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Progress Snapshot Release 2.3
Special to the National Law Journal
January 23, 2006

by Randolph J. May *

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In November, the Office of Management and Budget (OMB), which is responsible for coordinating the regulatory policies of all federal agencies, issued a bulletin seeking comment on proposed "good guidance practices" for agencies to follow in issuing guidance documents. As the number of regulatory programs grows each year, agencies increasingly rely on guidance documents to inform the public and to provide internal direction to agency staffs. If done properly, OMB's effort to provide guidance on guidance could improve the government wide regulatory process. In general, guidance documents are issued to further clarify or explain an agency interpretation of a statute or regulation. They take many forms and assume many names, such as staff manuals, interpretative memoranda, policy statements, circulars, bulletins and, not surprisingly, plain old guidance documents.

Significantly, guidance is issued without adherence to formal procedures, including Federal Register notice and a public comment process, which the Administrative Procedure Act ( APA ) requires before issuance of rules or regulations. Only regulations promulgated pursuant to the APA 's notice-and-comment requirements have a legally binding effect on the public. Because it is easier procedurally to issue guidance than a regulation, agencies therefore have an incentive to favor guidance documents over regulations. To the extent the public does not appreciate that interpretations of regulatory requirements contained in guidance documents are not legally binding, the agency may achieve through "backdoor" regulatory means what it might not be able to achieve if required to adhere to the APA 's rulemaking formalities.

A classic statement of the way guidance is sometimes misused is found in the leading case of Appalachian Power Co. v. EPA, 208 F.3d 1015 (D.C. Cir. 2000). In voiding an Environmental Protection Agency guidance document that set forth monitoring criteria that would be considered by the agency to comply with pollution-control permitting regulations, Judge A. Raymond Randolph recounted:

"The phenomenon we see in this case is familiar. Congress passes a broadly worded statute. The agency follows with regulations containing broad language, open-ended phrases, ambiguous standards and the like. Then as years pass, the agency issues circulars or guidance or memoranda, explaining, interpreting, defining and often expanding the commands in the regulations... Law is made, without notice and comment, without public participation."

The guidance at issue in Appalachian Power contained boilerplate that EPA had long included in its guidance documents: "The policies set forth in this paper are intended solely as guidance, do not represent final agency action, and cannot be relied on to create rights enforceable by any party." The court nevertheless set aside the guidance for failure to comply with the APA 's rulemaking requirements because it found, with the exception of the disclaimer, the guidance document, replete with the language of command, "reads like a ukase."

Close to a binding effect

The danger, then, is that an agency will use guidance to expand the scope of the statute or regulation it purports to interpret. Even though the guidance document may disclaim a legally binding effect, it may, as a practical matter, have such an effect if regulated parties believe that failure to conform to the guidance will lead to adverse consequences. This often happens when the guidance purports to establish some sort of safe harbor that will lead to faster processing of a permit application or more certain bestowal of some other regulatory benefit.

To its credit, OMB acknowledges that "the misuse of guidance also can impose significant costs or limit the freedom of the public without affording notice and an opportunity to participate." To check abuse, OMB proposes that agencies develop written procedures that ensure that significant guidance documents are approved by senior agency officials before issuance. Agencies also would be required to seek public comment on significant guidance documents before they are issued, and they would be required to post all current guidance documents on the agency Web site. Moreover, guidance documents generally could not include mandatory language such as "shall," "must" or "required."

These are good steps toward enhancing the quality of guidance documents and making the guidance process more transparent and consistent across the government. But OMB should do even more to educate the public about the nonbinding legal effect of guidance. This educational effort might include posting plain-language explanations on agency Web sites, issuing periodic statements by agency heads, and holding public workshops, all directed to reinforcing guidance's nonbinding legal effect.

When used properly, guidance documents play a positive role in furthering sound regulatory policy. They can channel the discretion of agency employees, simplify and expedite agency enforcement efforts and provide the public with notice of the agency's view of the line between permissible and impermissible conduct. In these respects, guidance can enhance the efficiency of the agency's regulatory programs, while promoting equitable treatment of similarly situated regulated parties.

OMB should avoid making the guidance process too burdensome by over-proceduralizing it. But it is important that it ensure that guidance is not improperly treated as binding by agency officials or misunderstood to be binding by the public. If its new guidance on guidance succeeds in finding the right balance, OMB will have accomplished something worthwhile.

* Randolph J. May, an NLJ columnist, is senior fellow at The Progress & Freedom Foundation in Washington. The views expressed are his own.

© 2005 The National Law Journal. All rights reserved. This article is reprinted with permission from The National Law Journal.




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