[Federal Register: February 19, 2003 (Volume 68, Number 33)]
[Notices]
[Page 7990-7994]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19fe03-51]
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DEPARTMENT OF ENERGY
Executive Order 13272; Consideration of Small Entities in Agency
Rulemaking
AGENCY: Office of the General Counsel, Department of Energy.
ACTION: Notice of procedures and policies.
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SUMMARY: The Department of Energy (DOE) is adopting procedures and
policies to ensure that the potential impacts of its draft rules on
small businesses, small governmental jurisdictions, and small
organizations are properly considered during the rulemaking process.
These procedures and policies, which are published for the benefit of
the public, also are available on the Office of General Counsel's Web
site: http://www.gc.doe.gov.
EFFECTIVE DATE: The procedures and policies in this notice are
effective February 19, 2003.
FOR FURTHER INFORMATION CONTACT: Michael W. Bowers, Office of the
Assistant General Counsel for Regulatory Law, U.S. Department of
Energy, 1000 Independence Avenue, SW., GC-74, Washington, DC 20585,
(202) 586-2902.
SUPPLEMENTARY INFORMATION: On August 13, 2002, President Bush issued
Executive Order 13272, ``Proper Consideration of Small Entities in
Agency Rulemaking,'' 67 FR 53461 (Aug. 16, 2002). E.O. 13272 generally
calls on agencies to establish procedures and policies to promote
compliance with the Regulatory Flexibility Act, 5 U.S.C. 601 et seq.
More specifically, section 3(a) of the Executive Order requires all
Executive agencies to ``issue written procedures and policies,
consistent with the Act, to ensure that the potential impacts of
agencies' draft rules on small businesses, small governmental
jurisdictions, and small organizations are properly considered during
the rulemaking process.'' It also requires agencies to make their
procedures and policies available to the public through the Internet or
other easily accessible means. Section 3(b) of the Executive Order
requires agencies to notify the Chief Counsel for Advocacy of the Small
Business Administration (``Office of Advocacy'') of any draft rules
that may have a significant economic impact on a substantial number of
small entities. Such notification must be made either: (i) When the
agency submits a draft rule to the Office of Information and Regulatory
Affairs of the Office of Management and Budget under
[[Page 7991]]
Executive Order 12866, or (ii) if review under E.O. 12866 is not
required, at a reasonable time prior to publication of the rule in the
Federal Register. Section 3(c) of the Executive Order provides that the
agency must give appropriate consideration to Office of Advocacy
comments on a draft rule and, subject to narrow exceptions, respond in
the notice of final rulemaking to any written comments submitted by the
Office of Advocacy on the proposed rule.
The procedures and policies in this notice were reviewed by the
Office of Advocacy pursuant to section 3(a) of E.O. 13272, and the
Secretary of Energy has approved their publication in the Federal
Register.
Issued in Washington, DC on February 12, 2003.
Lee Liberman Otis,
General Counsel.
On the basis of the foregoing, DOE adopts the following Procedures
and Policies:
Department of Energy (DOE) Procedures and Policies for Implementing
Executive Order 13272; Consideration of Small Entities in Agency
Rulemaking
I. Purpose
These procedures and policies implement Executive Order 13272,
``Proper Consideration of Small Entities in Agency Rulemaking,'' 67 FR
53461 (Aug. 16, 2002), consistent with the Regulatory Flexibility Act,
5 U.S.C. 601 et seq. (``Act'').
II. Applicability
These procedures and policies, which have been approved by the
Secretary of Energy, apply to the development of any regulation by DOE
(including by the National Nuclear Security Administration) that is
subject to notice and comment rulemaking under section 553 of the
Administrative Procedure Act (APA), 5 U.S.C. 553, or any other law. For
purposes of these procedures and policies, the Federal Energy
Regulatory Commission is not considered to be part of DOE.
III. Procedures and Policies
1. Preliminary Determination. In developing a proposed rule, a DOE
program office must determine whether an initial regulatory flexibility
analysis (IRFA) is required by the Act. The Act requires an agency to
prepare and make available for public comment an IRFA for any rule
subject to notice and comment requirements (5 U.S.C. 603(a)). The
agency must prepare a final regulatory flexibility analysis (FRFA) for
a final rule (5 U.S.C. 604(a)). However, the Act provides that these
analysis requirements do not apply if the head of the agency certifies
that the rule will not, if promulgated, have a significant economic
impact on a substantial number of small entities (5 U.S.C. 605(b)).
To make the foregoing determinations, the program office must
conduct a preliminary informal analysis to determine if there is any
impact on small entities and the magnitude of any impacts. The
preliminary analysis must be sufficient to answer the following
questions:
a. Does the Act Apply?
The Act applies to any rule subject to notice and comment
rulemaking under section 553 of the APA or any other law, including
notice and comment rulemaking required by an agency regulation. Among
the exemptions from the APA's notice and comment rulemaking
requirements are matters relating to agency management or personnel or
to public property, loans, grants, benefits, or contracts (5 U.S.C.
553(a)). In addition, the Act does not apply to rules of particular
applicability relating to rates, wages, corporate or financial
structures or reorganizations thereof, prices, facilities, appliances,
services or allowances (see definition of ``rule,'' 5 U.S.C. 601(2)).
Although exempted from notice and comment requirements under the APA,
certain rulemakings involving procurement contracts are subject to
notice and comment requirements under 41 U.S.C. 418b, and therefore are
subject to the Act.
If a rule is being promulgated in response to an emergency that
makes compliance with the analysis requirements of the Act
impracticable, DOE may delay the completion of a FRFA for a period of
up to 180 days after issuance of the rule (5 U.S.C. 608). If a FRFA is
not prepared within the 180-day period, the rule will lapse and have no
effect.
Program office staff should direct questions regarding the
applicability of the Act to a particular rulemaking or category of
rulemaking to program counsel at DOE, who may consult the Assistant
General Counsel for Regulatory Law.
b. What Is the Applicable Definition of a Small Entity?
The Act defines three categories of small entities: ``small
business,'' ``small organization,'' and ``small governmental
jurisdiction.''
The Act defines a ``small business'' as having the same meaning as
``small business concern'' under section 3 of the Small Business Act (5
U.S.C. 601(3)). Section 3 of the Small Business Act provides that a
small business concern includes any firm that is ``independently owned
and operated'' and is ``not dominant in its field of operation'' (15
U.S.C. 632). In addition, the Small Business Administration (SBA), as
authorized by section 3, has developed specific size standards and
related regulations (13 CFR 121.201) that further define ``small
business concern.'' In performing regulatory flexibility analyses, DOE
program staff must use SBA size standards for determining the number of
small businesses that would be affected by a proposed rule unless an
alternative definition of ``small business'' is adopted following
procedures required by the Act (discussed below). The SBA's size
standards generally are based on the total number of employees or on
gross annual receipts of an enterprise (including affiliates).
Beginning on October 1, 2000, the SBA size standards used the North
American Industry Classification System (NAICS) to categorize
businesses on an industry-by-industry basis. Previously, the SBA size
standards were based on the less-detailed Standard Industrial
Classification (SIC) codes.
The Act defines a ``small organization'' as any not-for-profit
enterprise that is independently owned and operated and not dominant in
its field (5 U.S.C. 601(4)). The Act defines ``small governmental
jurisdiction'' as governments of cities, counties, towns, townships,
villages, school districts, or special districts with a population of
less than 50,000 (5 U.S.C. 601(5)).
If an agency wishes to use an alternative definition of ``small
business,'' ``small organization,'' or ``small governmental
jurisdiction'' for purposes of its actions required by the Act, it must
consult with the Office of Advocacy on an appropriate alternative
definition and publish the proposed alternative definition for public
comment in the Federal Register. In addition, if an agency seeks to
change the definition of ``small business'' for rulemaking purposes
(i.e., for purposes of determining how a regulation applies to a
business of a certain size), the agency must obtain the approval of the
SBA Administrator using the procedures outlined in the Small Business
Act (see 15 U.S.C. 632(a)(2)(C)(i)-(ii)) and in SBA's regulations (see
13 CFR 121.902(b)). The Administrator's approval is not required,
however, if a different standard is specifically authorized by statute.
[[Page 7992]]
The Office of Advocacy can assist program office staff who have
questions regarding the definitions of small entities and the process
for using alternative definitions. Program staff with such questions
should contact the Office of Advocacy, U.S. Small Business
Administration, 409 Third Street, SW., Washington, DC 20416; telephone
(202) 205-6533. In addition, these definitions are discussed in Chapter
1 of the Office of Advocacy's guide for complying with the Act,
entitled The Regulatory Flexibility Act: An Implementation Guide for
Federal Agencies (``Office of Advocacy Guide''), which is available on
the Office of Advocacy's Internet site at: http://www.sba.gov/advo/.
c. What Is the Preliminary Assessment of a Proposed Rule's Economic
Impact Based on the Size and Type of Entities Affected and the Likely
Overall Cost?
After defining the small entities that would be affected by a
proposed rule, the program office staff must gather and consider
sufficient information for determining whether the rule, if
promulgated, will have a significant economic impact on a substantial
number of small entities. There are no ``hard'' boundaries for the
terms ``significant economic impact'' and ``substantial number'' of
small entities. Significance should be considered relative to the size
of the small businesses, the size of competitors' businesses, and any
disparity in impact the rule might have on small businesses. It may be
appropriate to group small businesses and other small entities into
more than one category for purposes of the analysis. The Office of
Advocacy Guide, Chapter 1, suggests criteria that may be used to
determine significance, including the percentage of revenue or profits
affected and effect on the ability of firms to make capital
investments. The interpretation of ``substantial number'' should be
made on an industry-specific basis. As explained in the Office of
Advocacy Guide, Chapter 1, the absolute number of small entities
required to meet the ``substantial number'' test may vary greatly
depending on the size of the universe of small entities within a
particular economic or other activity.
The level, scope and complexity of the preliminary analysis under
the Act also will vary depending on the characteristics and composition
of the industry to be regulated and the nature of proposed regulatory
requirements. For example, the level of data collection and analysis in
the preliminary assessment will be different for: (1) A proposed rule
to establish new energy efficiency standards for a type of home
appliance (e.g., refrigerators or furnaces), and (2) a procurement
regulation that applies principally to DOE's management and operating
contractors but has requirements that flow down to subcontractors, some
of whom may be small entities. In the former example of appliance
standards, a fairly rigorous analysis of the economic impact on small
manufacturers may be warranted because new energy efficiency standards
often impose costs on all manufacturers of the affected products, and
competition within the industry may be affected. In the latter
procurement contract example, it may be difficult to estimate the
number of small subcontractors who would be affected by new contract
requirements. However, if DOE is contractually obligated to reimburse
contractors for the cost of complying with regulatory requirements, the
proposed rule would not have a significant economic impact on small
entities. Because it is clear that such a proposed rule would not have
an adverse economic impact, there is no need to determine the exact
number of small contractors that might be affected by the proposed new
requirements.
d. Is There Sufficient Factual Basis for Concluding That the Proposed
Rule Would Not Have a Significant Economic Impact on a Substantial
Number of Small Entities?
The Act permits the head of the agency to forego the preparation of
an IRFA upon a written certification that the rule will not have a
significant economic impact on a substantial number of small entities.
The Act requires certifications to be supported by a ``statement of
factual basis'' (5 U.S.C. 605(b)). At a minimum, the statement of
factual basis must contain a description of the small entities that
would be directly affected by the proposed rule and the potential
economic impacts, as well as the program office's reasoning and
assumptions underlying the certification. This statement will be
subject to public comment, which will assure either that the
certification was not erroneous, or that erroneous certifications are
corrected. If the program office is uncertain of the impact on small
entities, it should consider: (1) Performing an IRFA with the available
data and information, and (2) soliciting public comment on the issue of
impacts on small entities. Based on information obtained during the
comment process, the program office may determine that a sufficient
factual basis exists to certify, in the notice of final rulemaking,
that the rule will not have a significant economic impact on a
substantial number of small entities.
The Office of Advocacy Guide, Chapter 1, gives examples of adequate
and inadequate certifications. One example given of an inadequate
certification is an agency statement that the rule would not have a
significant economic impact on small entities because they would not be
subject to any requirements not applicable to large entities. The
Office of Advocacy filed comments with the agency, objecting to the
certification because a principal purpose of the Act was to address
disproportionate impacts of ``one-size-fits-all'' regulations on small
entities. Therefore, the justification that the same requirements
applied to both small and large businesses was inadequate. Other
examples of inadequate certifications referenced in the Office of
Advocacy Guide involve unsupported generalizations that were
inconsistent with readily available factual information about the small
entities that would be regulated by a proposed rule.
2. The Initial Regulatory Flexibility Analysis and Notification to
Advocacy. If an IRFA is required, the DOE program office must inform
the Office of General Counsel point of contact for the Office of
Information and Regulatory Affairs in the Office of Management and
Budget (OIRA) -- currently the Assistant General Counsel for Regulatory
Law--that an IRFA is being prepared. This notice may be given when a
draft notice of proposed rulemaking is submitted to the Office of
General Counsel for review. To comply with the notification requirement
in section 3(b) of E.O. 13272, the Office of General Counsel point of
contact for OIRA will provide a copy of the draft notice of proposed
rulemaking and the draft IRFA to the Office of Advocacy either when:
(i) The submission is made to OIRA under E.O. 12866, or (ii) if review
under E.O. 12866 is not required, no later than 10 business days before
the notice of proposed rulemaking is published in the Federal Register.
The IRFA, or a summary, must be included in the Supplementary
Information portion of the notice of proposed rulemaking. The IRFA must
describe the economic impact of the proposed rule on small entities
that would be directly affected by the proposed rule. Sections 603(b)
and (c) of the Act set forth the elements of an IRFA. Each of the
elements is discussed in more detail in Chapter 2 of the Office of
Advocacy Guide. Section 603(b) requires that the IRFA contain:
[sbull] Reasons why action by the agency is being considered;
[[Page 7993]]
[sbull] A succinct statement of the objectives of, and legal basis
for, the proposed rule;
[sbull] A description of and, if feasible, an estimate of the
number of small entities to which the proposed rule would apply;
[sbull] A description of the projected reporting, recordkeeping,
and other compliance requirements of the proposed rule, including an
estimate of the classes of small entities that would be subject to the
requirements and the type of professional skills needed to comply; and
[sbull] An identification, to the extent practicable, of all
federal rules that may duplicate, overlap or conflict with the proposed
rule.
Section 603(c) of the Act provides that the IRFA also must contain:
[sbull] A description of any significant alternatives to the
proposed rule that would minimize the economic impact on small entities
while accomplishing the stated objectives of the applicable statutes;
and
[sbull] Consistent with applicable statutes, a discussion of
significant alternatives such as: (1) Differing compliance or reporting
requirements or timetables for small entities; (2) the clarification,
consolidation or simplification of compliance and reporting
requirements for small entities; (3) the use of performance rather than
design standards; and (4) exemption from coverage of the rule, or any
part thereof, for small entities.
To estimate the number of small entities to which the proposed rule
would apply, DOE program staff should identify each of the affected
classes of small businesses according to its NAICS code. They can then
use the NAICS code in combination with U.S. Census data to arrive at an
estimate of the number of entities in each class. To help agencies with
this element of the IRFA, the Office of Advocacy provides a full
listing of NAICS codes along with the U.S. Census data for each class
on its web page (http://www.sba.gov/advo/stats/us99_n6.pdf).
The Act requires the IRFA to provide either quantifiable or
numerical estimates of the impacts of a proposed rule and alternatives
to the proposed rule, although more general descriptive statements
concerning effects may be provided if quantification is not practicable
or reliable (5 U.S.C. 607). The level of the analysis in the IRFA also
will depend on such factors as the quality and quantity of available
information and the anticipated severity of a rule's impacts on small
entities that will be affected by the rule. Generally, the agency must
examine the costs and other economic impacts for the industry sectors
targeted by the rule. Impacts examined may include economic viability
(including closure), competitiveness, productivity, and employment. The
analysis should identify cost burdens for the industry sector and for
the individual small entities affected. Costs might include engineering
and hardware acquisition, maintenance and operation, employee skill and
training, and administrative practices (including recordkeeping and
reporting). The results of the analysis should allow interested persons
to compare the impacts of regulatory alternatives on the differing
sizes and types of entities targeted or affected by the rule. The
results should enable direct comparison of small and large entities to
determine the degree to which the alternatives chosen
disproportionately affect small entities or a targeted sector.
Furthermore, the analysis should examine whether the alternatives are
effectively designed to capture benefits to the public and accomplish
the purposes of the statute authorizing the regulations.
The Act provides that agencies may prepare regulatory flexibility
analyses in conjunction with, or as a part of, any other analysis
required by law as long as the Act's requirements are met (5 U.S.C.
605(a)). For significant regulatory actions requiring preparation of a
regulatory impact analysis under Executive Order 12866, the IRFA and
the regulatory impact analysis may be prepared together. Program staff
must, however, explicitly explain how the requirements of the Act are
satisfied.
The DOE program office also must include in the Supplementary
Information portion of the notice of proposed rulemaking a summary of
the actions that have been or will be taken to assure that small
entities are given an opportunity to participate in the rulemaking.
Examples of the techniques for accomplishing this are set forth in 5
U.S.C. 609 and include: (1) A statement in an advance notice of
proposed rulemaking alerting small entities that the rulemaking may
have a significant impact on them; (2) publication of the notice of
proposed rulemaking in publications likely to be obtained by small
entities; (3) direct notification; (4) conferences or workshops
targeted to small entities; and
(5) modification of procedural rules to reduce the cost or
complexity of small entity participation in the rulemaking. In
addition, for any rulemaking that may significantly or uniquely affect
small governments, program offices must follow DOE's policy on
intergovernmental consultation under the Unfunded Mandates Reform Act
of 1995. See Notice of Final Statement of Policy, 62 FR 12820 (March
19, 1997), which is posted on the Office of General Counsel's Web site:
http://www.gc.doe.gov.
Program staff may obtain additional guidance on how to prepare an
IRFA from the Office of Advocacy's Internet site: http://www.sba.gov/advo/.
Chapter 2 of the Office of Advocacy Guide deals with IRFAs.
3. The Final Regulatory Flexibility Analysis. A FRFA must be
prepared for any final rule that will have a significant economic
impact on a substantial number of small entities (5 U.S.C. 604). The
elements of the FRFA resemble, but are somewhat different than, those
for an IRFA. Section 604(a)(1)-(5) of the Act requires that the FRFA
include:
[sbull] A succinct statement of the need for, and objectives of,
the rule;
[sbull] A response to significant issues raised by the public
comments in response to the IRFA, including a statement of any changes
made in the rule as result of public comments;
[sbull] A description and an estimate of the number of small
entities to which the rule would apply or an explanation of why no such
estimate is provided;
[sbull] A description of the projected reporting, recordkeeping,
and other compliance requirements of the rule, including an estimate of
the classes of small entities that will be subject to the requirements
and the types of professional skills needed to comply; and
[sbull] A description of the steps taken by the agency to minimize
the significant economic impact on small entities consistent with
applicable statutes, including a statement of the factual, policy, and
legal reasons for selecting the alternative adopted in the final rule
and why each of the other significant alternatives to the rule
considered by the agency was rejected.
In addition, section 3(c) of E.O.13272 provides that, subject to
narrow exceptions, an agency must respond in the notice of final
rulemaking to any written comments submitted by the Office of Advocacy
on the proposed rule.
Section 604(b) of the Act provides that an agency must publish the
FRFA, or a summary, in the Federal Register and make it available to
the pubic. In most cases, this publication will be included in the
notice of final rulemaking. An agency may delay, but not waive, the
completion of a FRFA for up to 180 days after issuance of a rule if the
rule is being promulgated in response to an emergency that makes
compliance with the Act impracticable
[[Page 7994]]
(see section III.1.a. of these Procedures and Policies). If a FRFA is
not prepared within the 180-day period, the rule will lapse and have no
effect.
IV. Legal Effect
These procedures and policies are intended only to improve the
internal management of the federal government. They do not create any
right or benefit, substantive or procedural, enforceable at law or in
equity, against the Department of Energy, its officers or employees,
any federal agency or any other person.
[FR Doc. 03-3937 Filed 2-18-03; 8:45 am]
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