the public interest." Under the Investment Company Act of 1940, when engaging in rulemaking pursuant to the act, the SEC is required to consider (1) "whether an action is consistent with the public interest"; (2) "the protection of investors"; and (3) "whether the action will promote efficiency, competition, and capital formation." In 2011, in Business Roundtable v. SEC , the D.C. Circuit vacated an SEC rule that would have required public companies to disclose information to shareholders regarding shareholder-nominated candidates for board of director positions. The court noted that the SEC has an obligation to "determine as best it can the economic implications of the rule" and ultimately vacated the rule, finding the SEC's action arbitrary and capricious under the Administrative Procedure Act (5 U.S.C. §§551 et seq .). Commodity Futures Trading Commission. The Commodity Exchange Act (7 U.S.C. §§1 et seq .) provides the CFTC with rulemaking authority and requires the CFTC to consider costs and benefits before issuing certain regulations. Section 15(a) of the act states the following: Before promulgating a regulation under this chapter ... the Commission shall consider the costs and benefits of the action of the Commission. The costs and benefits of the proposed Commission action shall be evaluated in light of - (A) considerations of protection of market participants and the public; (B) considerations of the efficiency, competitiveness, and financial integrity of futures markets; (C) considerations of price discovery; (D) considerations of sound risk management practices; and (E) other public interest considerations. Title IV of the Dodd-Frank Wall Street Reform and Consumer Protection Act ( P.L. 111-203 , hereafter the Dodd-Frank Act) amended certain provisions of the Commodity Exchange Act and expanded the rulemaking responsibilities of the CFTC. According to the CFTC Office of the Inspector General, in light of its existing analytical requirements, the CFTC Office of General Counsel and Office of Chief Economist created a template for cost-benefit analysis processes that should be followed when proposing rules under the Dodd-Frank Act. The template requires the CFTC to consider, but not monetize or quantify, costs and benefits. The template also allows the CFTC to use discretion to determine that, notwithstanding its costs, a particular rule is necessary or appropriate to protect the public interest. Consumer Financial Protection Bureau. Title X of the Dodd-Frank Act created the CFPB and provided it with the authority to "administer, enforce, and otherwise implement the provisions of Federal consumer financial law." The act also established certain standards of rulemaking that the CFPB must adhere to when issuing rules. Specifically, the Dodd-Frank Act states that the Bureau shall consider - (i) the potential benefits and costs to consumers and covered persons, including the potential reduction of access by consumers to consumer financial products or services resulting from such rule; and (ii) the impact of proposed rules on covered persons, as described in section 1026, and the impact on consumers in rural areas. Therefore, it appears that the CFPB is required to consider potential costs and benefits before issuing certain rules, but it is unclear how much detail would be required in the analysis. Federal Deposit Insurance Corporation. The FDIC has rulemaking authority under Section 209 of the Dodd-Frank Act. While some provisions of the Dodd-Frank Act require consideration of certain benefits and costs, it does not appear that the FDIC would be required to conduct such analyses under its rulemaking authority. The FDIC is also provided rulemaking authority by the Riegle Community Development and Regulatory Improvement Act (Riegle Community Act, P.L. 103-325 ; 108 Stat. 2160). The Riegle Community Act requires federal banking agencies, including the FDIC, to consider the burden and benefits their regulations will have on depository institutions. A report prepared by the FDIC Office of the Inspector General noted that Section 302 of the Riegle Community Act states, In determining the effective date and administrative compliance requirements for new regulations that impose additional reporting, disclosure, or other requirements on insured depository institutions, each Federal banking agency shall consider, consistent with the principles of safety and soundness and the public interest - (1) any administrative burdens that such regulations would place on depository institutions, including small depository institutions and customers of depository institutions; and (2) the benefits of such regulations. Therefore, it appears that the FDIC is required to consider the potential benefits and administrative burden prior to issuing certain rules. However, based on the language of this statutory provision, the level of detail that would be required in the analysis is not clear. Office of the Comptroller of the Currency. Section 315 of the Dodd-Frank Act amended the PRA and designated the OCC as an IRC. Previously, the OCC had been part of the Department of the Treasury, and therefore was subject to E.O. 12866 and OMB Circular A-4. As a listed IRC, the OCC is no longer subject to those requirements. As a federal banking agency (as designated by 12 U.S.C. §1813), however, the OCC is subject to the same analytical requirements of the Riegle Community Act as the FDIC. Board of Governors of the Federal Reserve System. The Board of Governors of the Federal Reserve System (hereafter referred to as the Board) has rulemaking authority under multiple statutes, including the Federal Reserve Act (12 U.S.C. §§221 et seq. ) and the Bank Holding Company Act of 1956 (12 U.S.C. §§1841 et seq. ). According to the Office of Inspector General for the Board, statutes related to the Board's rulemaking authority "generally do not require economic analysis as part of the agency's rulemaking activities." However, as a federal banking agency, the Board is subject to the same analytical requirements of the Riegle Community Act as the FDIC and the OCC. Nuclear Regulatory Commission. The NRC is provided rulemaking authority under the Atomic Energy Act of 1954 (42 U.S.C. §§2201 et seq .) as well as the Energy Reorganization Act of 1974 (42 U.S.C. §5841). The Atomic Energy Act, as amended, provides the NRC with the authority to "establish by rule, regulation, or order, such standards and instructions to govern the possession and use of special nuclear material, source material, and byproduct material as the Commission may deem necessary or desirable to promote the common defense and security or to protect health or to minimize danger to life or property." According to an NRC issue paper, "courts have interpreted the AEA to mean that costs must not be considered by the NRC when it determines that a given regulatory action is necessary for adequate protection." However, the act also provides the NRC with the authority to adopt regulations that go beyond "adequate" protection and the NRC's internal rulemaking procedures permit more extensive CBA of those rules. For example, the NRC is subject to regulatory analysis requirements under the "backfit rule," which establishes procedures for the development of modifications to power reactors and/or selected nuclear materials facilities that are licensed by the NRC. Under the backfit rule, the NRC must perform detailed cost-benefit analysis of all proposed modifications to nuclear facilities that go beyond "adequate" protection and provide a "substantial increase in the overall protection of public health and safety." It appears that the NRC must adopt the regulations it determines are necessary to adequately protect the public from the risks posed by the materials and facilities it is regulating, notwithstanding the cost. However, it seems that the NRC also conducts more extensive CBA of regulations that go beyond "adequate" protection; and according to the NRC's FY2011 Regulatory Plan, the NRC "routinely conducts comprehensive regulatory analyses that examine the costs and benefits of contemplated regulations" based on "internal procedures and programs to ensure that it imposes only necessary requirements on its licensees." National Labor Relations Board. Generally, NLRB rules are promulgated under the authority in Section 6 of the National Labor Relations Act (29 U.S.C. §156), which does not mention a requirement to conduct cost-benefit analysis as part of the NLRB rulemaking process. A preliminary examination of NLRB rules submitted to GAO over the past year found that only one was considered a "major" rule. For this rule, the NLRB estimated costs but not benefits. Consumer Product Safety Commission. The CPSC is provided rulemaking authority under at least nine statutes, including the Consumer Product Safety Act (CPSA), the Federal Hazardous Substances Act (FHSA), the Child Safety Protection Act (CSPA), and the Poison Prevention Packaging Act (PPPA). These statutes contain varying degrees of requirements for CBA and other regulatory analyses. For example, the CPSA requires the CPSC to conduct a preliminary regulatory analysis prior to publication of a proposed rule, which must be published in the Federal Register with the proposed rule. The regulatory analysis must contain, in part, a preliminary description of the potential benefits and potential costs of the proposed rule, including any benefits or costs that cannot be quantified in monetary terms and.... a description of any reasonable alternatives to the proposed rule, together with a summary description of their potential costs and benefits. In contrast, the PPPA states that the CPSC should consider the "reasonableness" of packaging standards of specified household substances, but it specifically states the CPSC is not required to conduct cost benefit analysis. "Nothing in this Act shall be construed to require the Consumer Product Safety Commission, in establishing a standard under this section, to prepare a comparison of the costs that would be incurred in complying with such standard with the benefits of such standard." In sum, the IRCs may be required to conduct some form of CBA or other regulatory analyses of certain rules under cross-cutting statutes or the underlying statutes that provide them with rulemaking authority. In some cases, the analysis required may be less rigorous or less detailed than that which would be required under E.O. 12866 and Circular A-4. The IRCs may also conduct CBA or similar analyses as part of their internal rulemaking process, even if they are not statutorily or otherwise required to do so. Finally, the IRCs may be exempted or statutorily prohibited from conducting CBA as part of their rulemaking process. Table 1 summarizes the cost-benefit analyses of "major" rules that were conducted by selected IRCs in FY2010, FY2011, and FY2012. In some cases, the IRCs "monetized" or in other ways quantified costs, benefits, or both. According to an OMB report, however, the IRCs are more likely to discuss and consider costs and benefits without monetizing or quantifying them. In FY2010, FY2011, and FY2012, a total of 57 "major" rules were promulgated by the nine IRCs included in this analysis. Of those, 43 "major" rules contained some information on benefits or costs, though only 26 included monetized estimates of costs. None of the "major" rules included monetized estimates of benefits. The SEC issued 25 "major" rules, more than any other IRC. The SEC provided information on costs and benefits for all but one rule. Fourteen of the 25 rules promulgated by the SEC monetized costs but not benefits. The CFTC promulgated 15 "major" rules. The CFTC monetized costs for five of their "major" rules, and provided some information on costs and benefits for 12 rules. The Board of Governors of the Federal Reserve promulgated 12 rules, two of which monetized costs. The remaining IRCs each issued fewer than five "major" rules. The OCC and NRC each issued three "major" rules. The NRC monetized costs for each of its rules, while the OCC monetized costs for two rules. The CFPB and NLRB each issued one "major" rule. The NRLB rule monetized costs. The CFPB did not monetize costs, but did include some information on costs and benefits. There are several possible reasons why the cost-benefit analysis currently conducted by IRCs may not be as rigorous as the full analytical requirements contained in E.O. 12866 and Circular A-4. First, the statutory provisions that require the IRCs to conduct cost-benefit analysis vary in scope, and the analysis they require may be less rigorous than that which would be required under E.O. 12866. As shown previously, some agency-specific statutes require cost-benefit analysis, including monetized or quantified estimates of costs and benefits whenever possible. Others require consideration of potential costs and benefits, but do not require quantified or monetized estimates. Others require little or no analysis at all. In addition, the internal rulemaking practices of each IRC vary in scope. Some may require or encourage staff to follow the cost-benefit procedures in Circular A-4. Other IRCs may integrate some, but not all, of OMB's guidance into their internal rulemaking procedures. Generally, the nature of the rules being promulgated by the IRCs may make it difficult to conduct rigorous, quantitative, cost-benefit analysis. Some rules, for example, may involve costs and/or benefits that are more difficult for the agency to quantify or monetize. In such cases, E.O. 12866 and Circular A-4 instruct covered agencies to conduct cost-effectiveness analysis (CEA), which involves qualitative discussion of costs and benefits, as opposed to the more rigorous cost-benefit analysis, which typically requires monetized estimates of both costs and benefits. Finally, the resources and capacity to conduct cost-benefit analysis may vary from agency to agency. For example, concerns have been raised over whether agencies have a sufficient number of staff who are qualified to perform extensive, quantitative cost-benefit analysis. This, in turn, may be impacted by the number of rules promulgated by the agency each year; particularly those rules that are subject to cross-cutting or statutory analytical requirements. As shown in Table 1 , the number of "major" rules promulgated each year varies from agency to agency. The SEC, which issued highest number of rules between FY2010 and FY2012, created the Division of Risk, Strategy, and Financial Innovation (Risk Fin) in 2009 to enhance its capability to conduct economic analysis as part of their rulemaking process. However, comparatively smaller agencies and agencies that promulgate fewer rules may not have a sufficient number of staff with the expertise to conduct extensive quantitative cost-benefit analysis. The main argument in favor of extending E.O. 12866's CBA requirements to the IRCs is generally that such review would encourage agencies to produce higher-quality rules. Proponents have argued that through the executive orders establishing such review, Presidents have encouraged the executive branch agencies to consider more carefully the burdens associated with regulations; extending the requirements to the IRCs may bring those considerations to those agencies as well. A previously mentioned proposal in the 112 th Congress, S. 3468 , would authorize the President to extend CBA requirements through the issuance of an executive order. Some advocates for extending the executive order's CBA requirements maintain that it may lead the agencies to produce higher quality rules. For example, former OIRA Administrator Sally Katzen has suggested that extending the requirements for CBAs to the IRCs and having OIRA review of those CBAs would provide incentives to agencies to produce high-quality analyses, since "nothing focuses the mind like knowing that someone will be reading" their analyses. Susan Dudley, another former OIRA administrator, expressed disappointment in congressional testimony that President Obama has not extended the requirement for analytical requirements or OIRA review to the IRCs. Among the reasons she identified for this concern was that most financial regulations, including regulations issued by the new Consumer Financial Protection Bureau, will not be "constrained by the sound principles and procedures outlined by the President." Indeed, many of the regulations that have been and will be issued pursuant to the Dodd-Frank Act will be issued by IRCs. It is not entirely clear how and whether extending E.O. 12866's CBA requirements to the IRCs would change their current practices, given that many of the IRCs already have statutory requirements for various forms of CBA, even if they are not subject to E.O. 12866. To the extent that the agencies are already fulfilling statutory requirements for CBA, extending the E.O.'s requirements may create duplicative requirements for some of those agencies. The following section of this report examines more closely the potential effects of extending CBA requirements to the IRCs. If enacted, S. 3468 would authorize the President to extend, through executive order, the requirements for CBA that are currently found in E.O. 12866. The potential effects that this change may have on the CBAs conducted by each IRC would vary depending on (1) the agency's current analytical practices, (2) the agency's mandatory and discretionary rulemaking responsibilities, (3) the number of "significant" and "economically significant" rules the agency issues each year, and (4) the agency's analytical resources, such as the technical expertise of staff who are responsible for conducting their cost-benefit analysis. The effects of S. 3468 may be minimal for IRCs that currently have cost-benefit analysis procedures similar to those of E.O. 12866 and Circular A-4. For example, a 2011 report by the Office of the Inspector General (OIG) of the SEC stated that "the Commission's current rulemaking procedures are closely aligned with the requirements of E.O. 12866, E.O. 13563, and OMB Circular A-4." The OIG noted that the analysis conducted by the SEC did not always consider the costs and benefits of regulatory alternatives, but the SEC sought comments on the costs and benefits of alternatives to their proposed rules whenever possible. Similarly, the report by the OIG of the OCC noted that, prior to adoption of the Dodd-Frank Act, the OCC had been part of the Treasury Department and had been subject to E.O. 12866 as well as other OMB guidance. According to the OIG, "accordingly, the requirements for economic analysis defined in OCC's rulemaking guide generally mirror those of EO 12866 and OMB Circular A-4." For IRCs with current analytical practices similar to those of E.O. 12866 and Circular A-4, the additional requirements that could be imposed under S. 3468 may already be met by the analyses they are currently conducting. For agencies whose current procedures are less rigorous than those of E.O. 12866 and Circular A-4, the effects of S. 3468 may depend on the other three factors listed above. For example, an independent agency with fewer mandatory or discretionary rulemaking responsibilities that issues relatively fewer "significant" rules each year may find the additional requirements of S. 3468 minimally burdensome, even if their current cost-benefit practices are less rigorous. Those agencies may also find that their current staff and other analytical resources will remain adequate, even if they are subject to the executive order and OMB guidance. Conversely, the additional cost-benefit requirements may be more burdensome for agencies with relatively greater regulatory responsibilities and for agencies with recently expanded regulatory responsibilities. These agencies may not have the staff with the technical expertise necessary to conduct cost-benefit analysis that is more extensive than their current requirements. For example, in light of the increased regulatory responsibilities some IRCs face pursuant to the Dodd-Frank Act, some have suggested that IRCs should consult OIRA when conducting cost-benefit analyses. In May 2012, Commissioner O'Malia announced that the CFTC had recently signed a Memorandum of Understanding with OIRA to obtain technical expertise when conducting regulatory analyses of rules it plans to issue pursuant to the Dodd-Frank Act . The potential effects of S. 3468 may also be mitigated for IRCs whose rulemaking activities would be exempt from some or all of the requirements of E.O. 12866. Under E.O. 12866, agencies are exempt from certain analytical requirements if (1) measures of costs and benefits are difficult to quantify or monetize, (2) the rule is being promulgated under an emergency situation, or (3) the agency is under a statutory or judicially imposed deadline that makes full compliance with the executive order impossible. For example, the report from the OIG of the Board of Governors of the Federal Reserve noted that the executive orders provide agencies with exemptions to the cost-benefit analysis requirements in "emergency situations or when an agency is obligated by law to act more quickly than normal review procedures allow." The report did not specifically state whether, or how often, the Federal Reserve might qualify for such exemptions. In addition to the debate over the appropriate role for the use of cost-benefit analysis in the IRCs, a broader debate over the value of CBA has also taken place over the past several decades. On one hand, former OIRA Administrator Cass Sunstein, an administrative law professor, has been a strong advocate of CBA, and he has written many articles and books examining its rise and defending its use. In his book The Cost-Benefit State: The Future of Regulatory Protection, written prior to his tenure at OIRA, Sunstein examined the increase in use and requirements for CBA, arguing that the use of CBA can lead to a much stronger regulatory system and better regulations in general. Throughout the book, Sunstein made many arguments in favor of the use of CBA. For example, he suggested that CBA can be used not only to ensure that the benefits of regulation justify the costs and that "government action is worthwhile," but that it can serve as a check against interest group influence over regulations. Interest groups, according to Sunstein, are capable of "fending off desirable regulation or pressing for regulation when the argument on its behalf is fragile. Here CBA, taken as an input into decisions, can protect democratic processes by exposing an account of consequences to public view." Similarly, some economists and others have argued that CBA "can be a powerful tool in informing regulatory decisions. Regulation uses a sizable amount of resources, so it is relevant to ask whether the benefits of regulation are worth the costs" and that "centralized oversight can help with interagency coordination, setting priorities, and implementing most cost-effective regulation." On the other hand, some have argued that the use of CBA does not necessarily improve agencies' regulatory decisions. For example, one scholar testified before the House Judiciary Committee in 2011 that cost-benefit analysis is itself a flawed technique for distinguishing between useful and counterproductive regulations … the existing regulatory process already allows those affected by regulations to identify flaws in agency regulatory proposals and affords both regulated entities and agencies opportunities to fix problems such as overly costly or unfair regulation. The witness stated further that while estimates of costs and benefits can be useful in regulatory decision making, such estimates are full of uncertainty and should not be the sole basis for determining regulatory outcomes. He suggested that agencies can use comment periods, as enforced by the courts under the Administrative Procedure Act, to obtain information and identify the best regulatory alternatives. Additionally, CBA requirements may have the potential to slow down rulemaking, which may at times be contrary to the public interest. For example, the SEC has come under criticism recently because the pace of issuing rules appears to have slowed, particularly rules that are required pursuant to the Dodd-Frank Act. One reason cited for the slow pace of rules is that the SEC was attempting to fulfill its statutory requirements for CBA, particularly after a court recently struck down one of the Dodd-Frank Act's rules for having an inadequate analysis in the Business Roundtable case mentioned earlier. A related hesitation about the use of CBA is that adding further requirements to a rulemaking process that is viewed by some as already too burdensome and time-consuming could put an unnecessary strain on agencies to meet statutory and/or judicial deadlines and other requirements. Another concern that has been raised over the use of CBA is that it may be more difficult to estimate costs and benefits stemming from certain types of rules—particularly for those in which costs and/or benefits may be difficult to quantify or monetize. This criticism has often been voiced in response to proposals that would require banking agencies to measure costs and benefits, where the potential benefits involve things such as lowering financial risk or reducing fraud in securities markets. In addition, one recently issued report stated that costs tend to be easier to monetize than benefits, especially when dealing with market risk, which may cause costs to be overestimated in general. In the early 1990s, administrative law scholars began to write about the "ossification" of the rulemaking process. The argument behind the "ossification" thesis states that agencies are subject to so many requirements in the rulemaking process that they generally take longer to issue rules and may require more resources to do so, resulting in uncertainty for the agency or agencies involved and for the regulated industry. One unintended consequence is that as the number of rulemaking requirements increases, agencies may have more incentive to seek out other vehicles for policy implementation, such as through the issuance of guidance documents and other less formalized means of executing policy changes. Proponents of the ossification thesis may argue that if Congress or the President institutes additional CBA requirements for the IRCs, those agencies may attempt to find other less participatory and transparent means for implementing policy. In other words, the ossification of rulemaking can incentivize agencies to preserve their resources by avoiding the rulemaking process and instead taking other administrative actions, such as the issuance of guidance documents and non-legislative rules. On the other hand, President George W. Bush's OIRA Administrator John Graham testified before Congress that his experience and a review of the literature demonstrates that the ossification theory may be exaggerated, and that agencies continue to issue regulations in a timely manner, despite the numerous procedural and judicial requirements. Some academic studies have also called into question the ossification thesis. One study, for example, found that there was little evidence that additional procedural requirements cause substantial delay in rulemaking. The second major requirement of E.O. 12866, in addition to the requirement for agencies to conduct CBAs for "economically significant" rules, is centralized OIRA review of regulations. Under the order, agencies are required to submit proposed and final "significant" regulations to OIRA, at which time OIRA has up to 90 days to complete its review. During the review process, OIRA examines each regulation to ensure that the agency followed the principles and procedures outlined in E.O. 12866, including the applicable requirements for conducting CBA, and that the regulation is consistent with the policy preferences of the President. As former OIRA Administrator nominee James Blumstein discussed in an article on centralized regulatory review, E.O. 12866 made very clear that one of its main objectives was to make agency regulations consistent with presidential policy. According to Blumstein, this was illustrated by the frequent usage of the phrase "the President's priorities," which appears ten times in the order. E.O. 12866's requirements for OIRA review of "significant" regulations supplanted and somewhat scaled back the requirements of President Reagan's E.O. 12291, which required that agencies submit all proposed and final rules to OIRA for review. Since President Reagan issued E.O. 12291, scholars of the administrative process have expressed both support for and concern over OIRA's role, and by extension, the role of the President, in the rulemaking process. Some of this discussion, especially in recent years, has focused on the issue of whether rules by the IRCs should be subjected to OIRA review. S. 3468 would authorize the President to extend the requirements for OIRA review to the IRCs. Many administrative law scholars and other observers of the rulemaking process have expressed support for OIRA review, and some have spoken directly in support of extending the requirement for review to the IRCs. Much of this support for OIRA review relies on the underlying premise that increased presidential control, through OIRA review, of rulemaking could improve the both rulemaking process within agencies and the quality of the regulations themselves. Sally Katzen has suggested that centralized review of regulations "facilitat[es] political accountability (the President takes the credit and gets the blame for what his agencies decide)" and can "enhance regulatory efficacy (that is, decisions that take into account the multitude of disciplines and the multitude of perspectives that can and should be brought to bear in solving problems in our complex and interdependent society)." Others have suggested that the White House is in a unique position to identify rules under development that may conflict with a rule or rules under development in another agency; centralized oversight may provide a mechanism for coordination between and among agencies. Some organizations have also expressed support for the extension of OIRA review to the IRCs. The Administrative Conference of the United States (ACUS) has supported presidential review of IRC rulemaking. In 1988, ACUS expressed its opinion that presidential review should apply generally to federal rulemaking: "As a matter of principle, presidential review of rulemaking should apply to independent regulatory agencies to the same extent it applies to the rulemaking of Executive Branch departments and other agencies." The American Bar Association (ABA) has also endorsed extending presidential review to the IRCs. In 1990, the ABA House of Delegates adopted a recommendation endorsing ACUS's guidelines President Reagan's executive orders establishing presidential review of agency rulemaking. The resolution declared that "presidential review should apply generally to all informal federal rulemaking, including that by independent regulatory agencies." In 2009, the Section of Administrative Law and Regulatory Practice of the ABA provided comments to OIRA regarding presidential supervision of agency rulemaking and declared that the "White House should extend Executive oversight to independent agencies." In October 2011, the ABA also submitted comments on H.R. 3010 , the Regulatory Accountability Act of 2011 (RAA). Various provisions of the RAA would have extended OIRA oversight to IRC rulemaking. The ABA declared that it "strongly support[s] this feature of the bill" and noted that it has "long favored extension of the oversight orders to independent agency rulemaking." While many administrative law scholars and other students of the regulatory process support the extension of some OIRA review of regulations to the IRCs, other individuals and organizations have expressed hesitation or opposition. Many of the criticisms echo those that arose immediately following the establishment of centralized OIRA review under President Reagan in 1981. The main concerns of critics of Reagan's initial decision to establish centralized OIRA review of regulations were two-fold. First, some critics felt that OIRA review was a mechanism through which President Reagan would institute a deregulatory agenda. However, that concern has largely receded, in part because every President since Reagan has continued the practice of OIRA review. Second, critics charged that Reagan was asserting too much power, potentially violating the U.S. Constitution's separation of powers doctrine by asserting too much control over executive agencies' regulations. That objection has also largely receded since the 1980s. However, a similar concern has recently been raised over the possible extension of E.O. 12866's requirements to the IRCs, which have been considered at times to be quasi-legislative in function. Because the IRCs generally possess elements of independence such as "for cause" removal protection for their commission members and agency heads, it has been widely interpreted that Congress intended to insulate the agencies from presidential control. Perhaps the most primary current concern about the possible extension of presidential review to the IRCs is that such a practice could compromise the independence of those agencies, and that it may give the President an inappropriate amount of power or influence over the rulemaking decisions of the IRCs. Because OIRA is part of OMB and is, by extension, an agent of the President, the concern is that subjecting regulations to OIRA review may politicize the rulemaking process. As explained by Katzen and others, "past presidents have been reluctant to extend OIRA's role to the IRCs out of deference to Congress." Sunstein has also written in strong support of presidential review of regulations. In one article, for example, Sunstein and administrative law scholar Peter Strauss argued that "time has not undermined the ABA's conclusion in Roads to Reform that greater presidential control over the regulatory process is desirable" and that there was a "growing professional consensus" on the matter. Strauss and Sunstein identified three factors in support of OIRA review: First, the President is in a good position to centralize and coordinate the regulatory process…. Second, the President is electorally accountable…. Third, the President, by virtue of his accountability and capacity for centralization, is able to energize and direct regulatory policy in a way that would be impossible if that policy were to be set exclusively by administrative officials. Based upon those three premises, Strauss and Sunstein argued that OIRA review should be expanded to the IRCs: From the standpoint of sound regulatory policy, fashioned in a process of informal rulemaking, we believe that there is no meaningful difference between the "independent" agencies and those agencies to which the executive orders are currently applicable. The two categories of agencies engage in regulatory activities that are, from a functional standpoint, indistinguishable. Indeed, often those activities concern the same or similar subject areas; consider the overlapping work of the Department of Justice and the Federal Trade Commission in the area of antitrust. The same considerations that justify a coordinating presidential role with respect to "executive" agencies apply with full force to those characterized as "independent." For these reasons, we believe that Executive Orders 12291 and 12498 should be applied to the latter set of agencies. Were centralized OIRA review of regulations instituted, the question arises as to what the consequences of that review should be. Many scholars have offered suggestions as to how to extend the requirements and protect the independence of the agencies by limiting the ability of OIRA to stop an IRC from issuing a rule. For example, Katzen has said that presidential review should be extended to the IRCs, but it should be done cautiously: While the way the Executive Branch agencies and IRCs conduct rulemaking is for all practical purposes the same, the differences between the two types of agencies in terms of their structure and their relationship to the President suggests that the review process of the "enforcement" of any requirement for economic analysis should not—possibly, cannot—be the same without compromising the independence of the IRCs when they do not acquiesce in OIRA's assessment. In a 2002 article, two administrative law scholars suggested that while subjecting IRCs to OIRA review would be a beneficial change to the nation's regulatory system, None of this suggests that the President, or OIRA, should be permitted to displace the decisions of the independent regulatory agencies. But it does suggest that a supervisory rule, leaving the ultimate decision to those agencies, would be entirely acceptable. To those who are skeptical of this conclusion, it might make sense to create a special, weaker system of oversight for the independent agencies, limited to procedural matters (and hence allowing no room for return letters). But we think that it would be desirable to keep a single system in place for all agencies, retaining the idea that if an independent agency ultimately seeks to issue a regulation notwithstanding OIRA objection, it is entitled to do so. The establishment of limited OIRA oversight of agency CBAs, through means such as allowing non-binding feedback from OIRA that can only be advisory, may assuage some concerns, particularly if the authority is clearly delineated. This appears to be the approach taken by sponsors of S. 3468 . If enacted, the bill would authorize the President to issue an executive order requiring IRCs to submit their rules to OIRA review. OIRA would have the opportunity to provide a non-binding statement assessing the agency's compliance with the relevant CBA requirements. The statement would be placed into the administrative record for the rule and could be reviewed by a court if the rule, once promulgated, were ever to be challenged. OIRA would not have the authority to stop an IRC from issuing a rule with which the President does not agree. Furthermore, the bill explicitly states that compliance or noncompliance with the executive order's requirements for CBA or OIRA review would not be subject to judicial review. Another question that arises is whether it is appropriate for the President to assert a requirement for OIRA review, as the past several presidents have clearly been hesitant to do, or whether it would be more appropriate for Congress to institute centralized review. Katzen has suggested that while Presidents have been reluctant to extend OIRA's influence over the IRCs out of deference to Congress and over concerns about the independence of those agencies, congressional authorization of such an extension would "go a long way to ameliorate any concerns in that regard." Through enacting a statutory requirement or authorization for OIRA review of rules and/or CBAs, Congress would be giving its explicit approval. In a similar argument about the desirability for congressional authorization of the President to make such a change, one administrative law scholar said in testimony before Congress that Presidents have not brought the commissions fully into the tent of their executive orders, on my understanding, only because they fear that the political costs to their relationship with Congress would exceed the benefits of their doing so. In the Paperwork Reduction Act, Congress can be thought to have drawn that line. You can, and perhaps should, erase it. While the main criticism of the potential of subjecting IRCs to OIRA review is that the independence of the agencies could be compromised, other criticisms have been raised as well. A separate issue that has at times frustrated critics of OIRA review is that the OIRA review process may actually favor the interests of industry. Immediately after the issuance of E.O. 12291, critics expressed apprehension that OIRA review would serve as a "conduit" for private industry's interests. Some studies and media reports have suggested that industry plays a significant role in the outcome of regulations. The extension of that argument would suggest that OIRA could potentially serve as another access point for industry to influence rulemaking at the IRCs. A final concern that has been raised over the idea of subjecting IRC rules to OIRA review is that OIRA may lack the technical expertise that is often considered to be a strength of regulatory agencies, and that increasing the number of regulations to come under OIRA's purview could put a strain on its resources. Regulatory agencies have individuals who become subject matter experts in very narrow areas in which they regulate. Given the size and scope of OIRA's responsibilities, officials at OIRA tend to be issue generalists, not necessarily specialists. On the other hand, OIRA may not have substantive expertise in a particular regulatory field, but its general understanding and focus on regulations makes employees at OIRA properly suited to distinguish between regulations that "may lead to unintended and undesirable consequences." While S. 3468 would authorize the President to make the two changes discussed and analyzed above, there are additional points worth emphasizing. The scope of the rules that could be covered by an executive order issued pursuant to S. 3468 is slightly different that the scope of what E.O. 12866 currently covers. The bill has a narrower definition for "significant" rules. The definition of "significant" in S. 3468 omits two categories that are included in the definition of "significant" in E.O. 12866. Those categories are rules that "materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof;" or rules that "raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive order." In other words, rules that fall into those categories that are issued by IRCs would not be authorized by S. 3468 to be subject to OIRA review. However, the definition of "rule" in S. 3468 is broader than the definition of "rule" in E.O. 12866, and could possibly include some guidance documents. S. 3468 references the definition of a rule as defined in Section 551 of title 5 (the Administrative Procedure Act), rather than the definition used in 553, which is the section that defines "rule" for the purposes of notice and comment requirements. Furthermore, as mentioned above, the bill clearly states that the compliance or noncompliance of an IRC with the requirements of an executive order issued pursuant to the bill could not be subject to judicial review. The potential consequences of what could occur if an IRC and OIRA disagree on the analysis or substance of a particular rule also are unclear.

Summary: When issuing regulations that have the full force and effect of law, agencies are required to follow certain procedures. The Administrative Procedure Act (APA) of 1946 set up the basic framework for rulemaking: agencies are required to publish a notice of rulemaking in the Federal Register, take comments on the proposed rule, and publish a final rule in the Federal Register. Since the passage of the APA, additional procedures have been established in various statutes, executive orders, and guidance documents. One potential change to the rulemaking process that has been discussed over the past three decades and proposed in legislation in the 112th Congress is the extension of the requirements of Executive Order (E.O.) 12866 to the independent regulatory agencies, also known as independent regulatory commissions (hereafter referred to as IRCs). E.O. 12866 contains two major requirements: first, it requires that agencies complete cost-benefit analysis (CBA) of "economically significant" rules, considering the potential costs, benefits, and feasible alternatives to proposed and final rules. Second, the order requires centralized review of "significant" rules in the Office of Management and Budget's (OMB's) Office of Information and Regulatory Affairs (OIRA). Historically, the IRCs have been exempted from requirements for CBA and centralized review. Senator Rob Portman introduced a bill in the 112th Congress, S. 3468, that would authorize the President to extend to the IRCs, by executive order, E.O. 12866's requirements for CBA and OIRA review. If the requirements of E.O. 12866 were extended to the IRCs, there could be significant implications for those agencies. Potential Extension of CBA Requirements. Proponents of extending the requirements argue that subjecting the IRCs to CBA requirements and OIRA review could improve the quality of regulations issued by those agencies. On the other hand, extending CBA requirements and OIRA review to the IRCs could grant OIRA (and by extension, the President) the potential authority to influence or delay rulemaking proceedings, and such a requirement could potentially decrease the independence of the IRCs. The IRCs with fewer regulatory responsibilities that issue relatively fewer "significant" rules each year may find the additional requirements of S. 3468 minimally burdensome, even if their current cost-benefit practices are not as rigorous as what would be required under E.O. 12866. Conversely, the IRCs with greater regulatory responsibilities or the IRCs with recently expanded regulatory responsibilities may find the additional CBA requirements more burdensome. It is also possible that some IRCs may not have the staff with the technical expertise necessary to conduct cost-benefit analysis that is more extensive than their current requirements. Potential Extension of OIRA Review. The second major element of E.O. 12866 is OIRA review of "significant" regulations. During the review process, OIRA examines each regulation to ensure that the agency followed the principles and procedures outlined in E.O. 12866, including the applicable requirements for conducting CBA, and that the regulation is consistent with the policy preferences of the President. Numerous individuals, including former OIRA officials and several administrative law scholars, have spoken in support of potential OIRA review of regulations issued by IRCs. Much of this support for OIRA review relies on the underlying premise that increased presidential control, through OIRA review, of rulemaking could improve both the rulemaking process within agencies and the quality of the regulations themselves. On the other hand, some have expressed hesitation or opposition to the extension of OIRA review to the IRCs, suggesting that the independence of the IRCs could be compromised and that OIRA review of IRCs' rules could lead to delay.